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Tuesday, March 19, 2024

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State Bank of Vietnam

Legal gap in handling bad debt

The progress in resolving bad debt could face a setback due to a significant legal loophole: the right to seize collateral from defaulting borrowers is no longer enforceable following amendments to the Law on Credit Institutions. This change places increased pressure on banks to meticulously assess lending decisions, aiming to minimize the inherent risks associated with debt recovery. Bad debt continues to loom large Accompanying the growth in revenue and profits in 2023, financial reports from certain banks highlighted a significant uptick in non-performing loans. While subprime and doubtful debts in the second and third groups declined, there was a surge in the fifth group, comprising debts with very low debt collection ability. Techcombank saw bad debt climb from VND3,032 billion at the close of 2022 to nearly VND6,000 billion by the end of 2023. Consequently, the bad debt ratio soared from 0.74% to 1.19%, prompting the bank to bolster its bad debt provisions. Techcombank’s provisions for non-performing loans amounted to VND1,634 billion by the end of 2023, a significant increase from VND691 billion in the fourth quarter of 2022. Throughout the year, the bank allocated a total of VND3,921 billion for bad debt provisions, doubling the figure from 2022. […]
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