Mr. Nguyen Duc Huong,Vice Chairman of LienVietPostBank, shares his thoughts on banks and bad debts after three years of restructuring.
Most Vietnamese people will remember customers anxiously queuing up to withdraw their money from some banks three years ago. Bank staff provided them with lunch boxes or bread as they waited.
It was the first time bank restructuring had taken place in Vietnam, with three banks - Ficombank, TinNghiaBank and SCB - being consolidated. These days bank restructuring and mergers and acquisitions take place in a relatively quiet and calm manner.
Restructuring banks and bad debts have been implemented over the course of the last three years. Three years is a short period of time but the State Bank of Vietnam (SBV), under the leadership of the government, has made huge strides forward in terms of economic management in general and monetary policies in particular.
In my opinion six “summits” have been conquered by policymakers and these can be seen as the highlight of the restructuring process.
Firstly, inflation has fallen from nearly 19 per cent in 2011 to less than 2 per cent for 2015, as forecasted. Secondly, lending rates have been lowered from over 20 per cent to below 10 per cent. Thirdly, the gold market has been stabilized, bringing in trillions of VND or millions of USD to the State budget.
Fourthly, the exchange rate is more stable, stimulating exports and reducing the trade deficit. Fifthly, the achievements of the bank restructuring process, including the effective establishment and operation of the Vietnam Asset Management Company (VAMC), the taking over of commercial bank shares at a price of VND0, protecting the rights of customers and not causing the collapse or any negative influence on banks' operations, and authorities clearly clarifying the responsibilities of leaders of commercial banks. Sixthly, maintaining the faith of the people and businesses in monetary policy and other mechanisms and policies in general.
Overall, the bank restructuring process and the handling of bad debts over recent years have recorded positive developments. The handling of bad debts through the VAMC and the buying of commercial bank shares for VND0 are unprecedented initiatives.
In my opinion it is time to view bad debts as not such a bad thing. The VAMC has acquired many “good” bad debts that have become more valuable as time passed, like antiques. In the context of a warming real estate market, many commercial banks have not found it overly difficult to collect bad debs, as was the case in previous years.