Monday, December 17 2018

VietNamNews

Credit institutions urged to resolve bad debts

Update: November, 13/2018 - 09:00
The banking industry targets to reduce the ratio of bad debts from the current 6.6 per cent of the total outstanding loans to below 3 per cent in 2020. - VNA/VNS Photo
Viet Nam News

HÀ NỘI – Governor of the State Bank of Việt Nam Lê Minh Hưng has urged credit institutions and foreign banks’ branches to further speed up the settlement of non-performing loans (NPLs).

Under Document No 8425/NHNN-TTGSNH issued last week, the Governor instructed the institutions to better implement Directive No 05/CT-NHNN, which was issued in September to regulate the structure of credit institutions associated with dealing with bad debts in the 2016-20 period.

Accordingly, credit institutions must review and provide detailed roadmaps and solutions for settling their bad debts every year until 2022.

Credit institutions are also required to actively look for buyers for the debts they sold to the Việt Nam Asset Management Company (VAMC). Previously, banks had to sell their debts to the VAMC to keep their NPL ratios below 3 per cent as regulated by the central bank, but they still had to make provision for the debts. Meanwhile, the recovery of debts at the VAMC remains slow.

Hưng also asked the VAMC to speed up the handling of bad debts and collateral that the company purchased following market-based mechanisms.

On the same day, the Governor also sent Document No. 8424/NHNN-TTGSNH to chairpersons of People’s Committees of cities and provinces, asking for support from the localities’ State management agencies to help institutions and VAMC in handling bad debts according to the National Assembly’s Resolution No 42/2017/QH, which allows credit institutions and the VAMC to rapidly repossess collateral of default borrowers.

According to the development strategy of the banking sector to 2025 approved in August, the central bank targets to reduce the ratio of bad debts from the current 6.6 per cent of total outstanding loans to below 3 per cent in 2020.

During a recent question-and-answer session at the 14th National Assembly’s ongoing sixth session, SBV Governor Hưng also vowed to speed up the settlement of bad debts.

According to Hưng, the implementation of Resolution 42 on settling bad debt has been carried out drastically over the past year, producing initial positive results. Credit institutions handled VNĐ140 trillion (US$5.98 billion) worth of bad debts, and the VAMC handled about VNĐ95 trillion of the debts that it had bought from credit institutions.

Despite the initial results, the implementation of the resolution has still shown some shortcomings and difficulties after a year in effect, Hưng said, adding that the SBV has sent detailed reports on the issues to the Government and Prime Minister Nguyễn Xuân Phúc for consideration.

The SBV then would coordinate with the ministries of Finance and Justice, localities and People’s Courts at all levels to take more drastic measures so as to effectively tackle shortcomings in the coordination between offices in the work, Hưng said. — VNS

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