State Bank warns banks not to hide debt

Thursday, Aug 22, 2013 17:57

Many banks are hiding bad debts to present brighter financial reports, but experts warn that this can even worsen their debt situation. — Photo
HA NOI (Biz Hub) ― The combined bad debts of BIDV, Vietcombank and Vietinbank reached more than VND23.1 trillion (US$1.1 billion) in the first half of the year, financial news website reported, based on commercial banks' mid-year financial reports.

The debt figure of the three major banks made up nearly all bad debts in the domestic banking system, which totalled about VND24 trillion ($1.14 billion) in six months.

Bad debts reached VND9.4 trillion ($447.6 million) at BIDV, VND6.7 trillion ($319 million) at Vietcombank, and more than VND7 trillion ($333.3 million) at Vietinbank.

In terms of percentages, however, bad debts were highest at Sai Gon-Ha Noi Bank at 9 per cent, followed by Navibank at 6.1 per cent, and Techcombank at 5.28 per cent.

While the Government recently required lending institutions with bad debt ratios of 3 per cent or higher to sell debts to the Viet Nam Asset Management Company, most banks have announced "secure" bad debt levels.

Asia Commercial Bank posted 2.99 per cent, Sacombank 2.55 per cent, Vietinbank 2.1 per cent, Vietcombank 2.81 per cent, Eximbank 1.49 per cent, and Military Bank 2.44 per cent.

These low ratios were due to the banks' significant outstanding loans, according to

State Bank of Viet Nam Deputy Governor Dang Thanh Binh told a meeting on Monday, however, that many banks were hiding bad debts so that they could present brighter financial reports.

Jon Sheehan, a regional official of Capital Service, told the media that domestic banks didn't want to publicise accurate debt figures due to pressure from shareholders and fears of losing capital and prestige or causing share slumps on the stock market.

Lawyer Truong Thanh Duc from the Basico Law Co said that inexact data could lead to an even worse bad-debt situation. He warned that over optimism about quick market recovery might cause bad debts to even double.

Tran Thi Hong Hanh, secretary of the Banking Association, urged banks to look straight into their debt situation. "Without being aware of the real situation, they can't work out proper solutions to their problems. If this is prolonged, they will suffer more losses with more stagnant operations," she said.

"Can [banking] supervisory agencies operate efficiently without grasping precise data?" Binh asked, pushing for supervision to be strengthened to provide a stable monetary market and healthy business environment. ― VNS

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