Earlier this week, the State Bank of Viet Nam (SBV) issued a directive to hasten the restructuring of credit institutions associated with resolving bad debts.

Under Directive No 05/CT-NHNN, the central bank pushed for the compilation of amendments to several points of the Law on Credit Institutions to create a synchronous legal framework to speed up restructuring.

Inspections would be enhanced to prevent violations while analysis and forecasting on developments of monetary and forex markets must be improved to ensure market stability, according to the directive.

The central bank also asked the Viet Nam Asset Management Company (VAMC) to speed up the handling of bad debts and mortgaged assets that the company purchased following market-based mechanisms.

Cooperation between the VAMC and credit institutions must be strengthened in handling bad debts, the central bank said.

Credit institutions must also speed up the resolution of bad debts following their plans and strictly abide by the regulations on interest rates and raising capital.

According to the development strategy of the banking sector to 2025 approved in August, the central bank targets to reduce the ratio of bad debts from the current 6.6 per cent of outstanding loans to below 3 per cent. — VNS