Some banks extended credit beyond the allowed ceiling, even six times higher, according to a report by the State Audit.
The State Audit report recently sent to the National Assembly on the 2022 audit results pointed out a number of shortcomings related to credit granting by commercial banks in 2021.
Accordingly, the economic credit growth in 2021 is 13.61%, but credit poured into some potential sectors has increased beyond this level. For example, credit into real estate is nearly 15.4%, securities 23.85%, corporate bonds 17.65%.
The ratio of outstanding credit to GDP is high, 114.3% in 2020 and 113.2% in 2021. This poses difficulties in controlling credit flows into risky areas.
In addition, the State Bank has not issued specific regulations on the management and control of general credit growth targets and growth targets for each bank. This has caused some banks to have credit growth rates exceeding the ceiling set by the State Bank. In particular, Ban Viet Bank increased credit exceeding the allowed ceiling by nearly 2.2%. Some banks even increased credit exceeding the ceiling by up to 6 times, such as Bao Viet Bank, which was assigned 5.5% but actually increased by 31.82%. Orient Commercial Bank increased credit exceeding the maximum allowed at the end of July, August, September and October.
Credit limit (room) is a measure used by the State Bank in recent times to control credit growth, money supply to the market, thereby controlling inflation to some extent. This limit is considered by the State Bank to grant to banks based on criteria such as loan mobilization index, capital safety, bad debt ratio...
Customers transact at a commercial bank in Hanoi. Photo: Giang Huy
However, the Economic Committee once proposed that the State Bank consider removing this credit room because it believes that this is an administrative measure that distorts the market, causing requests and grants in granting credit limits. In addition, dependence on credit ceilings hinders businesses' access to capital.
Mr. Hoang Van Cuong, Vice President of the National Economics University, said that in the context of the current difficult economy, exhausted businesses, and need of capital, the State Bank should evaluate which banks are doing well, are dynamic, and ensure safety conditions, then consider granting more credit.
"Banks with good safety indexes, no bad debt, and reasonable interest rates should be considered to have more room for them, creating benefits for the economy and society," Mr. Cuong said on the sidelines of the National Assembly on May 27.
Regarding the restructuring of the banking system associated with bad debt settlement in 2016-2020 , the State Audit said that the approval of restructuring plans and schemes is still slow. In general, the time for the State Bank to approve the restructuring plans of credit institutions from the time of receiving the dossier is about 6-12 months. Some banks have their plans approved later, such as VietinBank (14 months), Vietnam-Russia Joint Venture Bank (13 months).
Many credit institutions determine the bad debt ratio incorrectly, when they do not fully calculate the potential bad debt (restructured debt, corporate bonds with potential bad debt, bad receivables, etc.). Therefore, if recalculated and determined, some credit institutions do not achieve the target of controlling bad debt below 3%, such as Ho Chi Minh City Development Bank (HDBank) at 3.7%; Nam A Bank at 8.96%; Saigon Thuong Tin Bank at 8.41% and Saigon - Hanoi Bank at 8.5%. In which, the bad debt ratio at VPBank as of December 31, 2020 was 13.4%.
The State Audit assessed that the target of reducing the bad debt ratio to below 3% after 5 years of restructuring the banking system has not been achieved. As of December 31, 2020, the bad debt ratio of the whole system was 3.81%; and if including the restructured debt according to Circular 01/2020, it was 7.43%.
The audit agency commented that the State Bank has not yet stepped up the handling of bad debts according to market mechanisms; it has not yet completed the handling of weak banks. The inspection and supervision of banks has not been carried out by the management agency on a focused basis according to importance and risk; the results of divestment have not met the plan.
Also according to the results of the State Audit, in 2021, some financial investment organizations were ineffective or ineffective, and had not recovered outstanding debts . For example, VietcomBank had an advance payment of 7 billion VND to buy test kits from Viet A Technology Joint Stock Company to provide in-kind funding to the Ministry of Health in the prevention and control of epidemics that arose in 2020. At Agribank, the Agricultural Insurance Company has not recovered nearly 4.3 billion VND of insurance premium debt arising from 2010, and has set aside 100% of the provision.
There are banks that have not accounted for revenue, income, and expenses in accordance with regulations and have not declared and paid taxes on income from providing letter of credit services as prescribed. For example, Military Bank had a bond investment balance in the Shipbuilding Industry Finance Company Limited by the end of 2021 of VND 50 billion, but had to set aside 100% of the provision. This bank also invested VND 33.96 billion in AAA Insurance Company since 2005 (accounting for 3.52% of contributed capital), but this insurance company has been operating ineffectively since 2009, with accumulated losses by the end of 2021 of VND 776 billion.
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