Working to address bad debts

Thought details of the plan involving settling up an Asset Management Company (AMC) to tackle banks’ bad debts have yet to be unveiled, this model is being chewed over by industry experts.

State Bank governor Nguyen Van Binh said the plan consisted of diverse measure groups featuring coordination among ministries and government different agencies. Issues like who will deliver debt purchase decisions, buying at what prices or whether bonds are distributed or not are all embedded in the plan.

Industry experts assumed the AMC would be established under the N+1 model, meaning apart from the State Bank as key member, diverse ministries and government agencies would involve.

The AMC would act as a special state enterprise founded by the prime minister and not putting profit-making as its top objective.

Deputy rector of Ho Chi Minh City University of Economics Dr. Tran Hoang Ngan supposed AMC members should come from key ministries and state agencies like Ministry of Finance (MoF), Ministry of Construction (MoC) and Ministry of Public Security (MPS).

That is because state businesses and firms in property area are big debtors and they belong to fields managed by the MoF and MoC. The process of settling debts would involve cases of fraud, asset appropriation or faults, so the Ministry of Public Security was needed.

Besides, participation of several other ministries and state agencies is  also important like the Ministry of Industry and Trade and Ministry of Agriculture and Rural Development.

From his part, Ho Chi Minh City National Assembly (NA) deputy Truong Trong Nghia assumed an independent supervision body consisting of NA members such as Economic Committee and Finance and Budgetary Committee should be founded.

In respect to operational capital, AMC’s initial capital scope would be around VND100 trillion ($4.7 billion) to buy out banks’ non-performing loans, helping to drive down bad debt rates.

At first, the AMC would help tackle bad debts having collateral mainly in property sector. Maybe banks will get in return not ‘fresh cash’ but bonds or valuable papers instead issued by the government or the State Bank.

Binh said after the NA session had ended, the government would start on the AMC project, which was expected by the public as a breakthrough step in addressing bad debt malaise.

Dr. Tran Hoang Ngan hoped AMC would be in place to help make the target of driving bad debt down to 3 per cent in 2013 achievable.