On August 28, 2018, the State Bank of Vietnam (SBV) organized a video conference on reviewing the 1-year implementation of Resolution No.42/2017/QH14 and Decision No.1058/QD-TTg. The conference was attended by Deputy Prime Minister Vuong Dinh Hue.
Deputy Prime Minister Vuong Dinh Hue delivers speech at the Conference
Also attending the conference in the center point in Hanoi were leaders from the Central Economic Commission, the Central Committee of Internal Affairs, the Committee on Economic Affairs and the Committee on Laws of the National Assembly, the Office of the Government, the Ministry of Justice, the Ministry of Finance, the Ministry of Public Security, the Ministry of Natural Resources and Environment, the Supreme People's Court, the Supreme People's Procuracy, etc. On the side of the banking sector, there were Governor Le Minh Hung and the Deputy Governors of the SBV, leaders of the SBV entities, the Banking Supervision Agency, VAMC, the National Credit Information Center of Vietnam, Vietnam Banks Association, together with representatives of the credit institutions, the foreign bank branches with head offices in Hanoi...
At the points of the SBV municipal and provincial branches, the conference was attended by representatives of the provincial National Assembly delegations, representatives of the provincial People's Committees, the provincial departments and the relevant agencies, as well as representatives from the SBV branches and the local credit institutions…
SBV Deputy Governor Nguyen Kim Anh delivers the opening remarks
Favorable conditions for the restructuring of credit institutions in association with NPL resolution
In his opening speech, Deputy Governor Nguyen Kim Anh stated that on June 21st, 2017, the National Assembly approved the Resolution on the pilot implementation of NPL resolution of credit institutions with the aim of codifying specific regulations on handling with NPLs, resolving the collateral assets for the NPLs of the entire banking system, thereby enhancing the role and capacity of the Vietnam Asset Management Company (VAMC). In addition, the Resolution aims to address obstacles and difficulties related to the legal framework for dealing with bad debts and the collateral assets for all debts of the credit institutions, creating a synchronous and feasible mechanism, tightening the control over bad debts and handling with the collateral assets of bad debts of the credit institutions. The credit institutions have continued to promote their role as a leading capital channel and meeting the demands for capital for production and business activities of the economy.
On July 19, 2017, the Prime Minister signed Decision No.1058/QD-TTg approving the Scheme on restructuring credit institutions in association with dealing with bad debts for 2016-2020 period. Thanks to the leadership and the direction of the Party and the Government, the enormous efforts of the banking sector and the coordination of the ministries, agencies and local authorities, after one year implementation, Scheme No. 1058 and Resolution No.42 have been implemented seriously and promptly, in accordance with the objectives, orientations and have obtained initial results in facilitating the restructuring and handling with bad debts of the credit institutions. Although the implementation has not been long, the macro-policy orientations and the solutions in these two legal documents have created remarkable points and positive changes in the handling of bad debts and the restructuring of credit institutions associated with dealing with bad debts for 2016-2020 period.
According to the Deputy Governor, this conference was organized online in the whole banking industry in order to assess the results after 1-year implementation of the Resolution of the National Assembly and the Decision of the Prime Minister.
Implementing comprehensively the substances of the restructuring of the credit institutions and handling with non-performing loans
Reporting the one-year implementation of Resolution No.42 and Decision No.1058, Mr. Nguyen Van Du, Deputy Chief Inspector of the Banking Supervision Agency, said that in order to implement Resolution No.42 and Decision No.1058, the SBV has implemented synchronously the following substances:
On improving the legal framework, the monetary policy and mechanism, and the banking operations: the SBV has advised the Government to submit to and get approval by the National Assembly Law No.17/2017/QH14 amending and supplementing several articles of the 2010 Law on Credit Institutions. At the same time, in order to implement the new Law amending and supplementing a number of articles of the Law on Credit Institutions, the SBV Governor has issued 08 circulars, and has advised and submitted to the Government for promulgation 01 Decision, as well as improved the legal framework for the operations of the VAMC in line with the regulations and practice.
In addition, the SBV has actively coordinated with the ministries, agencies, the people's committees of the centrally-controlled cities and provinces and related agencies to review the difficulties, obstacles, inadequacies, legal conflicts between the banking sector’s legal document system and the other sectors’ systems.
The SBV has strengthened the inspection, supervision, prevention, detection and resolution of risks, dealed strictly and determinedly with any violations of the credit institutions, required the credit institutions to implement strictly and effectively Scheme 1058. The banking supervision has continued to be improved and enhanced on the basis improving and implementing new supervising methods associated with promoting information technology applications, developing the databases and the supervising indicators. The SBV also issued prompt written instructions to the credit institutions to strengthen measures of ensuring security and preventing violations.
In the process of implementing Resolution No.42/2017/QH14 and Decision No.1058/QD-TTg, the SBV has coordinated closely with the ministries, agencies and local authorities, especially in actively providing information to the Ministry of Information and Communications, the People's Committees of the centrally-controlled cities and provinces, and the media agencies in order to disseminate and communicate the information on the policies, the legal regulations, the monetary developments, the banking operations and the restructuring of credit institutions associated with dealing with bad debts, with a view to creating a strong support and high consensus in the whole society.
Positive results after 1-year implementation of Resolution No.42 and Decision No.1058
After 1-year implementation of Resolution No.42 and Decision No.1058, the financial capabilities of the credit institutions have been strengthened, their charter capitals have increased gradually over the years: By June 30, 2018, the total charter capital of the entire banking system was estimated at VND 519, 01 trillion, up by 1.3% as compared to the end of 2017 and up by 6.3% in comparison with the end of 2016. The equity of the whole banking system was estimated at 720.43 trillion dong, up by 9.1% against the end of 2017, and up by 21.1% in comparison with the end of 2016.
Improved credit quality, comprehensive measures of dealing with bad debts together with measures of controlling and preventing new bad debts have contributed significantly to improving the quality of credit and reducing the bad debt ratio of the credit institution system. In addition, Resolution No.42 has initially set out critical conditions for the resolution of NPLs in the credit institutions. By the end of June, the NPL ratio out of the total loan outstanding was 2.09%, which was lower as compared to that of December 31, 2016 (2.46%).
The results of dealing with bad debts in accordance with Resolution 42: By June 30, 2018, the credit institution system had resolved VND 138.29 trillion of bad debts as determined in line with Resolution No.42 (excluding VND 61.04 trillion for risk provision to deal with bad debts on the balance sheets). Of which, the resolved bad debts on the balance sheets were VND 70.23 trillion (accounting for 50.78%), the resolved bad debts out of the balance sheets in accordance with Resolution No.42 were VND 21.59 trillion (accounting for 15.61%) and the resolved bad debts as determined in line with Resolution 42, which were sold to the VAMC and paid by the special bonds, were VND 46.46 trillion (accounting for 33.59%).
Difficulties and obstacles
Although the restructuring of the credit institutions in association with dealing with bad debts in the recent years has achieved encouraging results, there are difficulties and obstacles that require joint efforts of the entire political system, especially the support and coordination of the ministries, agencies and local authorities, such as:
There is not yet a formal and professional debt trading market, and this has affected bad debt trading operations. The implementation of Resolution No.42 in reality has encountered many difficulties, such as: the repayment of the collateral assets, which are evidences in criminal cases, the priority payments when dealing with the collaterals and the tax obligations; the maintenance of security and order, and support for the credit institutions to collect the collateral assets of bad debts; handling with the collateral assets in the form of unfinished real estate projects; the rights to receiving a mortgage or registering the mortgage of land-use right and assets attached to land in the future, which are the collateral assets for the debts that individuals and organizations buy from VAMC.
Besides, the mechanism of accessing to information on collateral asset status does not meet the requirements of the credit institutions, so it is difficult for them to determine which collateral assets are in dispute, or being applied urgent measures. That leads to different understandings of the disputed assets, making it difficult to apply the measures as determined by Resolution 42.
Overview of the Conference
Deputy Prime Minister highly appreciated the spirit of handling with bad debts of the banking sector after 1-year enforcement of Resolution No.42
Speaking at the conference, Deputy Prime Minister Vuong Dinh Hue stated that Resolution No.42 and Decision No.1058 were issued in the context of the urgent requirement to restructure the system of the credit institutions in association with handling with bad debts and weak credit institutions in appropriate forms in consistence with the market mechanism, ensuring the interests of the depositors and maintain the stability and safety of the banking system; strengthening the financial position and improving the management capacity of the credit institutions in accordance with the laws international practices.
In that context, implementing the general policy of the Party and the Government, the SBV has closely followed this task, looking for solutions, tools to successfully implement the set-out objectives. Particularly in 2016, the Government leaders had 3 special meetings on this topic with the VAMC, the Ministry of Justice, the Ministry of Public Security and the Supreme People's Court of Vietnam. The Prime Minister also assigned the Ministry of Justice, the Ministry of Public Security, and asked the Supreme People's Court to independently evaluate the legal corridor. Those reports focused on solving the legal difficulties and proposed to the National Assembly to formulate a Resolution on dealing with bad debts, in line with the amendments of the Law on Credit Institutions in 2010.
The Deputy Prime Minister also stated that no other draft law or resolution has received as much attention and efforts from the Government as the drafts of Resolution No.42 and the Law amending and supplementing the Law on Credit Institutions.
The fact that the National Assembly issued Resolution No.42 and the Law amending and supplementing the Law on Credit Institutions has historical significance to the operations of the banking sector, and forms important legal instruments for the restructuring of the credit institutions and dealing with bad debts.
In addition to Resolution No.42 and the Law amending and supplementing the Law on Credit Institutions, the Government along with the Ministerial Steering Committee for the Plan of restructuring the system of credit institutions and the SBV have developed a comprehensive legal framework with the Development Strategy of Vietnam Banking Sector, the Decisions on the Restructuring and implementation of major projects such as the Scheme on promotion of non-cash payments, the Scheme on promoting payments via banks for public services and social security programs, the Scheme of anti-dollarisation in the economy, the Restructuring plan for poor performing CIs, consolidating the banks’ management capabilities and substantially improving the legal framework for banking operations…
The legal framework enacted, in particular Resolution No.42, has historical significance, expressing the vision of the central government, the determination of the political system, the coordination of the sectors together.
The Deputy Prime Minister praised and highly appreciated the SBV Board of Management for the professional attitude and sense of responsibility, the strong efforts of the CIs system, together with the participation of the entire political system were decisive factors for the successful results of the restructuring of the credit institutions and dealing with bad debts in the past period, even though the world economy has undergone many complicated developments, which have affected the domestic economy.
In the organization for implementation, the banking sector has timely issued the instructions, guiding documents together with the participation of different sectors at all levels, thus the results in the past time have been very positive, reflected in the NPL ratio reduced to 2.09%, the management of bad debts has been more practical and effective. The monetary policies are managed synchronously and flexibly, targeting multiple objectives and being well-coordinated between the fiscal policy and the monetary policy.
The achievements in restructuring the credit institutions and dealing with bad debts have contributed to stabilizing the macro economy, creating favorable conditions for production and business, promoting economic growth and development. In the context that the world economic situation has been difficult, many Vietnamese banks and CIs have been upgraded in their credit ratings, the performance of banks has increased impressively, proving the correctness of Resolution No.42 and the results of the direction and administration of the Government, and the participation of the whole political system...
The Deputy Prime Minister said that dealing with bad debts is a common task of all Ministries and sectors, not only of the banking sector; however the focal point and the core must be the banking sector. In the coming time, the SBV should continue to promote its role as the focal point, continue to coordinate with the concerned ministries and agencies to report to the National Assembly and the Prime Minister in order to direct the effective implementation of Resolution No.42, at the same time continue to review the legal framework in a synchronous and timely manner to develop solutions to remove the difficulties in the process of dealing with bad debts.
Regarding the targets, the SBV must strive from now to 2020 to complete and out-perform the set-out targets, in particular in 2018, the SBV should strive to achieve at least 30% of the whole period’s goal. Striving to bring down bad debt ratios, including bad debts in the balance sheet and off balance sheet, while accelerating the handling of bad debts in order not to incur new bad debts, continuing to implement the Scheme of handling with weak CIs.
According to the Deputy Prime Minister, the SBV should create favorable conditions for VAMC to buy and sell debts in accordance with the market mechanism, strengthen the financial management capacity for VAMC, especially in human resource management.
The credit institutions should uphold the sense of responsibility and professionalism, raise the morale of the business profession, and take the initiative in dealing with bad debts. The CIs should also strengthen the inspection, supervision, and the implementation of the Schemes approved and supervised by the SBV Governor.
The Deputy PM hoped that the banking sector should strive to improve the banking services, calculate and properly address the credit quantitative and qualitative relationships, set in the general context of the country, all for the common good of the economy, stabilizing inflation and stabilizing the macro economy; continuing to address the cross-ownership among banks; strengthening the effectiveness and efficiency of the inspection and supervision; developing a plan to strengthen the organization, streamline the apparatus and improve the inspection and supervision of banks.
Another issue that the banking sector needs to improve is the effectiveness of coordination with the ministries, other sectors and local authorities in the restructuring of the CIs and the coordination between the banks and the agencies dealing with bad debts.
The ministries, other sectors and local authorities shall coordinate with the SBV in resolving the existing difficulties and problems in the process of restructuring credit institutions and handling with bad debts. The supervising ministries shall direct the State business groups and corporations to participate in the plan of restructuring the weak credit institutions with the major shareholders being the corporations; directing State business groups and corporations to perform debt repayment obligations, guarantee obligations for loans granted by them to their subsidiaries and member units…
The Deputy Prime Minister asked the Ministry of Finance to quickly implement measures to deal with bad debts related to capital investments in construction, recover capital for the State budget, e.g. from the advances and also taxes. It is necessary to have further studies and provide clear and specific guidance to the tax authorities in accordance with Resolution No.42 regarding the priority payments in the handling of the collateral assets and the obligation to pay taxes.
The Ministry of Planning and Investment and the SBV shall submit to the Government for approval the capital increase for state-owned commercial banks. The Deputy Prime Minister encouraged other credit institutions to save money to increase their capital.
The Deputy Prime Minister asked the Ministry of Public Security to consider to promulgate guidelines and coordinate with the local authorities in order to further strengthen the maintenance and assurance of social order, and assist in the process of seizing assets to secure bad debts. Handling with determination the individuals and organizations that oppose, obstruct the operations, and impose sanctions to ensure the effectiveness of the seizure of the collaterals.
The Ministry of Natural Resources and Environment should promulgate specific guiding regulations to apply uniformly in the localities concerning the handling of the collaterals being real estate projects.
Regarding the justice sector, it is necessary to study and expand the simplified procedures in implementing and handling of the collaterals. The Ministry of Justice should direct the General Department of Civil Judgment Enforcement to develop mechanisms and policies with the enforcement bodies at all levels, effectively implement the solutions of Resolution No.42, study and have specific instructions on the procedures for registration of secured transactions.
The media agencies should continue to coordinate with the SBV to accurately report in time. The banking sector should further strengthen the information and communication about the Party's policy, the State's legal policies in the restructuring of the CI system, the handling of bad debts in order to create a consensus in the society, among different organizations and the people.
SBV Governor Le Minh Hung take note of the instructions by Deputy Prime Minister Vuong Dinh Hue
Determation to accomplish the set-out objectives
Taking note of the directions by Deputy Prime Minister Vuong Dinh Hue, Mr. Le Minh Hung - Governor of the SBV stated that the handling of bad debts is a regular, continuous work of the whole banking sector, especially the credit institutions. The fact that Resolution No.42 was issued along with the consistency in the direction and administration of the Government and the SBV and the ministries, agencies and local authorities has created a favorable mechanism and environment for dealing with bad debts and restructuring the CIs.
Pursuant to Resolution No.42, Decision No.1058 and the Law amending and supplementing a number of Articles of the Law on Credit Institutions, the SBV has approved most of the restructuring plans developed by the CIs; the restructuring of the CIs and resolving of bad debts by has achieved remarkable initial results. For example, the financial capabilities of the credit institutions have been enhanced, the charter capital has been on a rise; The management capacity of the CIs has been gradually improved to be in line with international practices; Transparency in the operations of the CIs has been improved step by step; Improved credit quality along with control measures and new bad debt prevention have contributed significantly to reducing the NPL ratios of the CIs; Improved inspection and supervision has contributed to preventing, detecting and resolving the risks and violations by the CIs, encouraging the CIs to seriously and effectively implement Decision No.1058.
Although the restructuring of the CI system associated with handling of bad debts has achieved some encouraging results, there are still many difficulties and obstacles. Taking note of the directions of Deputy Prime Minister Vuong Dinh Hue, the SBV Governor pointed out a number of specific tasks in the management and implementation of the monetary policy, the specific tasks of the SBV departments and units, as well as of the credit institutions and VAMC in implementing Resolution No.42 and Decision No.1058, and the need for better coordination with the relevant ministries, agencies and local authorities to remove the obstacles and difficulties, accelerate the process of restructuring the CIs associated with dealing with bad debts in the coming time. At the same time, Governor Le Minh Hung also requested the SBV departments and units to take note of the comments and recommendations of the participants at the conference in order to study and propose appropriate solutions, create the most favorable conditions for the restructuring of CIs and dealing with bad debts.
With the close and timely directions of the National Assembly, the Government and the Prime Minister, the coordination and attention of the ministries, agencies at the central and local levels, and the efforts of the entities in the banking sector, the SBV Governor hoped that the restructuring of CIs associated with dealing with bad debts would continue to achieve good results and accomplish the set-out objectives, creating favorable conditions for the banking operations to be more secure and healthy, contributing more and more to the development of the country.
LH – VA