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Bank bad debt trading mechanism, why not?
A banking official said that he believes that non-performing loans (NPL) of the whole banking system are no less than several tens of thousand billion VND. However, Vietnam still does not have a mechanism for bad debt trading.
No less than tens of thousands of billion VND
The State Bank of Vietnam has not announced the real NPL ratio of Vietnam’s banking system as a whole for 2008. However, at a recent workshop held by Thoi bao Kinh te Vietnam newspaper, a banking official said that the NPL is ‘not less than tens of thousands of billion VND’.
Meanwhile, sources say that the NPL of three state-owned banks and equitised Vietcombank are estimated at 4% of total outstanding loans.
The headache for bankers and management agencies now is how to deal with the NPL. In fact, most loan contracts of the NPL all have mortgaged assets of real estate (workshops, land) and valuable papers. However, it is not easy to sell mortgaged assets due to the complicated procedures stipulated by the laws.
According to Tran Phuong, Director of the Development Planning Division under the Bank for Investment and Development of Vietnam (BIDV), in 2001, the Government of China allowed the formation of a bad debt trading market with the participation of many economic sectors, state-owned, private, domestic and international.
China believed that if only state-owned entities were allowed to join the market, the debt valuation would not be competitive. That explains why China allows Morgan Stanley and other US investment banks not only to purchase stakes, but also trade bad debts of banks.
How about Vietnam?
No bad debt trading mechanism yet
Phuong said that there seems to be no bad debt trading market in Vietnam, adding that the trade of bad debts has to undergo very complicated procedures. Because of this, very few foreign institutions want to jump into the field, as they fear they cannot sell the debts after they purchase them.
A legal expert at a bank said that bank debts are not available on the market because the government has not paid appropriate attention to the issue, and it has not allowed foreigners to join the field.
Meanwhile, Ngo Tuan Kiep, former Governor of the State Bank of Vietnam, he cannot see any reason why Vietnamese banks should not be able to sell bad debts to foreign investors.
To date, commercial banks have to deal with bad debts themselves, and they do not always do that well. Analysts believe that it is now the right time for state management agencies to think of a suitable bad debt trading mechanism which can help make banks financially healthier.
TBKTVN
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