Ho Chi Minh City-based Nam Viet Commercial Joint Stock Bank and Asia Commercial Bank said they are planning to sell part of their bad debts to the recently established state-owned Vietnam Asset Management Company.
Nguyen Hoang Minh, deputy director of the State Bank of Vietnam's HCMC branch, told news website thoibaokinhtesaigon that the two have only made tentative plans since the asset management company is still awaiting regulations to be passed to enable its functioning.
A Nam Viet (Navibank) executive said the bank has yet to decide how much of its nonperforming loans it would sell while ACB CEO Do Minh Toan said his bank would sell 1.5 trillion worth bad debts but has not decided when.
VAMC would valuate the bad debts based on both book and market value, an analyst said.
The analyst urged banks to sell off their bad debts to clean up their balance sheets and get refinancing from the central bank using five-year bonds the VAMC will issue against the debts.
Besides, it would allow them to make just 20 percent provision for bad debts instead of the current 100 percent.
As of the end of July bad debts at HCMC banks topped 52.3 trillion or 5.85 of loans outstanding and were 11 percent higher that at the end of last year.
Worryingly for lenders, 67.1 percent of the bad debts are classified in group 5 (potentially irrecoverable debts), which requires them to provision 100 percent.
Factoring is a common financial practice that involves selling receivables including debts to a factor.
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