Bad debt in Vietnam seen at 15% of loans

Vietnam ATMsRating agency Moody’s in a new report on Vietnam said that the country’s non-performing loan (NLP) ratio is much higher than the official figure of 4.7 per cent, saying that problem assets in the system are at least 15 per cent of total assets, VietnamNet Bridge reported.

Not only Moody’s, but many credit rating organizations said that Vietnam’s NPL ratio is much higher than the figure released by the State Bank of Vietnam and it may be at the 2-digit level. Fitch also said that Vietnam’s NPL ratio may account for 15 per cent.

In fact, there is a gap between the NPL ratios reported by commercial banks and those defined by management agencies. Normally, the numbers released by supervisory bodies are several percentage points higher but they have never reached up to the 2 digits as the assessment of foreign organisations.

At a recent meeting, a leader of the State Bank of Vietnam said the bank would take measures to minimise the gap. He said all credit institutions must conduct audits of credit quality to clarify the bad debts to have appropriate solutions. According to Moody’s, recent policies – such as the Vietnam Asset Management Company designed to take over banks’ problem loans – have not directly addressed undercapitalisation in the banking system.

It also said that profitability remains stagnant in a challenging operating environment, in which an improved external position has yet to revive domestic demand. Weak loan demand is depressing bank margins, which remain insufficient to offset rising credit costs and improve internal capital generation. Though bank regulators are aware of the need to improve accounting standards and transparency, decisive policies to address these issues have yet to be implemented.

Discussions around attracting foreign capital have also yielded limited results, since a cap on foreign investments continues to prevent control of domestic banks by foreign investors, according to the report. Moody’s rates nine banks in Vietnam, including two government-controlled banks and seven joint-stock banks.



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Rating agency Moody's in a new report on Vietnam said that the country's non-performing loan (NLP) ratio is much higher than the official figure of 4.7 per cent, saying that problem assets in the system are at least 15 per cent of total assets, VietnamNet Bridge reported. Not only Moody's, but many credit rating organizations said that Vietnam’s NPL ratio is much higher than the figure released by the State Bank of Vietnam and it may be at the 2-digit level. Fitch also said that Vietnam’s NPL ratio may account for 15 per cent. In fact, there is a gap...

Vietnam ATMsRating agency Moody’s in a new report on Vietnam said that the country’s non-performing loan (NLP) ratio is much higher than the official figure of 4.7 per cent, saying that problem assets in the system are at least 15 per cent of total assets, VietnamNet Bridge reported.

Not only Moody’s, but many credit rating organizations said that Vietnam’s NPL ratio is much higher than the figure released by the State Bank of Vietnam and it may be at the 2-digit level. Fitch also said that Vietnam’s NPL ratio may account for 15 per cent.

In fact, there is a gap between the NPL ratios reported by commercial banks and those defined by management agencies. Normally, the numbers released by supervisory bodies are several percentage points higher but they have never reached up to the 2 digits as the assessment of foreign organisations.

At a recent meeting, a leader of the State Bank of Vietnam said the bank would take measures to minimise the gap. He said all credit institutions must conduct audits of credit quality to clarify the bad debts to have appropriate solutions. According to Moody’s, recent policies – such as the Vietnam Asset Management Company designed to take over banks’ problem loans – have not directly addressed undercapitalisation in the banking system.

It also said that profitability remains stagnant in a challenging operating environment, in which an improved external position has yet to revive domestic demand. Weak loan demand is depressing bank margins, which remain insufficient to offset rising credit costs and improve internal capital generation. Though bank regulators are aware of the need to improve accounting standards and transparency, decisive policies to address these issues have yet to be implemented.

Discussions around attracting foreign capital have also yielded limited results, since a cap on foreign investments continues to prevent control of domestic banks by foreign investors, according to the report. Moody’s rates nine banks in Vietnam, including two government-controlled banks and seven joint-stock banks.



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