SBV postpones debt standards

Mar 22nd at 10:34
22-03-2014 10:34:28+07:00

SBV postpones debt standards

The State Bank of Viet Nam has issued a circular allowing commercial banks an additional year before applying new, strict debt classification standards.

 

According to the circular (Circular No. 09/2014/TT-NHNN), dated March 18, 2014, banks can continue to restructure existing loans and keep them in the same debt group until April 01, 2015 instead of reclassifying them using more rigorous standards by June 1, 2014 as planned previously.

In Viet Nam, debts are classified into five groups based on their risk status: Standard Debt, Debt Needing Special Attention, Subprime Debt, Doubtful Debt, and Potentially Irrecoverable Debt.

The postponement comes as a big relief for commercial banks and businesses.

If the new debt classification standards were to be applied next month, all debt balances and value of off-balance sheet commitments (OBS) of a customer with a credit institution would be placed in the same debt group. If these were already placed in different groups based on varying risk levels, they would now have to be put into the group which has the highest risk level in the customer's credit portfolio.

The central bank decided to allow deferment after the banks expressed their concern that bad debt would surge and stifle credit, causing major businesses to collapse and triggering a financial crisis.

However, Circular 09, which took effect on Thursday (March 20, 2014), still requires banks to manage their debts more stringently.

It says banks must issue internal regulations on controlling and supervising the restructuring of loans in order to keep them in their current group.

It also says that restructuring of a loan and keeping it in the same debt group (instead of downgrading it) can only be done once. If a customer fails to adhere to the repayment schedule of the restructured loan, it would have to be downgraded and placed in a higher risk category.

The new circular also stipulates that credit institutions and foreign bank branches set aside risk provisions when they purchase special bonds issued by the Viet Nam Asset Management Company (VAMC), which was set up by the central bank to buy bad debts.

In calculating the risk provision, credit institutions and foreign bank branches must periodically assess the value of relevant collateral to ensure that it corresponds to their current market value, the circular says.

vietnamnews



NEWS SAME CATEGORY

HSBC, ANZ reports not confident in credit growth

HSBC has analysed that a recent interest rate cut by the State Bank will have little impact on lending growth.

Vietcombank to abide by US foreign account tax rule

Vietcombank plans to be the first Vietnamese bank to conform to the US' Foreign Account Tax Compliance Act (FATCA).

Viet Nam tops ultra-rich growth

Viet Nam's ultra-high net worth individuals, with US$30 million or more in total assets, would double to nearly 300 in the next 10 years, according to a recent...

FX, gold trading via floors illegal in Vietnam: SBV

Trading in foreign currencies or gold via foreign exchange (forex) trading floors is illegal in Vietnam as currently there are no specific regulations on business...

Concessionary loans to individual customers at VIB

The Vietnam International Bank (VIB) has officially offered a preferential credit package worth VND2.5 trillion ($119 million with interest rates from 7.99 per cent...

VIB honours Excellent Brand of Vietnam 2013

The Vietnam International Bank (VIB) has just conferred the Excellent Brand of Vietnam 2013 award by English-language business magazine Vietnam Economic Times and...

Lower deposit rate cap won't have significant impact: banks

The State Bank of Viet Nam yesterday lowered the interest rate cap on bank deposits of up to six months by 1 percentage point to 6 per cent as part of efforts to...

Bank M&A deal nears

Many market observers believe that Sacombank will benefit less from its merger with Southern Bank.

Lukewarm response to export credit insurance

Only 46 export credit insurance policies were taken after three years of implementing a Government's pilot prog-ramme, according to the Ministry of Industry and...

State bank cuts interest rates to spur growth

Viet Nam's credit growth as of March 13 was negative 1.05 per cent against the end of 2013.

Bank stocks

Insurance stocks


MOST READ


Back To Top