Running to tackle NPLs head on

Based on figures reported by credit institutions, the non-performing loans (NPLs) ratio at the end of September 2012 was 4.93 per cent. The figure evaluated by the State Bank was 8.82 per cent.
According to Binh, the State Bank has implemented many solutions to NPLs which showed “some initial results”.

Specifically, based on the central bank’s Decision No.780/QD-NHNN dated April 23, 2012 on classification of rescheduled loans, from April to June, 2012, VND36,000 billion ($1.73 billion) in loans were restructured. In the year to the end of September, this figure reached VND252,000 billion ($12 billion), or 8-9 per cent of total outstanding loans.

Binh said credit institutions now had better loan loss provisions, which had increased by VND14,000 billion ($672.2 million) to VND75,000 billion ($3.6 billion) or 2-3 per cent of NPLs. By using their own provisions, credit institutions have settled bad debts of VND12,000 billion ($576.1 million).

About 80 per cent of NPLs reported by credit institutions have collateral assets and 57 per cent of those collaterals are real estate assets. Thus, Binh said the recovery of real estate market would contribute to addressing a huge amount of NPLs.

“From those figures, if we determine to handle with NPLs, at least we can make NPLs stay still and not increase,” Binh said. “And if we combine banking solutions with solutions for other sectors, NPLs can be solved.”

The State Bank last week issued Directive No.06/CT-NHNN dated November 9, 2012 on measures to manage the monetary policy, credit and banking operations in the final months of 2012 and early 2013.

Specifically, the directive emphasised that credit institutions, which do not make risk provisioning in accordance with law, are not allowed to pay dividends from profits of 2012 and increase salaries and bonuses for staff. Joint stock commercial banks must report their 2012 dividend and profit distribution plans at least 15 working days prior to implementation to the State Bank.

The directive also urged State Bank departments to complete establishing an asset management company to accelerate the resolution of bad debts, and increase credit supply of credit institutions to the economy.

At the National Assembly last week, Prime Minister Nguyen Tan Dung said the government already required the State Bank to combine with the Ministry of Finance to construct plan to establish an asset management company to handle NPLs.

Dung emphasised one of the focuses in reducing NPLs was to deal with VND90 trillion ($4.3 billion) in deadweight debt for basic construction.

According to Dung, the government already required  local governments to outline specific plans handling deadweight debt for basic construction. The Ministry of Planning and Investment will collect and submit the solutions to deadweight debt for basic construction to Dung.

“With synchronic solutions, we will strive to bring the NPLs ratio to around 3-4 per cent by the end of 2015,” said the prime minister.