Question mark over asset management move

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Senior economist Vo Tri Thanh said the banking system’s bad debts had hiked at 8-9 per cent per month in the past months.

Economists assumed in Vietnam’s current context founding a national asset management company (AMC) would be a single way-out since it would have sufficient tools to clear bad debts.

Bad debt valuations will be set by the government through AMC vehicle.
That is reportedly a successful Chinese model.

National Financial and Monetary Policy Advisory Council member Le Xuan Nghia said if banks insisted on not selling their bad debts at prices set by the government, the State Bank (SBV) might intervene by compelling disobedient banks to adhere to new accounting standards.

“The AMC having the right to bad debt valuations is a right move, but I do believe the government will deliver appropriate valuations,” Nghia said.

Banking system’s bad debts are put at over VND200 trillion ($9.52 billion) by the SBV, but economists assumed the AMC might just buy bad debts at half their price tantamount to around VND100 trillion ($4.76 billion) in the best-case scenario.

In respect to AMC’s chartered capital, Nghia said the AMC would only need VND10 trillion ($476 million) or VND20 trillion ($952 million) if banks came on board. Thereby, to radically iron out bad debt dilemma, the AMC would need to issue bonds to raise capital.

A Ministry of Finance executive revealed scores of foreign players wanted to procure Vietnamese banking system’s bad debts.

“Foreign firms are apparently more financially viable compared to local ones when it comes to bad debt procurement. To quickly tackle bad debts allowing them to play their part would be a smart choice. However, without discretion major economic sectors would fall into foreign players’ hands,” said the executive.   

“Many foreign firms wanted to step into Vietnam’s debt trading market, but they got stuck with asset ownership procedures. So, this should be inserted into the forthcoming AMC guiding decree to remove obstacles,” Nghia asserted.