Central bank says no more delays in new rules for bad debts

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The central bank says it will allow no more delays in the implementation of tighter rules on bad-debt classification and risk provisions initially set to take effect June 1 and then delayed until next year.

News website VnExpress quoted Dang Van Thao, the State Bank of Vietnam's deputy chief inspector, as telling a press briefing December 16 that the delay had played a "historic role" in helping banks and businesses in a tough time by giving the former more time for better preparations and enabling the latter to access loans.

But the central bank cannot postpone the implementation of Circular 02, which requires stricter standards for loan classifications and risk provisions, any longer, he said.

Lenders would have to comply "thoroughly" with the rules from June 1, 2014, Thao added.

Economist Nguyen Tri Hieu supported the central bank's decision, saying another delay, as proposed by analysts and banks, would drag the process on too long.

Banks have argued that they need another delay because the tighter loan access would force many businesses into collapse, but Hieu said he did not expect this to be the case.

He said it was much better let the government know the real bad debt situation in order to enable it to take proper measures.

A Reuters report published seven months ago quoted economists as saying that the new rules could triple the country's non-performing loan level, which stood at 4.65 percent as of the end of May, according to central bank chief inspector Nguyen Huu Nghia.

Missed target

At the press conference, the central bank's deputy governor Nguyen Dong Tien said the banking system would likely fail to hit it's targeted credit growth of 12 percent this year.

Loans have expanded 8.83 percent so far this year.

But Tien said the figure was appropriate given the tough economic circumstances and the country's prioritization of inflation control. Consumer prices are forecast to rise by 6 percent this year, compared to 6.81 percent last year.

The central bank has already set a target of 12-14 percent growth in loans for 2014.

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