SBV prepares bad debt settlement plan

10:08 | 27/07/2017 Economy

The central bank on July 21 held an online conference to prepare for the implementation of the scheme to settle non-performing loans (NPL) and restructure credit institutions in the 2016-20 period.


Addressing the discussion, Governor Le Minh Hung of the State Bank of Vietnam (SBV) spoke about the implications of the National Assembly resolution on NPL settlement approved last month and Prime Minister Nguyen Xuan Phuc’s Decision 1058/QĐ-TTg on the restructuring of credit institutions in the 2016-20 period issued on July 19, which gave the scheme the green light.

In addition to bad debt settlement, the scheme lists objectives, principles, solutions and itineraries to restructure the system of credit institutions in the period.

To implement it, Hung has asked all credit institutions to map out their own restructuring plans and submit them to relevant management agencies for approval.

In their restructuring plans, institutions have to look at and assess their own finances, corporate governance, shareholders and charter capital ownership status. They have to also detail the objectives, orientations and solutions proposed for their restructuring and for bad debt settlement for each year...

Under the scheme, all credit institutions will be restructured. The SBV will categorise solutions to restructure credit institutions into groups based on the type of credit institution. The country’s system of credit institutions currently includes State-owned banks, joint stock banks, finance companies, financial leasing companies, foreign credit institutions, co-operative banks, public credit funds and microfinance institutions.

Methods and measures to restructure credit institutions will be applied in accordance with the specific nature of each institution and in line with the market mechanism based on caution, ensuring the rights of depositors while maintaining stability and system security under the Government’s policies on restructuring the financial market.

The disposal of bad debts over the next few years must be linked to the implementation of measures to prevent and minimise new bad debts, improve the credit quality of credit organisations, and promote the role of Vietnam Asset Management Company (VAMC) in bad debt settlement. This is to ensure that the NPL ratio, including debts sold to VAMC, are maintained at a safe and sustainable level of less than 3% of the total outstanding loans.

The country finalised the first phase of bank restructuring in the 2011-15 period, which has helped the sector become more secure, and gained the trust of people and investors.

Since the end of 2011, the SBV has had to deal with nine poorly performing banks. Some names have disappeared from the financial market through mergers and acquisitions, such as HabuBank (merged with SHB), Western Bank (merged with PVFC), Tin Nghia Bank and FicomBank (merged with Saigon Commercial Bank-SCB), and DaiABank (merged withHDBank).

After five years of restructuring, the central bank still must deal with bad debts and issues related to fragile lenders to introduce more effective settlement measures. This shows that the process of restructuring the banking system still requires a lot of hard work.