Bad debt: Bank boss sells fish and watches warehouse

The bosses signed loans worth thousands of billions of dong and then failed in business but still had luxurious houses and nice cars. The debts were "stored" for the bank to take care of, which is why bank bosses have to sell fish and stew.

Painful things make me feel sorry for them.

At the beginning of the year, when Minister Dinh La Thang asked the question “When all the tycoons drive Phantom cars, what is there to rescue?”, many bank bosses shared their thoughts because they were the ones involved in this adversity. Bad debts arise from businesses and the economy, but are all counted in banks, and banks have to handle them themselves. Struggling with bad debts alone, bank bosses are even more concerned about this.

After two years of merging Habubank into SHB, one of the memorable achievements was successfully handling and restructuring the debtor Bianfishco. This seafood giant borrowed thousands of billions but invested for the wrong purpose, ineffectively leading to bankruptcy.

Banks struggle alone with bad debt.

Seafood tycoon Lam Ngoc Khuan fled abroad, leaving Phuong Nam with thousands of billions of dong in debt. When approaching the mortgaged assets, the banks were not only worried about their thousands of billions but also heartbroken over the large and modern production line starting to rust, thousands of workers and farmers struggling because of losing their jobs. Then, the banks themselves had to work together to deal with it, first of all to save the enterprise, jobs, and income for thousands of people, then hope to have money to collect the debt. Faced with a large amount of debt, a modern production facility that was stagnant, 'the property was in pain, the child was in pain', SHB had to concentrate its efforts and people to save the enterprise. Up to now, Bianfishco has been operating well, the old owner has safely withdrawn, only the banks continue to struggle and it will be a long time before all the debt is collected. Phuong Nam has been operating stably and profitably. But the banks continue to have to monitor and support, and collecting the full debt of thousands of billions may still be a long time.

Truong Thanh Wood borrowed thousands of billions for its ambition to develop quickly but failed, facing the risk of default and bankruptcy. The tycoon was at a dead end, to save the business, save his money, the banks had to step in, calculate together, restructure the debt and then continue to support the business first before thinking about debt collection later.

Mai Linh’s owner also made a mistake when he borrowed thousands of billions of dong and invested in many fields such as real estate, hydropower, finance, etc., outside of his strengths. Then, when he went bankrupt, the business stagnated, and workers went on strike, he had no choice but to ask for help from the bank. The bank stepped in, even though he knew that it would be more tiring and that it would take a long time to collect the debt.

The above are typical stories in the effort to handle bad debts of banks, but first of all, to save businesses and more broadly, to revive the struggling economy. However, in this arduous journey, only banks are struggling and struggling.

The State Bank report pointed out that the coordination between the parties with this agency in restructuring the banking system and handling bad debts is not really tight and effective. The results achieved in restructuring the banking system and handling bad debts are mainly due to the efforts and initiative or rather mainly internal solutions of the banking system.

Mr. Nguyen Duc Kien - Deputy Chairman of the National Assembly's Inspection Committee also admitted that there is a situation where borrowers have not proactively handled their debts to the bank. In many cases, customers have even delayed, avoided their debt repayment responsibilities and have not cooperated with the bank in handling their debts. In addition, the restructuring and bad debts of state-owned enterprises have not been handled.

Need a comprehensive solution

A recent report from the State Bank shows that, up to now, bad debt has been contained and continues to be handled. According to reports from credit institutions, by the end of July 2014, the total bad debt on the balance sheet was 162,200 billion VND, accounting for 4.11% of total outstanding debt (at the end of 2013, the bad debt ratio was 3.61%).

The results of bad debt settlement achieved so far continue to record the efforts of the credit institution system, especially in the condition of no financial support from the state budget; and market conditions are still more favorable than unfavorable.

Need a mechanism and synchronous engagement with bad debt.

However, it is worth warning that the fact that credit institutions themselves handle bad debts has reduced the financial health and business efficiency of banks in the short term. If this effort is not actively supported by economic recovery, effective implementation of macroeconomic management solutions, handling of outstanding debts in basic construction investment, slow removal of difficulties for production and business, support for the real estate market and promotion of economic growth, then the potential bad debts are very large, more difficult to handle and at risk of increasing sharply.

According to economic expert Tran Du Lich, the State does not provide money to handle losses and risks of the banking system, but mechanisms and policies to mobilize domestic and foreign investors to participate in restructuring banks and handling bad debts are still lacking and not attractive enough.

Mr. Nguyen Duc Kien noted that the lack of financial resources to support the handling of bad debts, the improvement and enhancement of the financial capacity of the credit institution system is one of the reasons slowing down the restructuring process of credit institutions.

According to Mr. Tran Du Lich, “bad debt has been and is an issue that needs to be resolved soon in the macroeconomic problem; it is related to market policies, to the legal system on economics, civil affairs, and even criminal matters”. “Bad debt is no longer a problem of banks alone, but is closely linked to the macroeconomic problem, opening up the market, and recovering the economy. Therefore, it is necessary to have synchronous and strong solutions from perfecting the legal framework, building a coordination mechanism between sectors, central and local levels to hope to ease the burden of bad debt”, he said.

According to reading the newspaper