The National Assembly (NA) Economic Committee
is concerned that bad debts and cross ownership are the two main risks to
Vietnam’s banking system.
In the
report named “Vietnam Economy 2012: a strong start of economic restructuring”,
the committee said the banking system is facing many risks that can greatly
affect the system safety.
Citing
the data of the central bank, the report said the bad debt ratio of the entire
system was 3.96 percent at the end of April.
However,
the economic committee warned the ratio might be higher, as the data of Fitch
Ratings showed that the bad debt ratio of Vietnam in 2011 was as much as 13
percent in accordance with the international accounting standards.
Deepak
Mishra, chief economist of the World Bank in Vietnam, said: “The ratio could be
higher if calculated on the international standards.”
The
economist declined to give comment on bad debts, but advised Vietnam to take
into account the warning of Fitch Ratings.
Vietnamese
experts also agreed that the ratio of bad debts might be higher than the
official data.
According
to the report “Facing the challenges of economic restructuring” recently
announced by the Vietnam centre for Economic and Policy Research (VEPR), the
bad debt ratio is estimated to be 3-4 times higher than the figure given by the
central bank.
Quach
Manh Hao, one of the report authors, said bad debts must be 8.25 percent-14
percent over the total assets.
Such a
figure is calculated based on the data of 41 commercial banks, with the
liabilities of Vinashin, Vinalines and similar State-run groups already
excluded, Hao noted.
The bad
debt ratio of the banking system is often kept by the central bank close to its
chest, and only disclosed to the public via other channels.
According
to the NA Economic Committee, since risk provisions are limited and additional
capital is insufficient, lenders, especially the small ones, are struggling
with liquidity.
Cross
ownership at several banks also sparks concern, as it may lead to careless loan
appraisal, a premise for bad debts to soar, posing risks to the system since
troubled liquidity of one bank may affect the others.
To
tackle bad debts, the economic committee suggested the Ministry of Finance
should provide more capital to Debt and Asset Trading Corporation (DATC), and
establish more debt trading firms, or even allow foreign companies to become
debt traders.
In
addition, the committee said the central bank needs to identify how many of the
incompetent banks have lost ability to pay and currently have negative equity.
Such banks must be put under special control and should not be provided with
additional liquidity.
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