More accurate accounting methods recommended
Dr. Trinh Quang Anh, Director of the Vietnam Investment Development Group’s Research Centre, said that the figure accounted for 4.1% of the total outstanding loans, but added that it was just half of the figure announced earlier by the State Bank of Vietnam (SBV).
In his estimation the real figure may be closer to 18% of total outstanding loans if extensions and debt forgiving for enterprises such as Vietnam Shipbuilding Industry Group (Vinashin) and Vietnam National Shipping Lines (Vinalines) were taken into account.
This figure would equal 17% of the country's GDP last year.
“These figures are very worrying and show an instability in the banking system as far as liquidity," Anh said.
He went on to say that the gloomy economic outlook may only add to the country's banking troubles, along with the more stringent regulations for accounting for financial institutions issued by the SBV.
Contradictory results by reports issued by banks and those of SBV inspectors have stirred up concern in the financial sector.
Vietnam also has different standards of accounting from international institutions.
Last October, Fitch Ratings estimated that Vietnam’s rate of bad debt had surpassed 10% of total outstanding loans, resulting in a widespread fall in the credit ratings of domestic banks.
Meanwhile, economist Vishnu Varathan from Japan’s Mizuho Bank, said even though the SBV has been aware of the importance of bad debts and the possible consequences for some time, they have yet to issue clear policy on the issue.
“Because it is so difficult to accurately assess the enormity of this problem, it is difficult to find a solution," he said.
Dr. Tran Dinh Thien, Director of Vietnam Institute of Economics, said that the lack of reliable data on bad debts is a worse problem than bad debts themselves.
