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Banks’ debt restructuring process slows   2012-04-27 - TBKTVN

The State Bank has urged commercial banks to restructure debts, but banks have been very slow in implementing the restructuring.


Feeling anxious about the bad debts, the Bank for Investment and Development of Vietnam (BIDV) has applied a series of measures to help businesses recover their operation soon, so that they can earn money to pay bank debts.

Pham Quang Tung, Deputy General Director of BIDV, has said that BIDV would restructure the loans by extending the debt payment deadlines. The bank is also considering providing medium and long term loans, assist borrowers to restructure the cash flow.

Especially, it may offer the reductions of the interests clients have to pay if they have goodwill to pay debts. The borrowers may be exempted from the fines imposed on overdue debts, if they pay all the principals and the interests.

“If businesses can pay up all the debts, the interest rate may reduce by 4-5 percent per annum. Once businesses can arrange money to pay bank debts, the bank would lend to them at the interest rates of 14-15 percent per annum,” said Tran Bac Ha, Chair of BIDV.

“In order to assist businesses, banks have to accept lower profits. If banks still insist on the high interest rates, they may not take the money back,” he continued, predicting that BIDV may see the profit decrease by 1200-1500 billion dong this year.

A member of the board of directors of a bank in G12 group (the group comprising of the most powerful banks in Vietnam) also said that the bank is checking the loans to find out the ones able for restructuring. However, he has revealed that the number of loans to be restructured would not be high.

On April 10, 2012, the State Bank released the document No. 2056, requesting credit institutions to reconsider the debt payment schedule for businesses, cooperate with borrowers to settle difficulties in businesses’ debt payment and capital access, ensure the debt payment ability and reduce the bad debts.

Especially, banks have been requested to consider providing new loans to the businesses which have feasible business projects and can show their solvency.

However, to date, except some banks in the G12 group, most of the other banks have been very slow in restructuring debts due to the fear for risks.

Nguyen Duc Huong, Deputy Chair of Lien Viet Post Bank, said that if the State Bank wants commercial banks to speed up the process of restructuring debts, it needs to amend the legal document on the classification of debts.

It’s understandable why banks keep reluctant to restructure debts. When restructuring debts, banks would have to accept higher bad debts, and spend money to cover the bad debts. As the managers of banks always bear a hard pressure from shareholders, they do not want to see the profits drop by hundreds of billions of dong when restructuring debts.

In fact, in order to have “beautiful” figures about loans and mobilized capital, banks have applied a lot of measures or tricks.

Nguyen Van Tan, Deputy Director of an animal feed manufacturing company, said that a bank has suggested a measure that his company seeks non-bank capital to pay the bank debt worth 1.2 billion dong to the bank at the interest rate of 20 percent per annum as agreed before. After that, the bank would lend the sum of capital at the interest rate of 16.5 percent only.

However, Tan said he has refused to follow the suggested measure, because he is not sure if he can borrow loans again from the bank at the low interest rates, after he has to borrow money on the black market at exorbitant interest rates.

“I would rather bear fines for delayed debt payment,” he said.

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