Vietnam’s ‘bad bank’ takes over $474m of spoiled debt

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DongVietnam’s newly launched “bad bank”, designed as a state asset management company to take over and “clean up” toxic debt from other local banks, has started operations and will be buying the first batch of bad debt in the next two weeks, Bloomberg reported on August 7.

Vietnam Asset Management Co. will acquire as much as 10 trillion dong – $474 million at current rates – of spoiled debt over the next 2 months. In exchange, it will issue bonds to the banks that enable them to secure funding from the central bank. Lenders with bad-debt ratios of 3 per cent and above will be required to sell their non-performing loans to the asset management company.

The exercise is aimed at restoring investor confidence and resolving the issue of almost $5 billion of toxic debt at banks amassed through mismanagement in state-owned corporations and bad property loans and estimated at 7.8 per cent of all outstanding loans at per the end of 2012, with about 35 per cent of property loans being non-performing. The model has already been implemented by other countries in the region as well as in China.

The asset company said it will prioritise buying debt from 10 banks with the highest non-performing loan levels. However, the debt needs to have a collateral such as property and other assets.

Creators of the biggest debt piles were state firms such as Vietnam Shipbuilding Industry Group.

The debt will be purchased at book value and sold at market value to international banks and investors with a high-risk profile.
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Reading Time: 1 minute

Vietnam’s newly launched “bad bank”, designed as a state asset management company to take over and “clean up” toxic debt from other local banks, has started operations and will be buying the first batch of bad debt in the next two weeks, Bloomberg reported on August 7.

Reading Time: 1 minute

DongVietnam’s newly launched “bad bank”, designed as a state asset management company to take over and “clean up” toxic debt from other local banks, has started operations and will be buying the first batch of bad debt in the next two weeks, Bloomberg reported on August 7.

Vietnam Asset Management Co. will acquire as much as 10 trillion dong – $474 million at current rates – of spoiled debt over the next 2 months. In exchange, it will issue bonds to the banks that enable them to secure funding from the central bank. Lenders with bad-debt ratios of 3 per cent and above will be required to sell their non-performing loans to the asset management company.

The exercise is aimed at restoring investor confidence and resolving the issue of almost $5 billion of toxic debt at banks amassed through mismanagement in state-owned corporations and bad property loans and estimated at 7.8 per cent of all outstanding loans at per the end of 2012, with about 35 per cent of property loans being non-performing. The model has already been implemented by other countries in the region as well as in China.

The asset company said it will prioritise buying debt from 10 banks with the highest non-performing loan levels. However, the debt needs to have a collateral such as property and other assets.

Creators of the biggest debt piles were state firms such as Vietnam Shipbuilding Industry Group.

The debt will be purchased at book value and sold at market value to international banks and investors with a high-risk profile.
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