Vietnam banking system's bad debts hit 1.7%

The Vietnamese banking system's bad debt ratio remained safe at 1.7% by the end of July, the central bank says in a report sent to the National Assembly’s Economic Committee.

From 2012 to the end of July 2022, the whole system of credit institutions handled about VND1,449.8 trillion ($60.75 billion) worth of bad debt, also called non-performing loans (NPLs).

In the first seven months of the year, VND88.1 trillion ($3.69 billion) of bad debt was handled, 82.6% of which by credit institutions themselves.

The self-handling of bad debts by credit institutions was mainly done through the use of risk provisions and customers' debt repayments.

Particularly, implementing the legislature’s Resolution 42 on piloting the bad debt settlement of credit institutions, from August 15, 2017 to July 31, 2022, the system of credit institutions handled VND399.7 trillion ($16.75 billion) of bad debts.

The central bank said that it is studying regulations on bad debt handling that need to be included in the Law on Credit Institutions for specific proposals.

Regarding the restructuring of the credit institution system associated with bad debt settlement, the central bank said that there are still many problems regarding the legal framework on restructuring credit institutions and dealing with bad debts, while financial resources to support the restructuring remain limited.

According to the World Bank, if including potential NPLs from restructured debts, the number of NPLs in the Vietnamese banking system is not low and must be continuously monitored.

The ratio of NPLs on the balance sheet at commercial banks has continued to increase since the end of 2020. Until June 30 this year, the total NPLs of 28 listed banks were about VND122 trillion ($5.1 billion), an increase of nearly 11% compared to the end of the first quarter and nearly 20% compared to the beginning of 2022, according to the central bank.