On November 4, 2021, in Hanoi, the State Bank of Vietnam (SBV), in collaboration with the International Finance Corporation (IFC), organized a virtual Seminar on Regulatory Framework for NPL Resolution. The Seminar was under the co-chairmanship of Mr. Nguyen Kim Anh, SBV Deputy Governor, and Mr. Kyle Kelhofer, IFC Country Manager for Vietnam, Cambodia and Lao PDR.
An overview of the Seminar
Also attending the Seminar there was Ms. Kim-See Lim, IFC Regional Director for East Asia and the Pacific; representatives from the SBV entities, Ministries, government agencies, credit institutions, consultants and international specialists.
In his opening speech, Deputy Governor Nguyen Kim Anh shared that the global financial crisis in 2009 with unexpectedly complicated developments had caused a global economic recession. In spite of being a small-sized economy, Vietnam had integrated intensively into the global and regional economy. Therefore, Vietnam’s economy had been adversely affected by the global financial crisis, with negative impacts on the banking performance of Vietnamese commercial banks. Non-performing loans (NPLs) and other potential risks had increased during that period. In that context, the SBV had conducted a Scheme on restructuring the credit institutions in association with resolving NPLs for the 2011-2020 period.
After ten years implementing the Scheme, Vietnam’s credit institution system is now operating in a more prudent and healthy manner; their asset quality has been improved, and the ratios of NPLs on the balance sheets have been controlled below 2%; the sizes, the financial and governance capabilities, and the operational transparency of the credit institutions have been enhanced; the legal frameworks for restructuring weak banks and resolving NPLs have been fundamentally improved. There are currently 19 Vietnamese banks in the list of 500 largest banks in Asia Pacific in terms of long-term profitability from the core business operations in 2019. Most of the credit institutions have ensured compliance with the requirements of capital adequacy in line with Basel II. In addition, the SBV Deputy Governor also made high evaluation for the role of the private sector in the process of resolving NPLs.
Deputy Governor Nguyen Kim Anh speaks at the Seminar
In a following speech at the Seminar, Ms. Kim-See Lim, IFC Regional Director for East Asia and the Pacific, emphasized that the implementation of measures to resolve NPLs has been a top priority for many countries. From previous crises, it could be seen that good preparations and timely actions are key factors to avoid NPL accumulation and to ensure post-crisis recovery.
Also at the Seminar, the participants focused on discussing the legal frameworks for resolving NPLs, and the engagement of the private sector in resolving NPLs, specifically on the following topics: current situation of NPL trading, collection and settlement by the commercial banks and the asset management companies in Vietnam; policies on the management and supervision of NPLs in the wake of the COVID-19 pandemic; practical lessons from other countries on the use of NPL resolution tools; IFC's experience in developing the NPL trading market with the participation of foreign investors.
Mr. Nguyen Van Du, Acting Chief Inspector of the Banking Supervision Agency, speaks at the Seminar
Speaking at the Seminar, Mr. Nguyen Van Du, Acting Chief Inspector of the Banking Supervision Agency, emphasized that the ideas and comments collected at the Seminar were important reference sources to help the SBV and its relevant entities to formulate and improve the legal frameworks for resolving NPLs and their collaterals in the coming time.
Le Hang