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In selling bad debts, banks cannot haggle
The government of Vietnam, via the asset management company (AMC)--where it holds controlling stakes, would define the prices of the bad debts.
It is highly possible that the measures to deal with the bad debts in the national economy would be put on the agenda of the regular government meeting this week.
Vo Tri Thanh, Deputy Head of the Central Institute of Economic Management (CIEM), said the bad debts have been increasing very rapidly in the last few months, by 8-9 percent a month. Therefore, settling bad debts should be seen as an urgent task.
No official solution to deal with bad debts has been put forward so far. However, experts believe that in the current circumstances, setting up AMC proves to be the only choice. Only an AMC has sufficient power and instruments to clear bad debts, and only when the debts are cleared, the capital would be able to go smoothly to the national economy.
However, two posed questions remain unanswered. Will the AMC be established as a joint stock company or 100 percent state owned company? And how will the bad debts be valued?
An economist has revealed that AMC would be a company in which the State would hold controlling stakes, a non-profit one.
Regarding the valuation of bad debts, the government, through AMC, would have the right to define the prices of the debts. The economist has also said that this is the way followed by China, which succeeded in dealing with bad debts.
The economist said some commercial banks would disagree with the regulation that commercial banks do not have the right to valuate their bad debts. They would rather keep the irrecoverable debts on books to enjoy profits than selling debts at the prices which they cannot be decide.
However, the State Bank of Vietnam would have its own ways to force commercial banks obey the decision to sell bad debts with the valuation by AMC.
Dr Le Xuan Nghia, a Member of the National Advisory Council for Finance and Monetary Policies, also said that he advocates the idea that AMC should be given the power to define bad debts’ prices. However, Nghia believes that the government would follow a reasonable valuation method which can set up reasonable prices to be accepted by both the parties.
In case commercial banks deliberately refuse to sell bad debts at the prices decided by AMC, the State Bank would apply necessary measures to force banks to do that (requiring higher compulsory reserve ratios, higher provisions against risks and requesting to apply new accountancy standards…)
The bad debts, according to the State Bank, have reached 200 trillion dong. Economists believe that AMC would only buy the bad debts at the prices equal to 50 percent of the bad debt value at maximum, or 100 trillion dong.
South Korea also purchased all the bad debts at the average price equal to 36 percent of the bad debt value.
Sources have said that a lot of foreign enterprises have sent words that they want to buy bad debts of the Vietnamese banking system. However, this is a big matter which needs much time to consider.
“It is true that foreign enterprises could be the potential debt buyers because they are more financially capable than domestic enterprises. However, we need to be very cautious, or some key industries would be controlled by foreigners,” an official from the Ministry of Finance said.
vietnamnet
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