NPL rate slowing, but broad trouble remains

State Bank Governor Nguyen Van Binh told the National Assembly last week that the situation of non-performing loans (NPLs) had been consistent with macroeconomic movements. “The growth pace of NPLs has been clearly slower since June, in line with the gradual decline of inventories.”

He said dealing with NPLs should not be the task of the banking system alone, but required the coordination of all the agencies and industries. NPLs, Binh highlighted, lied in inventories, real estate market and basic construction. “Only when those bottle-necks are removed, can the problem of NPls be addressed. Thus, dealing with NPLs needs  political determination of the overall system.”

The governor said that based on Decision No.254/QD-TTg issued by the prime minister on March 1,  approving  the banking sector restructuring scheme during 2011-2015, the State Bank would try to reduce the banking NPL ratio to less than 3 per cent by 2015 in line with international practices and standards.

The State Bank has required all credit institutions to deal with NPLs themselves. Currently, according to the State Bank, banks have used VND70 trillion ($3.36 billion) for loan loss provision. “The State Bank has decided that if any banks do not fully establish provisions, we will not let them pay dividends to shareholders. The State Bank will have inspection measures to ensure banks’ profits must first be used to address NPLs,” Binh said.

The State Bank governor informed that since April credit institutions had rescheduled VND36 trillion ($1.7 billion) for enterprises. Local authorities have had meetings with enterprises and banks to find out each enterprise’s difficulties and find ways to solve.

The State Bank has also carried out a large-scale inspection on credit institutions this year.

Twenty six credit institutions have been inspected and the State Bank stated it would  publish information about the inspection through mass media.