November 14, 2012 / 7:36 AM / 6 years ago

Vietnam says it aims to cut level of bad debt to 3-4 pct by 2015

HANOI, Nov 14 (Reuters) - Vietnam will take firm measures aimed at cutting the banking system’s non-performing loans to 3-4 percent of total lending by the end of 2015 from 8.82 percent at present, Prime Minister Nguyen Tan Dung said on Wednesday.

Bad debts were estimated at 250 trillion dong ($12 billion), of which 73 percent of the loans are mortgage-based, Dung said in a statement in the parliament that did not give a date for the figures.

This year, a slowing economy and weak domestic consumption have exacerbated bad debt problems in Vietnam, which already had one of the highest levels of non-performing loans in Southeast Asia.

A weak financial system is one of the country’s biggest economic problems. Fitch Ratings has put the non-performing loan figure at 13 percent.

“Bad debt has been preventing loans to reach businesses and is a threat to the stability of the banking system and financial markets,” the prime minister said. “Resolving bad debt is an urgent task which needs to be done swiftly and resolutely, but with a reasonable roadmap and tight procedures.”

Dung did not spell out what specific measures will be taken, but he said banks will have to restructure and those with bad debts will have to curb their credit growth.

The prime minister noted the government has urged the central bank and Finance Ministry to establish what he called a “debt-trading company”, which would buy non-performing loans from banks. Plans for such a body have been on hold for months.

On Tuesday, State Bank of Vietnam Governor Nguyen Van Binh said non-performing loans in the banking system - which he described as difficult to deal with - had reached 8.82 percent at the end of September.

Total loans in Vietnam’s banking system are estimated at 2,700 trillion dong (about $130 billion), Binh said.

The central bank governor’s remarks showed that some banks have underreported their bad loans. Lenders’ reports showed the non-performing loans at 4.93 percent as of Sept. 30, but several lenders who had reported non-performing loans at 1-3 percent had been found by inspectors to instead have far higher levels. Binh said.

($1 = 20,830 dong)

Reporting by Ngo Thi Ngoc Chau; Editing by Richard Borsuk

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