Tightening Risk Management in Banking System
The Governor of the State Bank of Vietnam (SBV) has asked the boards of directors and general directors of state-owned commercial banks (SOCBs) and joint-stock commercial banks (JSCBs) to implement steps to tighten risk management.
The Governor Nguyen Van Binh issued Document 7789/NHNN-TTGSNH dated 27th November on loan provisions and their exploitation, to address risks.
The Governor required banks to review and evaluate the possibility of putting up security property for auction, evaluate the market value of security property to estimate their proper value and discount rate, set up maximum of provisions for risks, create sources to handle non - performing loans (NPLs) by risk provisions 2012.
Based on business situation and NPL handling, banks should review, adjust targeted profits for 2012 to more proper level to create favourable conditions for handling NPLs in 2012.
Banks should actively classify loans and exploit specific loan provisions to deal with bad debts, especially those of group 5 according to regulations on loan classification, loan provisions and their exploitation to handle credit risk in banking operations of credit institution, issued together with Decision number 493/2005/QD-NHNN dated 22nd April 2005 of Governor of SBV, which was amended and supplemented by Decision number 17/2007/QD-NHNN dated 25th April 2007 of Governor of SBV.
Banks should also actively coordinate with customers to restructure loans; recover overdue loans; handle with security property; at the same time apply measures to manage and supervise closely loans handled by using loan provisions to recover capital as prescribed by law.
Assessing risk and bad loan management in Vietnam’s banking system, JPMorgan Chase affirmed that despite SBV informing that NPL rate is under 9 percent, most of credit rating agencies estimate that NPL rate of Vietnam must be over 12 percent. According to JPMorgan Chase, with public loan rate of under 50 percent of GDP, Vietnam’s Government is capable of absorbing bad debts in the banking system through direct transferring or establishing assets management company. However, by now, processes of cleaning bad loans in the banking system happen very slowly. Therefore, bad loans are forecasted to continue to be a barrier to credit growth and GDP growth.
Le Minh
Vietnamese
