Conditions unavailable for ADB to resolve bad debts
Conditions unavailable for ADB to resolve bad debts
Asian Development Bank (ADB) President Takehiko Nakao expressed an intention to help Vietnamese banks deal with bad debts, but necessary conditions were not yet in place for such a move.
Nakao told a press conference in Ha Noi late last week that ADB could buy stakes of local banks with high bad debt ratios and pump money into them.
This had been done in other countries, and ADB had even gained profits from the share acquisitions as corporate activities recovered and share prices increased.
Prime Minister Nguyen Xuan Phuc said during a reception last week that Viet Nam treasured its ties with the ADB, considering the institution one of the top donors in the supply of capital, technical assistance and policy consultation.
However, Viet Nam Asset Management Company (VAMC) Chairman Nguyen Quoc Hung said recently that while many foreign institutions had expressed the desire to buy domestic bad loans, there was a lack of a legal framework for them to do so.
Nguyen Tri Hieu, a banking and finance expert, told the Hai quan (Customs) newspaper it would be hard for the ADB to materialise its "goodwill" now because in Viet Nam, transferring assets to an international legal entity remained restricted.
Hieu added that the condition of mortgage assets was a key factor in dealing with bad debts. It was easy to liquidate some assets, and harder for some others.
He said that customers usually mortgaged real estate for bank loans, but the local realty market had been seeing frequent fluctuations, leaving potential risks for banks accepting such mortgages.
"Many Vietnamese banks are embarrassed to handle mortgage assets, so it will be even harder for foreign institutions to take part in the [bad debt settling] process without proper management measures," Hieu said.
In a recent working session with the State Bank of Viet Nam, Deputy Prime Minister Vuong Dinh Hue urged banking authorities to soon work out measures to develop a market for bad debt trade, and to intensify regulations for mortgage and debt settlement.
Industry insiders said a complete legal framework, including regulations on bankruptcy and asset liquidation, should promptly be made available.
Earlier this month, Hung told the press that the VAMC would use cash, departing from the usual practice of using only special bonds, to buy non-performing loans. This was aimed at accelerating bad debt resolution and help banks to boost lending.
The VAMC planned to issue special bonds worth about VND40 trillion (US$1.8 billion) to buy bad debts from credit institutions in 2016. It would settle some VND30 trillion to VND35 trillion of the purchased bad debts this year, which was double that of last year.
