Dec 4, 2012

Vietnam - Foreign bankers discuss Vietnam’s non-performing loans

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VietNamNet Bridge - Given that the bad debt situation in Vietnam is not considered as "tragedy" but foreign experts suggested the Vietnamese government taking rapid and drastic solutions to deal with it.

For the first time in its 15-year history, the Vietnam Business Forum (VBF) gave a lot of time for the representatives of four wholly foreign owned banks in Vietnam to talk about non performing loans (NPLs).

According to the head of the VBF’s working group on banking, Mr. Louis Taylor, though NPL have become a widely discussed issue in many forums, but the nature and seriousness of the debts as well as the debt scale of the Vietnamese banking system is still the thing that even the bankers do not know clearly.

"Banks have reported NPLs at 4.43%. The Governor said it is 8.8% but it is said that the figure must be double," said Taylor, who is the General Director of Standard Chartered Vietnam.

According to Taylor, if the figure is 8.8%, the bad debt is around $12 billion, and if the loss percentage in other markets - 40% - is applied, the amount of capital that banks may lose can reach $7 billion, equivalent to 5% of GDP.

However, it is important to identify who will bear the costs of NPLs: "The State, bankers or the both sides," the group suggested.

General Director of Citibank Vietnam, Mr. Brett Krause, said that in the process of restructuring bad debts, it is a must to establish asset management companies (AMC). Thanks to these companies, banks will not have to worry about handling bad debts to focus on the main lines while they can have a lot of capital from the liquidation of assets. Krause also said the existence of AMCs should be fixed, usually 5-7 years.

Experts also made suggestions to the Government on the refinancing for banks. According to the CEO of HSBC Vietnam, Mr. Sumit Dutar, the first thing to do is to sort out the banks that work well for being supported. The remaining banks can be closed, after selling good debts to AMCs.

In response to the above opinions from foreign banks, at the VBF on December 3, State Bank of Vietnam’s deputy governor Dang Thanh Binh spent a lot of time to talk about the results in fighting inflation, stabilizing the exchange rate and restructuring banks.

Regards to NPLs, Binh said Vietnam can accomplish the goal of reducing NPLs to 3% in 2015.

Translated by S. Tung

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