Bad debts are at the core of the Vietnamese banking sector’s restructuring, but the biggest difficulty facing this process will be dealing with interest groups, said a local senior economist.
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| Vietnam’s banking sector needs to deal with interests groups |
Bad debts are related to many big state-owned groups, therefore, agencies which are in charge of dealing with the problem must have sufficient power and be closely supervised to avoid losses, Thanh said.
“I hope that the settlement of bad debts will start in the second half of next year,” he said at a conference on challenges for the national economy during the restructuring process.
Sharing the same opinion, Dr. Nguyen Duc Thanh, Director of Vietnam Centre for Economics and Policy Research (VEPR), said bad debts were the decisive factor in banking restructuring, but no specific model had been suggested. Meanwhile, local policymakers remain too blasé about the problem, thinking that it’s a simple matter.
Dr. Thanh also pointed out that that loose credit policies were among the causes of the country’s high bad debt ratio. Through private relationships, many companies can get bank loans or credit.
“If bad debts are not resolved, businesses will continue facing high lending interest rate from banks despite lower deposit interest rates and the national economy will fall in to a trap.” he warned.
“It will take Vietnam between three and five years to deal with the problem,” he forecasts.
