Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Kim Anh and Heads of SBV entities met with Ms Ceyla Pazarbasioglu, Senior Director for the Finance and Markets Global Practice, World Bank Group and WB Delegation on May 29, 2017 at the SBV headquarters to discuss on NPL resolution and banking restructure.
The WB experts stated that bad debt management is a complicated issue and their resolution requires an effective cooperation of several related agencies. In this process, the supervisory agencies are responsible to formulate sufficient regulations on credit risk and capital provision, bad debt identification, transformation of bad debts, defining NPL resolution targets for each bank,… If NPLs can not be resolved thoroughly, the economy will have to face the stagnation, credit reducing, and the commercial banks will not be able to operate effectively, that all might lead to insolvency and spreading collapse of banking system. Therefore, it is indispensable to maintain close cooperation among the public sector to accelerate NPL management and resolution.
Ms. Ceyla Pazarbasioglu and WB Delegation introduced relevant substances relating to NPL solving and banking restructure. She said that NPL managing and resolution include 4 stages such as bad debt alerting; bad debt identification and risk provision; Bad debt classification and allocation by priority orders, intervention by intention of management agencies. Ms. Ceyla Pazarbasioglu emphasized that the public policies on bad debts shall have to create the favorable environment for bad debt managing and resolving with strict regulations on safe and sound operations of credit institutions, and guidance on supervision of NPLs. In necessary cases, policies of public sector shall have to directly intervene to NPL resolution in order to enhance its effectiveness and efficiency. In addition, bad debts also need to be recognized promptly and adequately, thereby it is helpful to determine the proper solutions and purposes for NPL management.
Commenting on the NPL resolving in Vietnam, the WB Delegation confirmed that, the NPL resolution in Vietnam needs a comprehensive conduction in a long time. The WB Delegation suggested 4 pillars to support for bad debt resolution, including: Modernizing financial sector; Consolidating the legal regulations and banking supervision; Restructuring and resolving sub standard banks and assets; and enhancing macro prudent monitoring.
These pillars are crucial and able to support each other to create a comprehensive solution for NPL resolution. It is really necessary for Vietnam to formulate efficient policies and need the decisive participation of Government and National Assembly to ensure the progresses of NPL resolution scheme and restructure of credit institutions.
The WB Delegation noticed that in order to support Vietnam to resolve NPLs, the WB has designed a four-year technical cooperation program with Vietnam and started discussing with international sponsors to fund for the program.
Speaking at the meeting, Deputy Governor Nguyen Kim Anh on behalf of the SBV expressed his sincere thanks for valuable sharing of senior experts of the WB. Deputy Governor affirmed that Government of Vietnam and the SBV have concentrated their interest on guiding, instructing the NPL resolution. Specifically, since 2012, the Government had issued several decisive documents on NPL resolution and banking restructure; the SBV has actively implemented the Government’s instructions and regulations, and achieved encouraging results.
However, there are still several difficulties and obstacles faced by Vietnam in the cause of NPL resolution and the SBV has conducted the assessment and wrapped up the lessons and experience of NPL resolution process. Concurrently, SBV is accelerating the learning experiences from other countries to apply to practical condition and tried to find out an appropriate and efficient model of bad debt resolving for Vietnam to successfully complete the objectives of NPL resolution and banking restructure in the period of 2016-2020.
Thoa Le