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Vietnam prepares bank revamp for bad debt clean up

Vietnam
Uncategorized
Debt

(23 May 2013 – Vietnam) The State Bank of Vietnam (SBV) has signalled a rate pause following the cut of the refinancing rate to 7 percent from 8 percent last week, as the country moves to clean up bad debt and revive growth.

A banking revamp approaches quickly after Prime Minister Nguyen Tan Dung approved the formation of an asset management company to acquire non-performing loans from the nation’s lenders, the central bank said on Tuesday.

The asset company will start operations in the second quarter, the central bank said in an e-mailed statement yesterday.

Deputy Governor Le Minh Hung said at a meeting with economists and bank executives yesterday that the prime minister approved a regulation to set up the vehicle, after the government missed an earlier target at the end of March.

The reluctance of banks to lend may result in economic growth of less than 6 percent for a third straight year, based on forecasts from the International Monetary Fund and the World Bank.

Gross domestic product expanded 5.03 percent last year.

“The government will be consistent in pursuing its goal of maintaining macroeconomic stability,” the central bank said in written answers prepared separately in response to reporters’ questions.

Vietnam plans to cut policy rates by 2 percentage points annually and the interest-rate cap on dong deposits by 0.5 percentage points each year, it said.

Vietnam will need to focus on other “prudent” policy measures to spur growth, the Deputy Governor said.

He forecast measures to clean up banks will contain bad debt at less than 5 percent of total loans at the end of the year, from 7.8 percent in December 2012.

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