The Viet Nam Assets Management Company (VAMC) will realise its target of purchasing between VND70 trillion (US$3.17 billion) and VND100 trillion (US$4.74 billion)worth of bad debts this year.— File Photo

HCM CITY (Biz Hub) — The Viet Nam Assets Management Company (VAMC) will realise its target of purchasing between VND70 trillion (US$3.17 billion) and VND100 trillion (US$4.74 billion)worth of bad debts this year, according to a source from Dau Tu (Investment) newspaper.

The paper quoted the State Bank of Viet Nam's Chief Inspector Nguyen Huu Nghia as saying that the central bank had outlined a bad debt purchase and sale plan together with several measures to help VAMC reach the goal.

Nghia said the total bad debts that credit institutions wanted to sell to the VAMC had climbed to VND30 trillion (US$1.42 billion). The number of bad debts is expected to increase after the issuance on June 1 of two circulars that provided classification of assets, the levels and methods of setting up of risk provisions, and the use of provisions against credit risks in banking activities of credit institutions and foreign banks' branches.

The two circulars contain detailed information on bad debts, and reveal that bad debts will increase.

Nghia, however, said the two circulars would also create a safe foundation for the credit institutions to better implement their risk administration work, and restructuring as well as settlement of bad debts.

"In recent times, the VAMC's purchase of bad debts has been rather slow because it had to wait for the central bank to approve a plan to issue special bonds. However, this does not mean that the banking sector's bad debt settlements have been stagnant.

"So far this year, the VAMC has bought more than 6.3 trillion worth of bad debts, thus increasing the total bad debts that the company has purchased to VND45 trillion. In addition, the banking sector itself has already settled bad debts worth about VND10 trillion," he said.

"Recently, the central bank approved the volume of special bonds to be issued so the VAMC would be able to accelerate its purchase of bad debts in the coming time."

A senior economic expert, who declined to be named, said that the low number of bad debt settlements was difficult to avoid since the central bank's policy could not use the state budget or foreign loans to solve bad debts. Worse still, the domestic debt purchase and sale market had not yet been created.

Also, foreign investors had shown little interest in being involved in this matter, he said.

Consequently, by the first quarter of this year many commercial banks announced that their potentially irrecoverable debts had increased strongly even though their bad debt ratio was under three per cent.

For instance, Vietcombank's potentially irrecoverable debts had gone up by 10 per cent, to VND3 trillion. Meanwhile, BIDV's irrecoverable debts had also been raised by 32 per cent to VND5.56 trillion, and ACB's VND2.3 trillion.

In an attempt to increase the settling of bad debts, Nghia said one of the measures that the central bank would immediately apply was to ask the VAMC and credit institutions to jointly build debt purchase and sale plans each month. — VNS