The bad debt situation of credit institutions is very worrying.

On May 17, Investor Magazine held a workshop on bad debt handling in the draft Law on Credit Institutions.

According to the organizers, along with the Law on Credit Institutions, on August 15, 2017, the National Assembly issued Resolution 42 on piloting the handling of bad debts of credit institutions, creating the necessary legal framework for the handling of bad debts of credit institutions and the Vietnam Asset Management Company (VAMC).

Thực trạng nợ xấu của các tổ chức tín dụng đang rất đáng lo ngại - Ảnh 1. — Many experts, businesses and management agencies attended the workshop.

According to the State Bank's report, from August 2017 to January 2023, the entire system of credit institutions has handled VND 416,000 billion of bad debt; an average of about VND 6,300 billion/month, much higher than the average bad debt handling result from 2012 - 2017 before Resolution 42 took effect (about VND 3,500 billion/month).

VAMC's bad debt handling activities have also achieved positive results. Accumulated from the time Resolution 42 took effect until the end of December 2022, VAMC has handled an estimated 276,000 billion VND of outstanding principal, 4.9 times higher than the total outstanding principal handled in the period 2013 - 2016.

However, the system-wide bad debt ratio by the end of February reached 2.91%, compared to 2% at the end of 2022 and nearly double that at the end of 2021. Total bad debt (bad debt on the balance sheet, debt sold to VAMC that has not been processed and debt potentially becoming bad debt of the credit institution system) by the end of February is estimated to account for 5% of total outstanding debt, nearly equivalent to the bad debt ratio the economy must face when Resolution 42 comes into effect.

Mr. Nguyen Quoc Hung, General Secretary of VNBA, expressed that the current bad debt situation of credit institutions is very worrying, especially in the context of business difficulties and the global economy showing signs of recession.

Thực trạng nợ xấu của các tổ chức tín dụng đang rất đáng lo ngại - Ảnh 2. — Mr. Nguyen Quoc Hung warned that bad debt will increase in the coming time.

Banks themselves are also facing difficulties: interest rates have "cooled down" significantly after the State Bank's decision to lower operating interest rates, but deposit and lending interest rates are still high because the rate of capital mobilization is still growing lower than credit.

In addition, businesses are facing many difficulties, so their ability to absorb capital is low, leading to slow credit growth. As of April 20, credit growth reached over VND 12.23 trillion, up 2.57% compared to the end of 2022, but much lower than the previous year (in the same period in 2022, it increased by 6.46%).

According to Mr. Hung, the decline in asset quality has made it difficult for commercial banks to control bad debts. Selling secured assets, especially large debts that require debt sales at market prices, is difficult to do in the context of a "frozen" real estate market...

"Bad debt ratio will continue to increase"

According to Mr. Hung, the handling of secured assets and debt collection in reality faces many difficulties; the legal framework for debt handling activities is not yet synchronous and unified; there are difficulties and obstacles in applying other legal regulations.

"Some businesses said they have run out of resources, which has led to banks having difficulty recovering debts. In my opinion, the bad debt ratio will continue to increase in the coming time. If bad debt is determined to be a problem specific to the banking sector, it will be very difficult to handle; but if bad debt is determined to be a social problem, an issue that needs attention, then consensus from agencies and organizations is needed to strictly handle and recover debts," Mr. Hung commented.

According to Mr. Hung, the Supreme People's Court needs to have a document guiding lower courts in handling disputes related to the creation of fake disputes by collateral owners, in order to prolong the handling of collateral assets of credit institutions.

In cases of deliberate procrastination, evasion, non-appearance, non-cooperation with authorities with the aim of prolonging debt settlement time, evading obligations, and disregarding the strictness of the law, it is necessary to create a precedent for trying these subjects in absentia or applying summary measures in court to shorten the time for filing a lawsuit, quickly handling and recovering the debt.

At the same time, the Supreme People's Court will coordinate with the Supreme People's Procuracy and the Ministry of Public Security to promptly issue detailed guidance on the return of collateral as evidence in criminal cases.

In addition, the Government needs to allow state-owned commercial banks to increase their charter capital in the coming years, through the form of paying dividends in shares from the profits left after setting up funds in the period of 2022 - 2023. This is to increase financial capacity and prevent risks in the context of increasing bad debt in the coming time.

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