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Authorities discuss ways to tackle bad debt (26/7)
26/07/2012 - 19 Lượt xem
Experts, managers and organizations issued different assessments of the bad debt situation in the Vietnamese commercial banking system. A State Bank of Vietnam report showed that the bad debt rate in the banking system was 3.39 percent in late 2011. According to reports by credit institutions, the bad debt rate was 4.47 percent as of May 31, 2012. Reviewing the banks' operations in the first half of this year, a State Bank of Vietnam representative said that the bad debt rate was 8.6 percent and bad debts amounted to VND202 trillion as of March 31, 2012. Fitch Ratings assessed that the bad debt rate in the Vietnamese banking system is currently 13 percent. State Bank of Vietnam Governor Nguyen Van Binh said at a National Assembly forum on June 7 that the bad debt rate is about 10 percent.
At the 13-tenure National Assembly Standing Committee's ninth session opening on July 16, 2012, the National Assembly Working Group presented an estimated agenda for the 10th session under which there will be four more government members including the State
Bank of Vietnam's Nguyen Van Binh answering questions. To be specific,
Binh will answer questions related to changes in interest rates and
solutions to solve problems for businesses and reduce bad debt in the banking system.
Contributing to bad debt reduction, on July 13 the Vietnam Association of Financial Investors (VAFI) suggested the following solutions:
1) To increase reserves for bad debs and be content with decreased profit or losses to fill losses and strengthen the inner financial capability.
2) To apply proper salary and bonus policies to reduce costs and have more funding for increasing bad debt reserves.
3) In cases where businesses have a good business administration history, part of the principle debts owed by them could be turned into mid-term bonds or shares. This solution has been successful in other countries where it has helped businesses to escape bankruptcy and also secure the banks' capital.
VAFI also has proposals related to state policies in the field:
1) To increase foreign investors' holdings in domestic banks to 40 percent of the bank's chartered capital and the holding rate of foreign strategic investors to 25-30 percent to attract more foreign indirect investment (FII).
2) To allow a number of foreign banks that are
strong in finance and have good business administration to acquire weak
banks. Many Asian countries such as Thailand, Indonesia and the Republic of Korea were successful with this solution and it helped restore their banking systems from the 1996-2001 financial crisis.
3) The State Bank of Vietnam should provide financially viable commercial banks with financial assistance to help them acquire weak banks. This assistance is aimed at reducing bad debt to make the banking system stronger. Strong banks only acquire a weak bank on a voluntary basis when they see that the acquisition benefits them because they have to fulfill their responsibility to shareholders.
4)
To free debt purchasers and sellers from value added tax (VAT) and
enterprise income tax to promote debt purchase and sales and encourage
private investors to participate in the debt purchase and sales market.
5) To free enterprise bond issuance activities from the enterprise
income tax, aimed at reducing deposit interest rates, helping
commercial banks to mobilize long-term capital, through which to promote the transformation of debts into securities, the enterprise bond market's development and the stability in commercial bank's capital mobilization.
6) To find solutions to warm-up the real estate market. There are millions of people that cannot afford to buy a house, while the number of customers willing to buy a house at a price of several hundred million dong is big. If the State and real estate businesses can do something so that the demand for low-price property is satisfied, many social security problems will be solved, the real estate market will be warmed-up and the rate of bad debts in construction, building material and property industries will decrease. To do this, the initiative
of creating 25 square meter apartments needs to be turned into a
reality. Local authorities, especially those in urban areas, need to
simplify construction licensing procedures to pave the way
for real estate businesses to surmount difficulties and stimulate
domestic consumption. A 50 percent reduction in VAT should be applied
to real estate and construction material businesses to help reduce
housing construction costs and increase business revenues.
7)
To restructure state budget allocation for 2013 towards increasing
spending for infrastructure development and decreasing expenditure in
sectors that do not have urgent capital demands, aimed at stimulating the development of many economic sectors through which to contribute to decreasing bad debt in the commercial banking system./.
Source: VEN.
Source: VEN.
