Commercial banks’ bad debt ratio reaches 40 percent
(VOV) - National Financial Supervisory Committee Deputy Head Dr Le Xuan Nghia has said the majority of bad debts are currently owed by select commercial banks because of inadequate emergency reserves.
The bad debt ratio of some commercial banks exceeds 40 percent, but this figure has not yet been officially announced, Dr. Nghia says.
He suggests the current liquidity weakness demands merging or nationalising small-scale commercial banks, particularly in rural areas.
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Nguyen Thi Thanh Huong, Banking Magazine’s editor-in-chief, emphasised the urgency of overcoming bank management challenges. Internal management systems have not adapted to the illegal operations of several commercial banks, she noted.
Huong also expressed faith in the potential for restructuring or nationalising ineffective banks, saying it will ease the difficulties confronting the central bank.
Vu Dinh Anh, the Ministry of Finance Market and Price Institute’s Deputy Director, is worried by the limited progress made on settling bad debts. He noted that in the time since the first three bank mergers in 2011, only one more—Habubank—Dr. Anh suggested commercial banks should devise their own credit growth plans based on their particular situations and capacities. For relevant management agencies, he said, it is essential to focus on interest rate adjustments.
Pham Xuan Hoe—Deputy Head of the State Bank of Vietnam (SBV)’s Monetary Policy Department—said macro policy interest rate adjustments should be made according to market trends and with inflation in mind. He said channels of credit are key to Vietnamese business operations, placing heavy pressure on the central bank. The current low growth environment, the high inventory levels, and the general economic downturn have made accessing bank loans much harder for businesses.. Ensuring an adequate supply of investment capital will be no easy task in 2013.
Hoe proposed the State Bank persist with its flexible monetary policies while monitoring fiscal issues in order to control the consumer price index and promote economic growth. He added a further interest rate cut is needed to accord with market operations.
Dr. Vu Dinh Anh voiced his concerns about interest rate pressure, saying a range of factors dramatically impact businesses’ input costs. Interest rates should be lowered and maximum lending rates avoided to maintain the credit market’s normal operations. Lending rates should be negotiated between banks and borrowers, he stressed.