Banks push bad debt reforms

Banks push bad debt reforms

The State Bank of Viet Nam (SBV) should reduce the 65 per cent rate of real estate collateral for loans being sold to the Viet Nam Assets Management Company (VAMC), bankers said in a Ha Noi meeting on Wednesday.

According to the SBV draft circular on the VAMC's operation, the assets firm will only buy non-performing loans (NPLs) backed by collateral, while at least 65 per cent of the collateral value must be real estate.

At the meeting to make recommendations for the draft circular, representatives from banks said the 65 per cent rate was too high, hindering banks from selling NPLs to the VAMC as intended by the central bank.

Agribank said loans with 65 per cent collateral in real estate were only held by real estate businesses. For other production companies, which preferred investing in machinery and factories to land, this ratio was insignificant.

Deputy head of Vietcombank's Debt Capital Market Division Nguyen Thi Kim Oanh said the rate was typically 50-60 per cent at his company, adding that 65 per cent was unfeasible.

The central bank should lower the rate to roughly 40 per cent so banks could realistically sell loans to VAMC, Vietcombank suggested.

Director of the Bank for Investment and Development of Viet Nam (BIDV)'s Legal Division Bui Minh Khai pointed out that the draft circular did not regulate who – VAMC or credit institutions - would appraise real estate collateral for loans.

Vietcombank's Oanh posited that VAMC would decide the appraisal of collateral after obtaining recommendations from independent advisory companies.

Bankers also proposed reconsidering the provision that VAMC will only buy individual loans worth more than VND1 billion (US$47,200).

Banks, especially Agribank, could not sell bad debts lent to household businesses and producers, as most of the loans were less than VND1 billion, BIDV's Khai added.

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