“If banks still use two books, bad debt will never stop”

“The biggest potential risk in the Vietnamese banking systemMaleThe current problem is a lack of transparency in the books. They report to the State Bank in one book, but keep a separate book for themselves. This is an alarming problem in the banking system regarding risk management," said independent financial expert, Dr. Pham Do Chi.

The concept of risk management has been mentioned a lot recently, especially in the context of the global economic crisis. What is your definition of risk management through data on bad bank debt?

Dr. Pham Do Chi: "Due to the interest rate ceiling of the State Bank, banks are forced to circumvent by providing two books."

VietnameseMaleThere are many sources of information on bad debt. The most official source of information is the data published by the State Bank based on the synthesis of reporting data from each credit institution. This figure on July 7, 2012 was 4.47%, equivalent to 117,000 billion VND.

The second figure from the State Bank Governor reported to the National Assembly is 10%. Then there is the figure of 8.6% from the State Bank Inspectorate itself based on recalculations of figures reported by credit institutions or data through inspections.

Most recently, the National Financial Supervisory Commission has released a number of large-scale and fairly accurate studies on short-term economic and financial issues such as inflation, production stagnation, the status of banks, securities and insurance companies, etc. The bad debt figure of the Supervisory Commission (11.8%) seems to be more accurate and much higher than that of the State Bank.

In addition, there are also figures from foreign organizations. A typical source of this information is the bad debt ratio published by Fitch. Basically, Fitch uses financial data from Vietnamese credit institutions.Malebut debt classification according to international accounting standards instead of Vietnamese accounting standardsMale. The figures given by Fitch are often three times higher than the official figures of the State Bank (over 13%).

Real estate loans also have different figures. This is because the classification of the lowest real estate loan figure matches the way banks report real estate loans by asset lending activities, and therefore only includes loans to real estate companies and not to individuals.

Even the larger figure does not include all real estate loans because many loans are actually for real estate investment but are classified in other areas. If loans secured by real estate are included, this figure would be over 50% of total outstanding credit.

According to his assessment, the current status of risk management in the Vietnamese banking systemMaleWhat is the current level? What are the basic shortcomings?

The biggest potential risk in the Vietnamese banking systemMaleThe current problem is the lack of transparency in the books. They report to the State Bank in one book, and keep a separate book for themselves. This is an alarming problem in the banking system regarding risk management.

In fact, risk management in the Vietnamese banking systemMalevery weak, interest is paid separately to customer groups. Due to the two-interest rate system; interest rate 14% down to 12%, then now 9% is official, but the agreed interest rate paid additionally to some customer groups is actually higher.

Not only that, many banks also applied the form of underground lending to avoid credit limits in June and the end of 2011. In addition, debt restructuring is quite popular in some Vietnamese banks.Male. When the unpaid interest of some large customers is replaced by a “new debt line” in the books of both parties. This can be easily found in the reports of some large debt-borrowing companies. This is very risky in a boom because the “huge” profits on the books are not necessarily real profits.

That is why bad debt is not reported correctly, because it must be reported according to the books published to the State Bank. And also because of that, the report on the bad debt situation of the banking industry has many numbers as mentioned above.

As an independent financial expert, with over 10 years of closely following Vietnam's economic and financial markets, I am currently in a state of confusion with these numbers, not knowing which numbers are correct and which are wrong.

Vietnamese banking systemMaleIn the eyes of foreign investors and analysts, it is a mess. I cannot do analysis because there is not enough data and accurate information. Even more dangerous is the situation that can happen to planners or policy makers without data. Is it possible that the "jerky" economic and financial policies in recent years have originated from that lack of data?

In addition, the lack of transparency in finance can easily lead to moral risks in the banking system or the consequences of bankruptcy and insolvency, such as the case of "super fraudster" Le Thi Huyen Nhu last year and SME Securities Company recently. With the current situation of two books in the banking system, bad debt will never stop.

Due to the interest rate ceiling of the State Bank, banks are forced to evade by presenting two books. Restructuring banks without imposing a risk control system, because they do not know exactly how much bad debt and what the credit limit is, how can they do it? If banks deliberately declare incorrect figures, how can they control risks?

To effectively manage risk, what is the most important solution, sir?

In my opinion, the solution is that we should immediately re-establish the market mechanism and float interest rates. The State Bank has delayed this for too long!

That way, banks do not need to avoid exceeding interest rate barriers in one way or another. At that time, the books are only one, and the State Bank can easily check the "health" of each bank to have appropriate and timely measures.

According to VnEconomy-M