Banks scrambling to rectify bad debts

For example, Saigon Commercial Joint Stock Bank (SCB), after selling VND5 trillion ($238 million) to the Vietnam Asset Management Company (VAMC), has had its hands full managing its bad debt policies under the guidance of the state group.

According to SCB’s acting general director Vo Tan Hoang Van, the VAMC is putting its trust in SCB to handle bad debts through measures such as postponing due dates, selling debts, or recouping capital through collateral.

Similarly, Southern Bank executives said after selling VND200 billion ($9.5 million) in bad debts to the VAMC in late October, it has cooperated with the state body to restructure other bad debts with the goal of bringing its rate of these liabilities to below 5 per cent by the end of the year.

Saigon-Hanoi Bank (SHB) sold more than VND400 billion ($19 million) in bad debts to the VAMC in October and another VND1 trillion ($47 million) in November. Its goal is also to bring its bad debts to below 5 per cent by year end.

“Our bank is working with the VAMC to develop credit ratings for customers and restructure our business. Businesses with bad debts, but with feasible production-business plans will have their debts rescheduled and will be allowed to continue borrowing,” said the bank’s general director Nguyen Van Le.

The move showcase banks’ tremendous efforts to clear bad debts before the State Bank’s circular on debt classification comes into force on June 1, 2014.

The circular reportedly contains stringent requirements on classifying debts and provisioning against loans, and as such, banks from small to big want to sell off their bad debts to the VAMC.

State giant Vietcombank and BIDV each sold around $47 million in bad debts to the VAMC. Agribank sold $81 million and is contemplating selling a total of $476 million by the end of the year.

According to VAMC executives, over 20 credit institutions have requested to sell a combined value of $1.9 billion in bad debts to the VAMC, which has said it will make purchases on a selective basis.

Former chairman of the National Financial Supervisory Commission Le Xuan Nghia said this year the banking system would strive to tackle about 30 per cent, $4.7 billion, of total bad debts. The banking system’s bad debts are expected to go down to 3-3.5 per cent by the end of 2014.