Bad debt ratio likely to drop below 3% by 2020: Deputy PM
The State Bank of Vietnam’s goal of lowering the bad debt ratio to under 3% by 2020 is completely obtainable, stated Deputy Prime Minister Vuong Dinh Hue.
The State Bank of Vietnam (SBV) on October 15 held a teleconference to review the two-year deployment of the National Assembly’s Resolution 42/2017/QH14 on the pilot settlement of bad debts by credit institutions and the prime minister’s Decision 1058/QD-TTg approving a project to restructure credit institutions associated with the settlement of bad debts in the 2016-2020 period, the Government news site reported.
At the teleconference, Deputy PM Hue noted that the target, upon being reached, will contribute significantly to the restructuring of credit institutions and macroeconomic policies, thus stabilizing the macroeconomy, increasing the credit ratings of the country and credit institutions, and ensuring the steady development of the banking system.
Settling nonperforming loans and restructuring credit organizations have been the top priorities of the Government over the past few years, Hue remarked.
He urged credit institutions to play a greater role in settling bad debts. To date, 11 banks have met Basel II standards, achieving a capital adequacy ratio of at least 8%, and many banks have cleared their bad debts that they had sold to the Vietnam Asset Management Company.
Bad debts must be settled in line with the law and market and risk sharing principles, promoting the self-control and responsibility of credit institutions, ensuring the safety and effectiveness of the banking system and involving the participation of the entire political system.
As for credit institutions, Deputy PM Hue called for law-abiding principles, corporate culture development and transparency in settling bad debts.
Meanwhile, the central bank must quickly approve plans to restructure banks, coordinate with the relevant ministries and agencies to take over loss-making banks, increase the efficiency of its inspections and take steps to prevent new bad debts.
Localities should continue to enforce Resolution 42 among their subordinates to support the banking system in settling bad debts.
At the teleconference, SBV Deputy Governor Nguyen Kim Anh stated that after two years of deploying Resolution 42 and Decision 1058, the banking system has reported considerable achievements in bad debt settlement, bank restructuring and banking system development.
Specifically, the bad debt ratios at credit institutions have been maintained below 2%. From August 2017 to August 31, 2019, credit institutions settled VND236.8 trillion worth of nonperforming loans, or VND9.6 trillion per month, well above the VND4.7 trillion per month settled in the 2012-2017 period.
Nguyen Van Du, chief inspector of the SBV’s Banking Inspection and Supervision Agency, said from last year to August 31, SBV conducted nearly 2,300 inspections and issued conclusions for 2,100 inspections, asking credit institutions to correct their mistakes or warning of risks to the banking system.
The total assets of credit institutions reached VND11.81 quadrillion by the end of August, up 6.7% against 2018. They offered loans worth VND7.61 quadrillion and mobilized VND8.96 quadrillion, a respective increase of 8.4% and 8.2% over late last year.
The banking system’s capital adequacy ratio was 11.9%, while the average liquidity ratio stood at 16.9%.