HANOI May 27 Vietnam's central bank said it
will give banks an extra year - until June 2014 - to apply
stricter rules on classifying and making provisions for bad
debts, a delay that could prolong the time needed to fix the
country's banking problems.
In January, the central bank had told lenders to apply new
rules as of June 1 for bad debt classification. Economists said
the rules could triple the level of non-performing loans (NPLs)
from the publicised ratio of 6 percent.
The central bank's instruction, named Circular 2, also
required lenders to make more risk provisions for credit grants,
including credit card debts, investment in unlisted corporate
bonds and deposits in domestic and foreign banks, in addition to
normal loans, to raise funds to clear the NPLs.
On Monday, the State Bank of Vietnam said in a statement
that lenders will now have to comply with the regulations of
Circular 02 from June 1, 2014, instead of this June 1.
The delay aims to enable businesses to access loans, help to
boost credit growth, cut loan rates and give banks a chance to
prepare for the regulations, the statement said.
Alan Pham, chief economist at fund management firm
VinaCapital, said: "This is a regrettable decision, though I
understand the reason for the central bank's move."
Banks and business associations had called for the central
bank to delay the NPL classification rules, citing the country's
economic slowdown, enterprises' difficulties getting loans and a
large number of bankruptcies.
Vietnam has been enduring its biggest slowdown in growth
since 1999. In 2012, gross domestic product increased only 5.03
percent due to falling domestic consumption. There were about
100,000 bankruptcies in 2011-2012.
Businesses could not access loans due to their existing
debts, while lenders tightened lending rules for fear their bad
debts would increase. Vietnam's lending growth slowed to 8.91
percent last year from an average 29.5 percent annual rise from
2006 through 2011.
The government aims to accelerate economic expansion to 5.5
percent this year, but economists have said the projection is
The central bank's decision may also affect its efforts to
clear the banking system's bad debt burden, said Pham.
On May 18, the government gave the green light to the
establishment of the Vietnam Asset Management Corp (VAMC), the
tool expected to speed up NPLs settlement.
"The VAMC will have to hang around for one more year to
really get started on its job," said Pham.
In a separate move, the government has required the central
bank to go ahead with running the VAMC and adjust its operation
in the meantime, state media have reported.
(Compiled by Ngo Thi Ngoc Chau; Editing by Richard Borsuk)