Efforts by the Vietnamese authorities to speed up resolution of legacy problem loans could help to address the asset-quality issues that weigh heavily on banks' viability ratings, but the resolution process is unlikely to improve significantly in the short term due to the considerable implementation challenges
Resolution 42, which took effect last month, could remove some of the legal impediments to effective loan resolution. It includes measures to improve lenders' ability to enforce collateral security, which already appears to have made banks more aggressive in seizing commercial property to foreclose bad loans.
It also enhances the trading of bad debt in the secondary market. Bad debt can now be sold to any legal entity, including foreign investors, without them needing a licence for debt trading.
The attempt to involve foreign investors could increase the funds available for debt resolution. However, the sale of debt to foreigners could still be constrained by remaining uncertainties, including restrictions on foreign investors taking security over property.
A more effective debt resolution regime could, over the longer term, help banks to reduce asset-quality problems, which weigh on their earnings and profitability.
The NPL ratio was 2.55% at end-March 2017, but this did not take into account banks' bad-debt sales to the Vietnam Asset Management Company (VAMC). These sales help banks avoid restrictions that the State Bank of Vietnam (SBV) applies when their reported NPL ratios rise above 3%
Quicker debt resolution could also reduce banks' capital charge burden, which would better position banks for the scheduled implementation of Basel II in January 2020.
As it stands, banks' reported capital adequacy ratios (CARs) meet minimum requirements, but these are based on official NPL ratios that understate problem loans in the banking sector. The IMF estimates that the full adoption of Basel II will reduce CARs by 200bp to 400bp.
The SBV's guidance to the banking sector has been that loan growth should be 17%-18% in 2017, and there have been reports that this is being raised to 21%-22% to help the government hit its 6.7% GDP growth target for 2017. GDP growth in 8 months was some way below target at 5.9% yoy.
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The United Capital Management Joint Stock Company (Unicap) which manages investment funds will provide financial services to FLC and Faros in the near future.
Techcombank has announced that two separate legal entities managed by Warburg Pincus will invest over US$370 million into the Bank, subject to appropriate regulatory approvals.
In only the first two months of this year, the banking, financial services and insurance sector (BFSI) of Vietnam received up to US$1.45 billion worth of investment.
It is feared that the escalating trend of trade protectionism will hinder global growth and make many businesses struggle for survival.
According to the World Bank, remittances to Vietnam in 2017 are estimated at a record high of US$13.81 billion, increasing by US$1.9 billion, equivalent to 16% over 2016.
Within less than five months leading the Southeast Asia Joint Stock Commercial Bank (SeABank), Nguyen Canh Vinh has resigned from this position since February 8, 2018, for personal reason.
