Nguyen Van Binh, governor of the State Bank of Vietnam, has received 361
requests from National Assembly delegates to make a formal explanation on
Tuesday over a statement he made last week.
With such number of requests,
Binh is the Government member having received the most questions after stating
“as the governor of the State Bank of Vietnam, I could not promise anything
about the handling of non-performing loans (NPL), or bad debt,” in a National
Assembly (NA) meeting last week.
“This statement is inappropriate
because Binh is the head of the agency advising the Government in management
the banking sector. Many local voters told me that since the governor said so,
he will have to reconfirm that if SBV can effectively monitor the local banking
sector,” Le Viet Truong, Deputy Chairman of the Defense and Security Committee
under the NA, told Tuoi Tre.
“That's a very hot issue, as a
majority of voters have proposed to clarify the management responsibilities of
SBV in the management of bad debt, gold, and a number of other negative
incidents related to banking activities.”
Cao Tien Vi, former president of
the Ho Chi Minh City Businesspeople Association, told Tuoi Tre that the economy
never faces such a tough time with sky-high inflation and lending interest
rates at close to 25 percent [in 2011- early 2012].
There were around 100,000 local
firms that officially declared bankruptcy over the past two years, accouting
for about 50 percent of dissolved firms within the past 20 years, Vi said,
citing a recent report from the Vietnam Chamber of Commerce and Industry
(VCCI).
Meanwhile, many small and weak
banks, waging unfair competition by raising deposit rates when facing liquidity
shortage, have finally been bailed out by joining merger and acquisitions
(M&A) activities. It led to a deposit rate race in the local banking
system, which heavily damaged local firms with affordable lending rates.
“As a result, I want to ask the
governor if the central bank has the control over cash flow for banking
acquisition activities as motioned above. Because if not, many banks, in
tackling their bad debt situation, have continued pushing up interest rates, making
it very difficult for businesses to access bank loans.”
“It is the consequence of the
licensing of so many banks in the past, but the correcting process has been so
slow. So, we also want to hear an explanation of the governor on the issue.”
Nguyen Thi Tuyet Mai in Ho Chi
Minh City’s District 3 told Tuoi Tre that there are so much unofficial
information around the banking M&A, most noteworthy is the cross ownership
and investment, and the intricate relationship between many local banks.
“I hope the governor lets people
know which banks are subject to restructuring and when the banking
restructuring process finishes. People also want to know the truth behind the
banking M&A stories and if those activities are legally conducted.”
Bui Tuan Nghia, production
executive of HCMC Industrial Innovation Joint Stock Co, said at the enterprise
level, what his firm needs the most is the clarity and transparency in the
lending policies. For example, in corporate lending policy, which kind of firms
can access a certain lending package and which cannot.
A bank has notified us of the
lowest short-term interest rates (less than one year) and long-term interest
rates are 17-18 percent and 12 percent, respectively. But it is still very hard
to gain access to such a loan at those rates.
Binh earlier said SBV is working
on the establishment of an asset management company to focus on debt settlement
in a large-scale, especially NPLs backed by real estate assets.
According to the governor, there
are a number of other support measures to deal with those bad debts. For loans
secured by under-construction real estate projects which are close to
completion or have been completed but not yet sold, the Government will
consider buying those properties for the purpose of social security.
SBV said as of June 30, 2012, the
total bad debts as reported by local credit institutions reached VND119.14
trillion (US$5.7 billion), about 4.49 percent of total outstanding loans.
However, according to an
inspection of SBV, the total bad debts by that time accounted for a whooping
8.8 percent of total outstanding loans.
The governor confirmed that the
bad debts have been accumulated for a long time, especially since the period of
loose monetary policy dating back from April 2011 following deteriorating
business environment and slow credit growth.
Bad debts of state-owned
commercial banks group accounted for 44.26 percent of total loans, while NPLs
of the commercial banking group made up 35.3 percent of bad debt of the system.
Bad debts are mainly concentrated
in the 6 out of 21 economic sectors.
By the end of June 2012, bad
debts of 6 sectors, including industrial processing and manufacturing, property
and related services, transportation-warehousing; wholesale-retail, auto
repair, and construction, was about VND96 trillion, accounting for more than 80
percent of the bad debt of the whole economy.
TUOI TRE
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