Participants exchange experiences in recognising, managing, and resolving NPLs across the globe (Photo: VNA)Hanoi (VNS/VNA)— Nonperforming loans (NPLs) must be revolved at the earliest, especially inthe banking and financial sector, in order to strengthen Vietnam’s economy,ensure efficiency and boost effectiveness in capital allocation, a World BankGroup (WBG) official told a seminar on September 26.
Speaking at a workshop on Vietnam’s bad debts, Nguyen Phi Lan, Acting DeputyDirector General of the Department for Banking System Safety Supervision underthe State Bank of Vietnam (SBV), stated that on the whole, most bad debts hadbeen resolved and its current ratio stood at 2.55 percent of outstanding loans.
According to Lan, since 2012, a systematic restructuring of credit institutionsordered by the Prime Minister was followed by the formation of the VietnamAsset Management Company (VAMC) in 2013 to help acquire and resolve NPLs. Thesemoves were followed by various legal and regulatory amendments designed totackle NPLs and help stabilise the economy.
These courses of action have proved effectual, with the VAMC actively assistingcredit institutions in handling NPLs using special bond provisioning,enterprise restructuring, risks reduction and credit growth promotion.
Doan Van Thang, Chief Executive Officer of the VAMC, listed a number ofapproaches to NPL resolution that his company had employed to some extent ofsuccess, in which the SBV and the Government assign the VAMC to repurchase NPLsfrom credit institutions at fair market value paid in cash or bonds,effectively removing the NPLs from the credit institutions’ rolls.
As such, the model is not only suitable to Vietnam’s economic conditions, but alsosuccessful in keeping the banking sector’s bad debts below 3 percent by 2020,according to Thang. This should help credit institutions and commercial banksremove NPLs from their balance sheets, and reduce risk provision pressure whileincreasing credit worthiness.
Since its formation, the VAMC has successfully purchased up to 26,110 NPLs from16,197 institutions using special bonds. Most notably, in 2017, the VAMCmanaged to repossess the Saigon One Tower in HCM City from a number ofcustomers whose total outstanding debts had accumulated to more than 311.8million USD.
Jennifer Isern, WBG’s Finance and Markets Practice Manager for East Asia andthe Pacific, said the Vietnamese Government and the SBV had made positiveprogress in tackling NPLs.
Nevertheless, Isern warned that total outstanding and potential NPL volumeremained high, with risks to the country’s financial institutions. She alsosaid she believed the regulatory framework on handling NPLs and securingcollateral remained somewhat ineffective, and that successful management ofNPLs in Vietnam would be essential, as would be strengthening lending practicesand financial sector oversight to prevent an accumulation of NPLs.
Furthermore, she regards banking sector reform as fundamentally important for Vietnamto maintain the systematic capacity of the economy.
Katia D’Hulster, the WBG’s Lead Financial Sector Specialist in Finance andMarkets, said the SBV must impose a strict supervisory regime on NPLresolution, in which commercial banks should be supervised and assisted by theSBV throughout the process of NPLs governance, operation, recognition andimpairment, as well as forebearance and collateral valuation specification.
In particular, the workshop focussed on the recently approved Resolution 42,aiming to improve the regulatory framework on NPLs and secure collateralresolution, as well as developing the NPL market by addressing the issues ofeligible debt buyers and land titles.
According to the SBV, the regulation pathway set by the National Assembly torestructure the credit system is raising some concerns regarding NPLsresolution.
A key issue is the increasing value of NPLs and potential bad debts, which posepotential risks to the economy’s safety and efficiency.
This could be due to difficulties in dealing with collateral foreclosure, andthe lack of synchronisation in implementing the legal framework set by theGovernment, which still relies on the banking sector for funding and measuresinstead of the State budget.
As such, on behalf of the VAMC, Thang suggested some improvements in thecountry’s NPL resolution legal framework, providing the VAMC with up to 89million USD budget, as well as establishing an inter-agency committee for debtresolution, and developing the market for buying and selling NPLs.
The workshop was jointly held by the WBG and the SBV, with support from theSwiss State Secretariat for Economic Affairs. More than 100 policy makers,economic experts, and private sector representatives gathered to exchangeexperiences in recognising, managing, and resolving NPLs across the globe.-VNA
Speaking at a workshop on Vietnam’s bad debts, Nguyen Phi Lan, Acting DeputyDirector General of the Department for Banking System Safety Supervision underthe State Bank of Vietnam (SBV), stated that on the whole, most bad debts hadbeen resolved and its current ratio stood at 2.55 percent of outstanding loans.
According to Lan, since 2012, a systematic restructuring of credit institutionsordered by the Prime Minister was followed by the formation of the VietnamAsset Management Company (VAMC) in 2013 to help acquire and resolve NPLs. Thesemoves were followed by various legal and regulatory amendments designed totackle NPLs and help stabilise the economy.
These courses of action have proved effectual, with the VAMC actively assistingcredit institutions in handling NPLs using special bond provisioning,enterprise restructuring, risks reduction and credit growth promotion.
Doan Van Thang, Chief Executive Officer of the VAMC, listed a number ofapproaches to NPL resolution that his company had employed to some extent ofsuccess, in which the SBV and the Government assign the VAMC to repurchase NPLsfrom credit institutions at fair market value paid in cash or bonds,effectively removing the NPLs from the credit institutions’ rolls.
As such, the model is not only suitable to Vietnam’s economic conditions, but alsosuccessful in keeping the banking sector’s bad debts below 3 percent by 2020,according to Thang. This should help credit institutions and commercial banksremove NPLs from their balance sheets, and reduce risk provision pressure whileincreasing credit worthiness.
Since its formation, the VAMC has successfully purchased up to 26,110 NPLs from16,197 institutions using special bonds. Most notably, in 2017, the VAMCmanaged to repossess the Saigon One Tower in HCM City from a number ofcustomers whose total outstanding debts had accumulated to more than 311.8million USD.
Jennifer Isern, WBG’s Finance and Markets Practice Manager for East Asia andthe Pacific, said the Vietnamese Government and the SBV had made positiveprogress in tackling NPLs.
Nevertheless, Isern warned that total outstanding and potential NPL volumeremained high, with risks to the country’s financial institutions. She alsosaid she believed the regulatory framework on handling NPLs and securingcollateral remained somewhat ineffective, and that successful management ofNPLs in Vietnam would be essential, as would be strengthening lending practicesand financial sector oversight to prevent an accumulation of NPLs.
Furthermore, she regards banking sector reform as fundamentally important for Vietnamto maintain the systematic capacity of the economy.
Katia D’Hulster, the WBG’s Lead Financial Sector Specialist in Finance andMarkets, said the SBV must impose a strict supervisory regime on NPLresolution, in which commercial banks should be supervised and assisted by theSBV throughout the process of NPLs governance, operation, recognition andimpairment, as well as forebearance and collateral valuation specification.
In particular, the workshop focussed on the recently approved Resolution 42,aiming to improve the regulatory framework on NPLs and secure collateralresolution, as well as developing the NPL market by addressing the issues ofeligible debt buyers and land titles.
According to the SBV, the regulation pathway set by the National Assembly torestructure the credit system is raising some concerns regarding NPLsresolution.
A key issue is the increasing value of NPLs and potential bad debts, which posepotential risks to the economy’s safety and efficiency.
This could be due to difficulties in dealing with collateral foreclosure, andthe lack of synchronisation in implementing the legal framework set by theGovernment, which still relies on the banking sector for funding and measuresinstead of the State budget.
As such, on behalf of the VAMC, Thang suggested some improvements in thecountry’s NPL resolution legal framework, providing the VAMC with up to 89million USD budget, as well as establishing an inter-agency committee for debtresolution, and developing the market for buying and selling NPLs.
The workshop was jointly held by the WBG and the SBV, with support from theSwiss State Secretariat for Economic Affairs. More than 100 policy makers,economic experts, and private sector representatives gathered to exchangeexperiences in recognising, managing, and resolving NPLs across the globe.-VNA
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