State Audit names a series of banks that exceed credit ceilings and have high bad debts

In 2022, the State Audit audited the financial statements and activities related to the management and use of State capital and assets in 2021 of the State Bank and 5 financial, banking and insurance institutions.

Hot growth in many risky areas

According to the State Audit, in 2021, the State Bank implemented many solutions to manage monetary policy and banking operations, contributing to controlling inflation at 1.84%, stabilizing the macro economy, supporting economic growth, and stabilizing the money and foreign exchange markets. Audited banks ensured safety indicators in operations, profitable business, and the on-balance sheet bad debt ratio was below 3%.

However, the State Audit noted that with the overall credit growth of the economy at 13.61%, credit growth for most potentially risky sectors was higher than the overall growth rate (real estate sector 15.37%, securities sector 23.85%, corporate bond sector 17.65%).

The ratio of outstanding credit balance of the economy to GDP is high (114.3% in 2020; 113.2% in 2021).

Many banks exceed credit growth. Photo: Hoang Ha

"According to the World Bank's assessment, Vietnam's rate is among the highest in the world, posing many risks in controlling credit flows into risky areas," the State Audit quoted the World Bank's assessment.

The State Audit also pointed out that there is no legal document specifically regulating the management and control of general credit growth targets and credit growth targets for each credit institution.

Some credit institutions increased their credit growth beyond the maximum level allowed by the State Bank. Specifically, exceeding the maximum credit growth assigned for the year were Viet Capital Commercial Joint Stock Bank (assigned 13.48%, implemented 15.67%), Bao Viet Commercial Joint Stock Bank (assigned 5.5%, implemented 31.82%).

Exceeding the maximum credit growth at different times of the year is Orient Commercial Joint Stock Bank (at July 31, 2021, August 31, 2021, September 30, 2021, October 31, 2021).

Ineffective financial investment

The State Audit also pointed out a number of ineffective or inefficient financial investment units.

Vietcombank Securities Company Limited invested VND23.19 billion since 2011 in Saigon Post and Telecommunication Services Joint Stock Company and VND17.5 billion since 2014 in Transport Construction Corporation 8 - JSC but has not yet received dividends and has not yet divested capital in these companies according to the approved plan.

For MB Bank, the balance of bond investment in Shipbuilding Industry Finance Company Limited as of December 31, 2021 was VND 50 billion, with 100% provision; invested VND 33.96 billion in AAA Insurance Joint Stock Company since 2005 (accounting for 3.52% of contributed capital), the Company has been operating ineffectively since 2009 and accumulated loss as of December 31, 2021 was VND 776 billion.

The Policy Bank still has many cases of lending beyond the limit. Specifically, the same household has 2 people borrowing capital from the same program: Clean water and environmental sanitation loan program of 8.08 billion VND, loan for households doing business in difficult areas of 5.11 billion VND, newly escaped poverty households of 1.67 billion VND...

In addition, there is a situation of lending to subjects that do not meet the criteria of the Employment Loan Program of VND 114.72 billion (by April 2022, VND 111.63 billion had been recovered). This led to the determination of the amount of compensation for interest rate differences and management fees from the State budget increasing by VND 0.97 billion; there are 478 customers who still have outstanding debt under the social housing loan program but have not deposited enough monthly savings at the Policy Bank system as prescribed.

The State Audit also informed about the results of the thematic audit of the implementation of the Project on restructuring the system of credit institutions associated with bad debt settlement in the period 2016-2020.

The results of the Project implementation by the end of 2020 show that the operations of the banking system are basically controlled safely; the financial capacity and governance of credit institutions are improved, approaching international practices; the situation of investment, cross-ownership and ownership with manipulative and dominant nature in related credit institutions is gradually handled and eliminated; the business model gradually shifts from dependence on credit activities to a multi-service business model...

However, the State Audit believes that there are still some shortcomings and difficulties in the implementation that affect the objectives and results of the Project: The approval and promulgation of the Project and restructuring plan are still slow. Some credit institutions do not have specific solutions and roadmaps to implement some of the objectives set out in the restructuring plan.

The State Bank has not yet conducted a specialized inspection of the implementation of the restructuring plan for credit institutions; a number of ministries and branches have not completed a number of tasks assigned in the Project.

Many credit institutions determine the bad debt ratio incorrectly according to the State Bank's instructions when they do not fully calculate the debts that have the potential to become bad debts (restructured debts, corporate bonds with potential bad debts, bad receivables, interest receivables that must be repaid but have not been repaid...).

If recalculated and re-determined, the State Audit believes that some credit institutions did not achieve the target of controlling the bad debt ratio below 3%.