VAMC to Buy Non-Performing Loans
Hanoi – The State Bank of Vietnam (SBV) has issued an instruction directing credit institutions to sell 75 percent of non-performing loans (NPLs) to national debt dealer Vietnam Asset Management Company (VAMC) by June 30, 2015. The rest of the loans are to be sold to VAMC by September 30 of the year. This move is to help banks meet the government mandated reduction of NPLs to below three percent of loans by the end of 2015.
VAMC, which came into operation on July 9, 2013, is a state-owned company with a mandate to purchase bad debts from the banking sector and restructure these loans. In exchange, banks are be provided with special bonds that can be temporarily placed with the State Bank of Vietnam for liquidity. VAMC is expected to speed up cleaning up bad debts while encouraging banks to lend more.
The Vietnamese government has made a great many efforts to handle bad debts, one the most critical issues for the financial and banking sector in recent years. Thanks to VAMC, the ratio of NPLs in banking system has fell to 5.4 percent in 2014 from 17 percent in 2012. VAMC has bought NPLs worth about VND 96 trillion (US$4.57 billion) in 2014, and has got approval from SBV to purchase debts worth VND 80 trillion (US$3.76 billion) this year. It is compulsory for credit institutions to sell their NPLs this year, as soured loans among Vietnamese banks have led to this tightening of credit to boost weak consumer spending.
According to the Vietnam General Statistic Office, Vietnam’s gross domestic product (GDP) rose 5.98 percent in 2014 from a year earlier, beating the government target of 5.8 percent and higher than 2013’s 5.42 percent rate. Inflation in 2014 was at its lowest level in the past ten years at 1.84 percent, helped by falling global oil prices. Credit growth rate was 13 percent in 2014. The Vietnamese government has set a target of 6.2 percent GDP growth rate, five percent inflation rate and 13 – 15 percent credit growth rate in 2015. As GDP growth and inflation rates appear on target, SBV has revealed that the banking sector has recorded 0.68 percent credit growth in the first two months of 2015.
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