Brining banking to account

Economic experts claim upcoming projects dealing with bad debts and founding the Vietnam Asset Management Company (AMC) would include explicit regulations concerning the involvement of foreign players in the debt trading market.

However, these projects have yet to come into place until now though a decree on AMC shall have to be submitted to the government for approval this month.

Central Institute for Economic Management deputy director Vo Tri Thanh said while many countries have loosened monetary policies to stimulate growth Vietnam should make use of foreign capital flows in an effective manner to facilitate the process of tackling bad debts.

“Dealing with bad debts is time-consuming. We do not fear lacking money as money can be raised from foreign partners. Having ideas, determination and transparency are more important factors,” said Thanh.
“Some debts are ‘bad’ in our eyes, but ‘fine’ in the eyes of foreign investors.”

Many local banks assumed allowing foreign players to buy banks’ bad debts might accelerate banking sector restructuring.
“In current context, foreign partners are most potential in buy-out of weak banks,” said VietinBank’s deputy director Nguyen Van Du.

State Bank (SBV) chief Nguyen Van Binh had pledged banking authorities would hike room to foreign investors at feeble credit joint stock entities subject to be restructured to make them appeal to foreign investors, particularly encouraging foreign banks to embrace Vietnam’s banking sector shakeup process.

ANZ Vietnam chief executive director Tareq Muhmood confirmed ANZ would step into buying stake at a local bank only when the SBV hiked room to foreign partners to 100 per cent as by that time ANZ could change the way of governance to revive the bank.

Though many bank bad debts are viewed as ‘attractive’ to foreign capital flows, it is not simple to make foreign investors to loosen the purse strings.

Managing director of PricewaterhouseCoopers in Malaysia Chui Sum Lee assumed founding the AMC and allowing foreign investors to come up with debt purchases would bring some positive effects.

“We can increase foreign investment through selling bad debts to foreign investors, getting improved skills with taking back debts through forming joint ventures with capable investors and having opportunities to spur development of several sectors initially submerged in bad debts,” said Lee.

Lee suggested securitilising the debts before selling them. “But to charm investors, these securities need to be secured by prestigious organisations and we also need people having experiences who know about debts and how to take them back as quickly as possible,” said Lee.