Bad loans in banks slashed to 3.8 pct, central bank says

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Bad debt in Vietnam's troubled banking system accounted for 3.79 percent of total loans at the end of 2013, down by more than half of the ratio recorded a year earlier, the central bank said on Tuesday.

The Vietnam Asset Management Company (VAMC), a firm set up by the State Bank of Vietnam to rescue debt-laden lenders, had bought VND40 trillion (US$1.9 billion) of non-performing loans (NPLs) since it was set up in July, Le Duc Tho, the head of the SBV's office, told reporters.

Vietnam has one of Asia's highest ratios of NPLs, which has squeezed the economy and led to a tightening of credit needed to boost flagging consumer spending and keep businesses afloat.

The economy expanded 5.42 percent last year, up slightly from 5.25 percent 2012, which was the slowest in 13 years, with NPLs - widely estimated to have been in double digits - blamed for putting the brakes on several years of boom growth.

SBV Governor Nguyen Van Binh in November told parliament the toxic loans problem would be solved by the end of next year. Independent economists, however, have long suspected NPL estimates by banks and the government have been understated.

Investors welcomed the long-awaited formation of the VAMC as a positive step, but critics say it has insufficient capital to tackle the problem and it is unclear what exactly is being done with the debt it buys.

The VAMC plans to take on between VND70 trillion and 100 trillion worth of NPLs in 2014 and raise its registered capital to VND2 trillion, up from the 500 billion it started with, according to state media.

Loans by Vietnam's more than 40 banks were worth VND3,316 trillion at the end of October, up 7.27 percent from end of 2012, SBV data shows. Year-end figures were not available.

The government recently announced a decree allowing foreign institutions to buy bigger stakes in lenders from next month, capping them at 20 percent for a single "strategic foreign investor", within a total 30 percent foreign shareholding.

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