The state-owned Vietnam Asset Management Company (VAMC) is piloting a new method to revive the country’s financial system.
Rather than using inflated book values determined by lenders, the company will switch to its own valuations in order to buy up bad debt from banks by the end of next month.
Chairman Nguyen Quoc Hung told Bloomberg that the new method would speed up how quickly bad debt is cleaned up and encourage banks to lend more. “I’m confident that we can buy and sell bad debt faster next year since we’ve improved our methods with more than a year of experience,” he said.
The deputy chief executive of Vietnam’s Bank for Investment and Development, Phan Thi Chinh, agreed that the process would help, but added that the current system needs some reworking, saying: “it has to come with a better payment method, perhaps by cash, rather than issuing special bonds to banks like they do now.”
The move is part of efforts to meet government targets for banks, which push for them to reduce their bad debt ratio to 3%.
Hung says that the VAMC has signed 16 co-operation agreements with overseas investors looking to broker the debt sales, while TPG Capital Management, Standard Chartered and the World Bank’s International Finance Corp have all showed interest in buying up distressed debt from VAMC.
Fitch upgraded the country’s credit rating to BB- this month.
A total of US$4.88 trillion of debt has been sold so far this year reports Dealogic, close to the level of 2007 when US$4.91 trillion of bonds were issued over the same period.
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