VietNamNet Bridge – The State has been urged to put a hard
pressure on enterprises, forcing them to speed up the debt settlement. However,
at first, it needs to perfect the legal framework on the debt assessment.
Banks don’t want to sell debts
“A friend of mine, a businessman,
has revealed that the bad debt of his bank has been higher than the bank’s
chartered capital. However, when discussing the debt sale, he said he would
only sell the debts if the buyer accepts to pay 100 percent of the value of the
debts”.
This is the story related by Pham
Manh Thuong, Deputy General Director of the Debt and Asset Trading Corporation
DATC, an arm of the Ministry of Finance.
Valuating debts and fixing the
prices of debts proves to be the biggest problem that hinders the debt trading
now.
“Some banks demand 100 percent of
the value of the debts, others demand 80 percent. The overly high requirements
have kept DATC away,” Thuong explained.
In most cases, DATC only accepts
to pay 30 percent of the face value of the debts, which means that DATC would
enjoy the discount of the other 70 percent of the value of the debts once they
are successfully settled.
Meanwhile, the 30 percent level
proves to be lower than the level expected by most commercial banks, which are
taking on bad debts.
While commercial banks complain
that DATC pays too low for the debts, DATC argues that even with the low buy
prices, it still cannot make high profits.
By August 31, 2012, DATC had
bought the debts of 74 enterprises which were under the restructuring process.
The book value of the debts was 6520 billion dong. The prime cost for the debts
was 1647 billion dong, or the average debt purchase ratio of 25.6 percent.
Meanwhile, to date, only 1536 billion dong has been recovered, which means the
low recovery ratio of 93.23 percent.
Thuong has admitted that
commercial banks do not want to sell debts to DATC. In general, DATC has to
make payment in cash. Meanwhile, banks, when selling debts at low prices and
receive cash, would see a big loss item on books, which would “spoil” their
capital adequacy ratio.
Banks are not forced to sell debts
According to Thuong, there are
some 20 operational asset management companies (AMC) belonging to commercial
banks, but the companies just have the functions of recovering debts by
liquidating mortgaged assets.
The current laws stipulate that
banks have to make provisions against the bad debts. However, in fact, banks do
not bear the pressure of having to settle bad debts quickly to make their
financial situation healthier.
Analysts believe that the
Ministry of Finance and the State Bank of Vietnam should set up a regulation
that forces all credit institutions which have bad debts exceeding the safely
line and cannot settle debts themselves, must sell the debts or transfer the
debts to DATC. If not, banks would bear some limitations in their operation
until the debts can be settled.
Nguyen Thi Mui from Vietinbank,
said AMCs have more favorable conditions to deal with the bad debts, because
they better understand both the creditors and debtors. However, Mui thinks that
it is necessary to set up a mechanism allowing to monitor the debt settlement
process in a transparent way. If not, it may happen that the books show
“beautiful figures,” while in fact, the bad debts still exist.
Meanwhile, experts have doubts
about the debt settlement feasibility of DATC. To date, DATC has just dealt
with 8 trillion dong worth of debts, a very small figure if compared with the
current bad debt worth 200 trillion dong.
Pham Huyen
Business & Investment Opportunities
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