Banks look over their shoulders at VAMC proposal

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>> Debt issue held up to the light

The Vietnam Asset Management Company (VAMC) proposed launching and the State Bank’s (SBV) recent rate cut have had little impact on boosting market demands, according to a HSBC Vietnam source.

Many bank executives said they did not have big hopes for potential VAMC support after its launching. Eximbank chairman Le Hung Dung said banks should take the initiative in settling their bad debts through making provisions. Besides, banks and firms needed to join hands sourcing ways to cushion bad debts, but not simply waiting for VAMC support.

“We willingly sacrificed part of our profits for loss provisioning since this is a safe measure. In the meantime, banks should be choosy in lending to avert bad debts from surging,” Dung said.

Mekong Bank chief executive officer Tay Hang Chong said VAMC’s birth would help shape a clearer picture of Vietnam’s bad debt situation. In respect to banks’ selling bad debts to VAMC, Chong argued this could help banks temporarily avoid incurring losses.

However, in a nutshell if VAMC failed to sell these debts, banks would again be held responsible for their bad debts. HDBank deputy director Le Thanh Trung said banks primarily must rely on inner strength to settle the bad debt malaise.

VAMC’s birth could help extend the payment of bad debts, but will not totally resolve hardships regarding banks’ bad debts. Trung argued it was unfair when bad debt issue was considered the banking sector’s problem as the market was in a fix.

Besides, dealing with the collateral relevant to overdue debts was not simple in current context due to cumbersome legal procedures.

Orient Commercial Bank (OCB) chairman Trinh Van Tuan said if a bad debt case arose, it would take six months to bring the case to court and selling mortgaged items has proven hard under current regulations.

In respect to VAMC’s future operations, it was said that the VAMC would have an initial capital of VND500 billion ($24 million) for bad debt purchases via issuing bonds. This special bond could be used to source SBV refinancing loans when necessary.

A senior financial expert warned that a lack of prudence in tackling bad debts would hurt the property market since banks were rushing to sell mortgaged assets which were mostly properties.