Vietnam needs to tackle bad debt

DAWN ^ | 10/10/2013 | DAWN

[TexGrill]

HA NOI: The task to reduce non-performing loans (NPLs) and increase charter capital as well as complete basic ownership structure of weak credit institutions would be given priority in the period of 2013-14.

The advice was made by Le Xuan Nghia, member of the government advisory board and former deputy chairman of the National Financial Supervisory Committee.

Addressing the conference entitled "Movements of macro-economy and prospects of Vietnam's bank restructuring process" held in Ha Noi yesterday, Nghia said the basic task for bank restructuring last year was to fundamentally ensure liquidity and handling weak credit institutions.

"After two years of restructuring, the system's liquidity was ensured. The State Bank of Vietnam (SBV) has partially resolved NPLs," he said.

He added that the central bank has handled eight out of nine weak credit institutions.

However, he said large and prolonged cross-ownership hindered the improvement of governance and risk management in a number of commercial banks.

"The reason was due to lack of transparency about the origin of contributed capital and sanctions to thoroughly handle ownership matters," he said.

He proposed to strengthen supervision and discipline and transparency of the banking system in general and sales of debts in particular.

It is suggested to relieve concerns of banks and enterprises when selling NPLs to the Vietnam Asset Management Company (VAMC).

The country should have more financial sources besides special bonds to handle NPLs, for example, government bonds or sale of State assets including divestment, sales of State enterprises and real estate to provide capital support for VAMC.

[TexGrill]

Global business tip

[MCF]

Why would anyone buy a state business or real estate in a communist country? The government could just seize it at any time, that is how they got it in first place.