Banks cautious over selling debts to VAMC
Banks cautious over selling debts to VAMC
Banks sold limited debt amounts to the Viet Nam Asset Management Company (VAMC) this year, although their bad loans are increasing, reported Dau tu (Viet Nam Investment Review) online.
VAMC Chairman Nguyen Quoc Hung said that the company has bought nearly VND55 trillion, or US$2.62 billion, of bad loans from 35 credit institutions since it began operations in July 2013.
This year, it purchased about VND16 trillion, or $761.90 million, of debts, much lower than the annual target of VND70 million to VND100 trillion, or $3.33-4.76 billion.
The volume of debts that VAMC has sold is even more insignificant, reaching VND1.4 trillion, or $66.67 million.
Industry insiders said that the slow progress made by VAMC in dealing with bad loans has caused banks to become reserved in selling debts.
To Duy Lam, director of the State Bank of Viet Nam's HCM City branch, said that local banks resolved VND8 trillion, or $380.95 million, of bad debts in the first seven months of this year.
They transferred only one-eighth of this amount to VAMC, and dealt with the debts mainly with their own risk provisional funds and other measures.
Dau tu cited a recent survey by Ernst & Young Viet Nam which showed that while 76 per cent of the domestic banks see bad debts as the most worrying issue for the banking sector, many don't prioritise selling of assets to VAMC.
The newspaper quoted Ernst & Young official Nguyen Thuy Duong as saying that this is because banks are still responsible for resolving bad debts even after selling them. In particular, banks have to establish every year a provisional fund amounting to 20 per cent of the value of the debts they sold.
"We would sell debts to VAMC as it's very difficult to sell mortgages in dealing with bad loans…But now, when even VAMC complains that it faces the same obstacle due to mechanism problems, how can we rely on the company?" an unnamed deputy general director of a joint stock bank told Dau tu.
Sources told the newspaper that many foreign investors have expressed interest in buying debts from VAMC. But the company maintains the principle of not bargaining away bad loans, requiring investors to have restructuring plans for the businesses involved in the debts.
"We'll wait and see if VAMC sets up a new mechanism. Then we'll consider selling more debts," the unnamed official added.
Meanwhile, the bad debts of banks continued to rise this year.
On June 30, the bad debt ratio at Eximbank increased 43.1 per cent over the level recorded at the end of last year. Debts facing risks of loss of capital represented 61.7 per cent of all bad loans, an increase of 35.8 per cent.
The amount of debts facing the risk of capital losses at Vietcombank was more than VND4.7 trillion, or $223.81 million, a 70 per cent increase during the first half of this year.
The amount of debts facing risk of capital losses at Vietinbank was VND3.17 trillion, or $150.95 million, a 40 per cent increase during the period.
Banks' financial reports showed that many lenders saw the costs of risk prevention increase by 20 to 40 per cent in the second quarter of the year.
VAMC is considered a powerful entity of the State Bank of Viet Nam for restructuring bad debts, but it will need significant support to fulfill its tasks, industry insiders said.
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