Bad debts till June equal to 9.2% of GDP

The country's total non-performing loans by the end of June stood at VND346.96 trillion (US$15.489 million), equal to 9.2 per cent of the country's GDP. Photo tiepthithegioi.vn

This was according to statistics from HCM City Securities Co (HSC).

Of the total, roughly VND217 trillion was kept at the Viet Nam Asset Management Company while the rest is at credit institutions.

HSC said there is no need to use State funds to settle bad debts at this time as the banking system is still very positive about settling the debts through provisions for the past five years.

Recently, the Ministry of Planning and Investment proposed using State funds to settle commercial banks' bad debts in its draft plan on economic restructuring for the 2016-20 period.

The proposal was given the cold shoulder. Experts said the solution is not feasible as it puts pressure on public debts, especially in the context of the state budget deficit.

The Government has, so far, also affirmed it would consider carefully the use of financial resources to resolve debts in the future in accordance with targets of restructuring the system of credit institutions and the whole economy from 2016 to 2020.

HSC believed that with the speed of settling bad debts as it is currently, a significant amount of the debts would likely be settled in the next two or three years.

According to HSC, the main solution to settle bad debts is to continuously use the income of credit institutions to settle it until the book value of the debts declines to the market value. At that time, the debts would be settled through the debt trading market that the State Bank of Viet Nam is mapping out.

If the speed of making provisions remains the same, HSC forecast that the settlement of the bad debts through the debt trading market could be launched in the second half of next year.

According to the HSC, the central bank is also concerned about the settlement of bad debts and it wants to see more progress made on the issue before applying Basel II regulations for 10 banks from 2018.