Economists suggest dealing with bad debts before meting out punishment
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Solving bad debts or handing out punishment
The Resolution on Bad Debt Settlement is expected to enter into force on July 1, 2017. Currently, the draft is controversial because of worries about possible loopholes. Some delegates even proposed dealing with those responsible for bad debts first, then settling the debts themselves later.
“The resolution should find out the causes of bad debts and deal with individuals or organisations behind them, so that bad debts can be settled properly,” Mai Sy Dien, a delegate from the central province of Thanh Hoa said.
However, many experts said that authorities should clearly distinguish between solving bad debts and dealing with those behind them. Confusion between the two matters may extend the timeline of bad debts settlements.
“Bad debts may be caused by commercial banks and enterprises, however, settlements are beyond their reach. Thus, if we force these individuals and organisations to handle debts on their own, maybe the will stay for decades,” Dr Le Xuan Nghia, member of the National Council of Consulting Finance and Monetary Policies, said.
Besides, setting up a mechanism for quick bad debt settlement does not mean forgiving the primary sources or giving them a chance to evade responsibility.
According to economist Truong Dinh Tuyen, bad debt settlement is not a kind of loan write-off for commercial banks or a method to evade responsibility, instead, it is a leverage to spur economic growth. Still, there should be strict punishments for those racking up the heaviest volume of bad debts. Indonesia is an example, as besides bad debt settlements, this country also sentences those responsible to prison sentence by the dozens.
Le Minh Hung, Governor of the State Bank of Vietnam, said that individuals and organisations found in violation are strictly judged in accordance with Vietnamese laws and regulations. There is no regulation in the draft that would give these individuals and organisations a chance to profiteer or evade responsibility.
Over the last five years, according to statistics of the Ministry of Public Security, police officers (excluding local ones) found and prosecuted 95 economic cases of and started procedures against 200 bank officers.
Recently, related agencies have investigated and prosecuted 128 bank officers, many of whom were chairmen, general directors, or deputy general directors.
Awaiting a legal mechanism
According to Nguyen Van Thang, chairman of Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), the main reason behind bad debts derives from the Vietnamese economy. For example, the soaring bad debts in 2012 originated from the crisis of the real estate and securities market. However, commercial banks cannot deny their responsibility in contributing to the growth of bad debts recently. A range of cases when big shareholders of banks violated and illegally withdrew capital for their companies are typical examples.
Le Minh Hung agreed that one of the causes behind bad debts is that the credit process in many banks is not strict enough. In addition, some banks’ risk management and internal control systems are weak, while bank officers may abuse their power to violate regulations.
However, at present, enacting a mechanism to solve bad debts is more important than punishing guilty individuals and organisations. According to Dr Le Xuan Nghia, the separation between solving bad debts and punishing those behind them will speed up settlements.
One more important thing is to protect the legal rights of creditors, especially the right to collect collaterals. If regulations are strict enough, debtors will have to seriously follow the rules.
“State agencies should have put in place a specific legal corridor for bad debts as soon as possible, so that commercial banks will have a foundation to work on,” Nghia said.
By Ha Tam