The banking sector is being hit by the Covid-19 pandemic as the bad debt tends to increase. Besides, the sale of assets and debt recovery of banks has not been smooth, making it more difficult.

Banks find it difficult to handle bad debts 

Bad debt has increased

Many banks have released second quarter financial statements and business results in the first six months of 2020, these reports have revealed the gray in the picture of bad debts.

At TPBank, total bad debt increased from 1.29% at the beginning of the year to 1.47% at the end of June 2020. Of which, subprime debts (debt in group 3) and doubtful debts (debt in group 4) increased 47% and 22% respectively compared to the end of the year.

At Sacombank, the debt increased 63%, while the debt of group 3 also increased nearly three times.

By the end of June, ACB's bad debt was VND1,918 billion, 32% higher than the beginning of the year, causing the bad debt ratio to total outstanding loan increased from 0.54% to 0.68%.

Similarly, the non-performing loan ratio of Saigonbank also increased from 1.94% to 2.27%.

VietBank also increased from 1.32% at the beginning of the year to 1.88%.

There are still many banks that have not released their financial statements yet, but experts have said that the increase in the bad debt ratio is due to banks facing many difficulties from the Covid-19 pandemic.

Dr. Can Van Luc also said that bad debt will be seen most clearly at the end of the year due to the impact of the pandemic; banks continue to structure debt for customers affected by Covid-19.

Moreover, the outstanding loans are calculated as standard debt, the banks have not transferred the debt group nor set up a risk provision, so the current data of bad debt in the first six months is not necessarily accurate.

Agreeing with Mr. Luc, financial expertDr. Nguyen Tri Hieu said the amount of outstanding loans affected by Covid-19 is very large, so when the Circular 1 comes into effect and businesses still cannot pay debts, so bad debts of banks will increase strongly. Therefore, banks must have resources to prevent risks as well as actively promote debt recovery and asset sale to minimize risks.

“Legalize” Resolution 42

For many years, the building of a bad debt trading market has been mentioned many times but the implementation hasstill been delayed, due to many reasons. Therefore, banks are still “struggling” in selling bad debts and selling assets to recover capital. This problem became even more difficult withthe Covid-19 pandemic.

BIDV has auctioned all debts of Thuan Thao Nam Sai Gon Joint Stock Company 17 times, 29 times auctioning collateralof Thuy Dat Joint Stock Company. The value of the property is also reduced many times compared to the original price, such as the property of Thuan Thao Nam Saigon Company was VND800 billion, down nearly VND2,000 billion compared to the principal and interest. Not only BIDV, but many banks, even the Vietnam Asset Management Company Limited (VAMC), also struggle to sell bad debts.

The property is difficult to sell is due to the collaterals are mainly real estate, equipment, and machinery, but the Covid-19 pandemic has caused the real estate market to "freeze", the spending of people and investors is reduced. In addition, the National Assembly Resolution 42 on piloting the handling of bad debts of credit institutions has been implemented since 2017, but there are still many legal problems, especially the seizure and handling of security properties, the application of simplified procedures to settle disputes under the Article 8 of Resolution No. 42 discourages buyers.

Therefore, the Agribank report said that the bank had 11 applications for simplified procedures accepted by the Court, but they were not processed because the Court concluded that they were not eligible.

Similarly, of the 12 documents of BIDV that are being processed by the Court, six have been answered to be transferred to the trial according to normal procedures. Therefore, Dr. Nguyen Tri Hieu said that the legal procedures are too complicated, many problems are the main barrier of the debt trading market, so it is necessary to remove the bottlenecks to promote the debt trading market to be implemented successfully.

In addition, many also suggest that it is necessary to “legalize” Resolution 42, so that sanctions can be clearer.

At the recent meeting, Deputy Governor of the State Bank Nguyen Kim Anh asked credit institutions to review problems, to propose suitable recommendations to coordinate with the State Bank in order to continue to effectively handle bad debts under Resolution No. 42 in the future.

With the drastic efforts of the whole system, the banking sector will achieve the goal of dealing with bad debts in order to contribute to maintaining the stable, safe and sustainable development of the banking system.