Vietnam's Central Bank Outlines Lenders' Amount of Overdue Debt
By ANYA SCHIFFRIN
Dow Jones Newswires
HANOI, Vietnam -- Overdue debts at Vietnam's state-owned banks stand at 9.4% of total outstanding loans, while the rate is nearly 17% at the country's 52 commercial banks, central bank figures show.
Overdue debts at state-owned Industrial & Commercial Bank of Vietnam stand at 19% of outstanding loans, while overdue debts at the flagship Bank for Foreign Trade stand at 14%, according to an internal document of the State Bank of Vietnam, the central bank. Among the commercial, or joint-stock, banks, the worst was Tu Giac Long Xuyen with overdue loans equal to 98% of its lending.
Foreign bankers have long worried that Vietnam's banks were saddled with bad loans, but specific figures are hard to come by. Much data is covered by the government's banking-secrecy laws. Few joint-stock banks issue audited accounts and most won't say who their borrowers are.
Central Bank's Payments
Late last week, central bank Gov. Nguyen Tan Dung said overdue debt in the entire Vietnamese banking sector amounts to 14% of outstanding loans and that the central bank has taken measures to deal with the problem. He said the central bank is paying out $200 million over 1998 and 1999 to recapitalize the country's state-owned banks.
Noting that the central bank document doesn't define what constitutes overdue, accountants and bankers cautioned that the figures probably understate the amount of overdue loans. "It's the tip of the iceberg," said one foreign banker.
According to a 1996 law, loans become overdue when payment on principle and interest comes in more than 360 days after it is due -- a far longer grace period than the 90 days stipulated under many regulatory regimes. In addition, the 1996 law doesn't take into account late interest payments due before the principle, and the State Bank of Vietnam has declined to answer questions about how such loans are classified.
Analysts' Concerns
Foreign analysts note that Vietnamese banks have weak credit appraisal practices and they are particularly worried about government-directed lending to unprofitable enterprises. The central bank document doesn't provide any information as to which companies the banks are lending to, nor does it say whether the overdue loans were backed by collateral. State-owned companies don't typically pledge collateral when they borrow money. Also, Vietnamese law makes it difficult for banks to take over collateral once a borrower defaults.
The State Bank of Vietnam document classifies part of the overdue debt as bad debt and also explains how part of the overdue debt is being dealt with through measures including rolling over the debt, collecting part of it or freezing it to be paid later. Once this debt has been accounted for, the State Bank of Vietnam classifies overdue debt as only 8.2% of total outstanding loans.
Among the rest of Vietnam's four state banks, which together account for 80% of lending in Vietnam, the Bank for Investment & Development of Vietnam has only 2.4% of its loan portfolio overdue and Vietnam Bank for Agriculture & Rural Development has only 5.3% of its loan portfolio overdue. Overdue debts at joint-stock banks total 1.909 trillion dong ($26,533), or 16.6% of total outstanding loans, according to the document.
The State Bank of Vietnam is in the process of restructuring the joint-stock banking sector and plans to force a number of banks to close or merge with others. And analysts said that even if some do collapse, Vietnam's 52 joint-stock banks, which together account for about 10% of total bank lending in the country, are too small to seriously hurt Vietnam's economy. However, the joint-stock banks have received a lot of media attention since several owe tens of millions of dollars in late payments for letters of credit issued by Vietnamese banks on behalf of local importers.
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