Business » Finance
Settling VND40-70 trillion in bad debts to be difficult for VAMC: Economist
  • | Dau Tu, dtinews | July 10, 2013 11:25 AM
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Governor of the State Bank of Vietnam Nguyen Van Binh expected that Vietnam Assets Management Company (VAMC) would settle between VND40 trillion (USD1.42 billion) and VND70 trillion (USD3.33 billion) bad debt this year, but this may be a difficult task.

 

This comment was made by senior Economist Le Xuan Nghia, Head of Business Development Institute.

The company started operations on July 9, however, its two most important regulations, Internal Operation Regulation and Special Bond Issue Regulation, have not yet been signed, he explained

According to Mr. Nghia, VAMC only deals with one third of bad debts; meanwhile, private banks will have to be responsible another third and the Ministry of Finance will restructure the rest.

The firm only buys bad debts valued at more than VND1 billion for individual customers and VND3 billion for corporate customers.

After selling bad debts to VAMC, banks will receive special bonds from the company which can be used as collateral to get loans from the SBV through the OMO mechanism. Accordingly, banks will be provided with loans of a maximum of 30% of the bonds value.

Capital source is the most decisive factor for bad debt settlement, making settlement quicker using the state budget rather than capital from the SBV, the economist said because the bank has to settle bad debts while also enforcing inflation policies. He added that, during the process of bad debt settlement, growth will be around 5.5-6% per year.

“We hope that the bad debt problem can be dealt with in the next four to five years. During this time economic growth will be slowed down and the property market will gradually recover. These are things we have to accept,” Nghia emphasised.

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