Vietnam central bank to look into banks' bad debts in 'grand inspection'

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Vietnam central bank to look into banks' bad debts in 'grand inspection'

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The central bank said in a statement issued Friday it would launch a grand inspection of bad debt and debt restructuring at all banks.
It said it will hire independent auditing organizations to look into the credit quality of the banks, and their restructuring of loan terms, Thoi Bao Kinh Te Saigon Online reported.
Banks had previously been instructed to assess their own credit and their plans to sell bad debt to the Vietnam Asset Management Company, specifying to monthly amounts.
Lenders that fail to draft bad debt management plans or follow their plans will be punished, the statement said.
The central bank earlier gave them until the beginning of next year to submit to stricter assessment by the central bank’s Credit Information Center on loan classification. Bank loans are classified into five groups – current, special mention, substandard, doubtful, and bad.
Banks will have to explain for their classification decisions, and estimate the provisions needed when more of the loans are classified as bad ones.
The Vietnam Asset Management Company, run by the central bank, said last November that it has bought non-performing loans from 20 banks since it began operations in late July.

Nguyen Quoc Hung, its vice chairman, said in a Thoi Bao Kinh Te Saigon Online report that around VND17.7 trillion (US$840.7 million) worth of bad debts have been bought.

The company will issue VND14 trillion worth special bonds for the bad debts, and the banks can pledge them to borrow 70 percent of their value from the State Bank of Vietnam.

Last November bad debts were estimated at VND152.18 trillion (US$7.22 billion), or 4.55 percent of outstanding loans. That represented an increase of VND19.76 trillion ($937.5 million) from January 2013 when the ratio was 4.3 percent.

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