00:53 (GMT +7) - Monday 17/12/2018

Banking & Finance

SBV: $31.5bn in bad debts recovered during last six years

Released at: 17:19, 12/01/2018

SBV: $31.5bn in bad debts recovered during last six years

Illustrative image (Source: tapchitaichinh.vn)

Recovery and resolution of bad debts continue on right track, SBV Deputy Governor tells central bank meeting.

by Quang Huy

The non-performing loans (NPLs) of credit institutions were effectively controlled during 2017, according to the State Bank of Vietnam (SBV), helping the NPL ratio in the entire banking system fall to 2.3 per cent from 2.46 per cent as at late 2016.

SBV Deputy Governor Nguyen Kim Anh told a central bank meeting on implementing banking tasks for 2018 that the ratio of NPLs and other risky debts that could become NPLs had also fallen, to 7.91 per cent by the end of November from 10.08 per cent at the end of 2016.

From January to November last year, NPLs worth VND93.7 trillion ($4.12 billion) were recovered, raising total NPLs recovered in the last six years to VND705.3 trillion ($31.5 billion).

The outcome was partly due to improvements to the legal framework for restructuring credit institutions and dealing with bad debts, under Resolution No. 42/2017 from the National Assembly and the amended Law on Credit Institutions.

Not only including measures to improve lenders’ ability to enforce collateral security, which already appears to have made banks more aggressive in seizing commercial property to foreclose bad loans, Resolution No. 42 also enhances the trading of bad debts in the secondary market. Bad debts can now be sold to any legal entity, including foreign investors, without them needing a license for debt trading. 

The attempt to involve foreign investors could increase the funds available for debt resolution, particularly given their recent strong interest in Vietnam, with net FDI inflows being among the strongest in Asia-Pacific in 2016, at 5.6 per cent of GDP. 

According to the central bank, the entire banking system had recovered a total of more than VND50 trillion ($2.2 billion) as at December 31 under the resolution, which was only in effect for the closing four months of last year.

Reports from the National Financial Supervisory Commission estimate that pre-tax profits in the banking sector for 2017 would rise more than 40 per cent over 2016 and after-tax profits would be 44.5 per cent higher, mainly due to the handling of bad debts being hastened by Resolution No. 42.

The SBV said this year it would step up the restructuring of the banking sector as well as the settlement of bad debts, with lending to continue focusing on the government’s prioritized sectors, such as agriculture, exports, component industries, small and medium-sized enterprises (SMEs) and hi-tech firms, while limiting capital to risky industries such as real estate and securities.

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