Hanoi (VNA) - The Government has directed the StateBank of Vietnam (SBV) to add non-performing loan (NPL) settlementregulations under Resolution No.42/2017/QH14 into the revised Law on CreditInstitutions, SBV Deputy Governor Nguyen Kim Anh has said.

Addressing a forum on Vietnam’s bankingindustry in 2020 held in Hanoi on September 30, Anh said the restructuring ofthe credit institutions system, in association with bad debt handling, has beenone of the key tasks of the banking industry during the 2016-2020 period.

The National Assembly issuedResolution No.42/2017/QH14 in 2017 as a pilot programme for the first time tospeed up the bad debt handling of credit institutions.

"The resolution has createdpositive changes and proved effective in the handling of bad debts andrestructuring of credit institutions in the past few years", Anh said.

He said credit institutionshave so far followed the resolution to build and implement their restructuringplans associated with bad debt handling in the 2016-20 period. As a result,credit institutions' credit quality has improved with their on-balance-sheetNPL ratio controlled below 2 percent. Their size, financial strength,governance capacity and transparency have been also improved significantly, Anhadded.

Besides, based on the resolution,inspection and supervision of competent authorities over credit institutionshave been strengthened, which have contributed to removing cross-ownership ofgroups of shareholders in the institutions.

Nguyen Dang Phi, SBV’s Deputy ChiefInspector, reported the NPL ratio of the banking sector has been graduallydecreasing over the years, from 2.46 percent at the end of 2016 to 1.99 percent,1.91 percent and 1.63 percent at the end of 2017, 2018 and 2019, respectively.

On average, the banking industryrecovered some 6.92 trillion VND (298.27 million USD) of bad debts per month bythe end of July this year, much higher than the rate of 3.94 trillion VND inthe 2012-2017 period.

However, Anh noted the COVID-19pandemic this year had adverse impacts on the restructuring and bad debtsettlement of credit institutions in the 2016-2020 period.

"If the pandemic continues,causing production and business to stagnate and affect the country’seconomic growth adversely, the credit risk will rise and the pressure ofbad debt will be very high. Therefore, meeting the Government’s targets ofcontrolling bad debts is still a huge challenge for the banking industry,"Anh said.

According to Do Giang Nam, DeputyGeneral Director of the Vietnam Asset Management Company, despite itseffectiveness, Resolution 42 is only a pilot programme and took effect forfive years from August 15, 2017.

Therefore, Nam said, if therewere no other regulations to replace the resolution after it expires, baddebt buyers would be concerned, causing a delay in the banking industry’s baddebt settlement./.