Banks lent large corporate customers more than 3.2 quadrillion VND by the end of 2020. (Photo: baodautu.vn)Although banks have tried to boost retail credit for individual customers inrecent years, big corporate customers are still their main targets as a creditcontract with a large enterprise can bring a profit hundreds of times higherthan that of thousands of small credit contracts of individual customers.
The SBV said bad debts of large corporate customers in 2020 increased comparedto the end of 2019. The total outstanding loans that banks lend to largeenterprises exceeded 3.2 quadrillion VND, accounting for more than 30 percentof the total outstanding loans of the entire economy. Of which, bad debtsaccounted for 1.65 percent of the loans. Notably, bad debts for enterpriseswith outstanding loans of 5 trillion VND or more was 2.42 percent, higher thanthe average bad debt ratio of the banking system.
As many banks are increasingly dependent on large corporate customers, riskshave increased.
Although the SBV did not specifically mention the 3.2 quadrillion VND loans, itis estimated that the large enterprises mainly operate in the real estatesector.
According to experts, real estate credit is not bad because the real estatemarket is a fundamental market and its development will lead to the growth ofthe entire economy. However, the SBV’s warnings about large corporate creditand real estate credit are understandable.
First, some banks are too focusing on a number of large enterprises. At manybanks, real estate credit is not only reflected in huge corporateloans but also huge corporate bond investments.
Second, in terms of data, cross-ownership in the banking sector has decreasedsharply, but in reality, this relationship is increasingly complex. Generalmeetings of shareholders in the banking industry this year also witnessed manynew bosses appointed who also run large real estate groups.
Third, banks could face liquidity difficulties if they lend too much capitalfor a few large enterprises, as in recent cases when banks have struggled withloans worth tens of thousands of billion dong to build-operate-transfer(BOT) enterprises that have failed to pay their debts due to difficulties intheir business.
When lending to enterprises, banks always have tools to calculate and preventrisks. However, avoiding too much focus on large customers will spread risks,experts said.
Experts suggested to deal with the risks, under a project to restructure thesystem of credit institutions associated with bad debt settlement for 2021-25,the SBV should draft the restructuring with a focus on asset quality but notthe size of banks. Many countries are also trying to develop small butquality banks, which lend to individual customers and small andmedium-sized enterprises, instead of depending too much on big enterprises.
In addition, to reduce risks for banks, the SBV must gradually raisebanks’ risk governance standards, require them to be more transparentabout governance and improve the independence of the banks’ executive boards./.
VNA
