Vietnam may cap bank bad debts at 3 pct

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The State Bank of Vietnam may force banks to keep bad debts at below 3 percent of their total loans and sell off the excessive amount, if any, in a bid to stabilize the banking sector.

In a January 25 report, news website Saigon Times cited a central bank draft decree as saying it would establish the Vietnam Asset Management Company (VAMC) to buy the bad debts.

The central bank will send inspectors to banks or ask them to hire auditing firms to check up on their bad debt levels.

VAMC is projected to have a managing board composed of six specialized members and five non-specialized members; among the latter one would be from the central bank, and the remaining four from the ministries of Justice, Finance, Construction, and Environment and Natural Resources.

The company will be allowed to open branches in several centrally-managed provinces.

Central bank Governor Nguyen Van Binh has said bad debts increased by nearly 70 percent to 8.82 percent of the total outstanding loans in the banking system through the first three quarters of last year.

But reports from the banks themselves put the bad debts levels at just 4.93 per cent.

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