SBV to ease banking system crisis

July 13, 2012 | 18:00

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An official from the State Bank of Vietnam said that they will not need VND100 trillion ($4.8 billion) to deal with the bad debts at local banks.

Massive amount of bad debt threatens the banking system

Nguyen Huu Nghia, head of banking inspection and supervision at SBV, said at the meeting to address bad debts on held on July 12, that they have not yet decided on the establishment of a bad debt trading company and have not yet officially reported to the Prime Minister. "But we will not need VND100 trillion in capital." he said.

If the company is established, SBV will use financial instruments such as stocks, bonds, short-term loans deal with the problems. The value of bad debts may be VND100 trillion, but the money can be acquired through other various means at better rates.

In answer to the question as to why there has been such an increase in the ratio of bad debt, Nghia said that one of the reasons is that the credit institutions attempted to achieve high growth without sufficient risk mitigation, especially commercial banks that changed from rural to urban markets.

Many credit institutions made risky investments in sectors such as real estate, and when the market went into a slump, bad debts soared, he said, adding that the regulatory process has not been thorough enough.

To clear bad debts and prevent the same situation from occurring in the future, the SBV has asked banks to restructure loans to borrowers, extend repayment deadlines and lower interest rates to make it possible for the loans to be repaid.

The SBV will review and classify debts and adjust banking regulations to be more in line with international regulations as well as the economic realities of the country.

Dtinews

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