Vice Chairman of the National Assembly’s Economic Committee Nguyen DucKien spoke with Nhan Dan (People) newspaper about the restructuring ofthe banking sector and solutions to deal with bad debts.
* What is your assessment of Vietnam’s banking sector restructuring and the resolution of bad debts?
Inall the economic structure pillars, the banking sector’s restructuringis the most successful with the number of banks reduced by 15, includingnine weak banks. The banks have maintained liquidity flow and systemstability.
* Some people have said that the process has not touched on the root cause of the problem. What’s your view?
Thegeneral view is that the banking sector has taken some bold measures tosettle bad debt and advance the restructuring process. This wasconducted according to the law to ensure national monetary security. TheState Bank of Vietnam has bought back some banks for zero VND. This hasbeen done for the first time, showing our creativity in solving theissue. We cannot use the state budget for the settlement of bad debt, sowe have to do it this way. The bad debts, on the other hands, have beenbought by the Vietnam Asset Management Company (VAMC), which is thesmartest and least risky solution for us.
The State Bank hasasked all credit institutions to reduce their dividends to set up acontingency fund, so as to gradually clear up their system. This has tobe done at the systemic level, including big banks.
Bad debt is aproblem of the entire economy. The settlement of bad debt is related tothe national economy because bad debts have been accumulating for along time.
* What are the differences in Vietnam’s banking sectorrestructuring and bad debt solutions, compared to internationalpractices?
We don’t have a companion in the solution of bad debt.Internationally, other countries have the support of internationalorganisations. For example, Greece solved bad debt with a loan of 270billion USD from the EU, the European Bank and the IMF. We have to do itourselves without financial support, even from the budget. So we haveto choose the best solution for our situation. That’s why I said oursolution is the most cost effective.
* So we are settling baddebts using special solutions. What have been the challenges during theimplementation, and how have we overcome those challenges?
Thereare three figures related to bad debts, including that of the creditinstitutions, of the banking supervisory body, and of internationalorganisations. Only the number from the State Bank’s inspection iscredible and legally binding.
There are two issues in bad debtsolutions. We should not use the state budget because it will increasepublic debt. The second issue is that bad debts have been accumulatingsystematically and for a long time. The Government, ministries, sectorsand localities, the whole political system needs to join hands to solvebad debts.
I think we need to auction all assets that are notunder dispute, and solve all issues related to mortgages, for examplesome assets served as mortgages in several banks. The State Bank is notthe sole agency to solve all economic problems. It has its own duties,and cannot do the work on behalf of commercial banks. VAMC has supportedcredit institutions and enterprises by buying the bad debts. We willalso need more supervision.
I highly appreciate the fact that theState Bank did not allow commercial banks to distribute high dividendsto shareholders, so as to set up a contingency fund. Also, there has tobe close co-ordination among all related agencies, such as theministries of Natural Resources and Environment, Construction, PublicSecurity and the Court to solve the issue. The State Bank should applyBasel II standards in the management of the banking system to ensuresafety and international integration.-VNA
* What is your assessment of Vietnam’s banking sector restructuring and the resolution of bad debts?
Inall the economic structure pillars, the banking sector’s restructuringis the most successful with the number of banks reduced by 15, includingnine weak banks. The banks have maintained liquidity flow and systemstability.
* Some people have said that the process has not touched on the root cause of the problem. What’s your view?
Thegeneral view is that the banking sector has taken some bold measures tosettle bad debt and advance the restructuring process. This wasconducted according to the law to ensure national monetary security. TheState Bank of Vietnam has bought back some banks for zero VND. This hasbeen done for the first time, showing our creativity in solving theissue. We cannot use the state budget for the settlement of bad debt, sowe have to do it this way. The bad debts, on the other hands, have beenbought by the Vietnam Asset Management Company (VAMC), which is thesmartest and least risky solution for us.
The State Bank hasasked all credit institutions to reduce their dividends to set up acontingency fund, so as to gradually clear up their system. This has tobe done at the systemic level, including big banks.
Bad debt is aproblem of the entire economy. The settlement of bad debt is related tothe national economy because bad debts have been accumulating for along time.
* What are the differences in Vietnam’s banking sectorrestructuring and bad debt solutions, compared to internationalpractices?
We don’t have a companion in the solution of bad debt.Internationally, other countries have the support of internationalorganisations. For example, Greece solved bad debt with a loan of 270billion USD from the EU, the European Bank and the IMF. We have to do itourselves without financial support, even from the budget. So we haveto choose the best solution for our situation. That’s why I said oursolution is the most cost effective.
* So we are settling baddebts using special solutions. What have been the challenges during theimplementation, and how have we overcome those challenges?
Thereare three figures related to bad debts, including that of the creditinstitutions, of the banking supervisory body, and of internationalorganisations. Only the number from the State Bank’s inspection iscredible and legally binding.
There are two issues in bad debtsolutions. We should not use the state budget because it will increasepublic debt. The second issue is that bad debts have been accumulatingsystematically and for a long time. The Government, ministries, sectorsand localities, the whole political system needs to join hands to solvebad debts.
I think we need to auction all assets that are notunder dispute, and solve all issues related to mortgages, for examplesome assets served as mortgages in several banks. The State Bank is notthe sole agency to solve all economic problems. It has its own duties,and cannot do the work on behalf of commercial banks. VAMC has supportedcredit institutions and enterprises by buying the bad debts. We willalso need more supervision.
I highly appreciate the fact that theState Bank did not allow commercial banks to distribute high dividendsto shareholders, so as to set up a contingency fund. Also, there has tobe close co-ordination among all related agencies, such as theministries of Natural Resources and Environment, Construction, PublicSecurity and the Court to solve the issue. The State Bank should applyBasel II standards in the management of the banking system to ensuresafety and international integration.-VNA
