Banks and businesses will breathe easier
Reality shows that the implementation of Circular 02 by credit institutions has helped businesses reduce the pressure of loan repayment while still accessing capital sources conveniently to overcome difficulties, maintain production, recover, and develop.
According to Ms. Ha Thu Giang, Head of the Credit Department of Information Technology sectors, according to statistics, as of December 31, 2023, nearly 188 thousand customers have had their repayment terms restructured while keeping their debt groups with a total debt and interest value of over 183.5 thousand billion VND.
Experts suggest that the extension of Circular 02 must be based on an evaluation and analysis of the economic recovery capability
Sharing specifically more about the results from banks, Mr. Pham Quang Thang, Deputy General Director of Techcombank, said that by the end of January 2024, Techcombank had restructured repayment terms for customers with a value of about 6,000 billion VND and now customers have also started repaying the debt gradually.
At LPBank, Mr. Ho Nam Tien, Deputy Chairman of the Board of Directors and CEO of LPBank, informed that up to the present time, LPBank has implemented the restructuring of repayment terms for 192 customers, with a total principal debt of customers of over 7,237 billion VND, with a structured interest of 327 billion VND. However, repaying these debts by June 30, 2024 (when Circular 02 expires) is very difficult for many customers. Therefore, the bank wants the State Bank of Vietnam to extend the restructuring period, extending the debt repayment under Circular 02.
According to Mr. Tran Long, Deputy General Director of BIDV, Circular 02’s expiration will create a very high pressure on debt repayment for businesses; meanwhile, dealing with bad debts of credit institutions also faces difficulties. Therefore, BIDV’s representative recommended extending the application period of the Circular until the end of 2024.
Mr. Pham Toan Vuong, General Director of Agribank, proposed that the State Bank of Vietnam allows credit institutions to maintain debt groups according to Circular 02 for principal debts arising in 2023, while extending the restructuring period until December 31, 2024 instead of June 30, 2024 as currently. Based on that, Mr. Vuong proposed allocating additional provisions over 3 years, up to December 31, 2025 to fully reserve 100%. In addition, for debts that are restructured while maintaining debt groups, credit institutions are allowed not to apply the principle of adjusting debt groups according to CIC immediately in the debt classification period (without waiting for the next debt group adjusting period according to CIC).
Policies need to be closely aligned with reality
Extending Circular 02 on debt restructuring, maintaining debt groups at the present time is considered necessary by experts. Specifically, borrowers will have more time to fulfill their debt obligations while waiting for the economy to fully recover at the appropriate time. Regarding banks, the pressure of bad debts on the balance sheet and financial statements will be reduced to some extent.
According to FIDT’s analysis department, extending Circular 02 helps credit institutions to set aside credit risk provisions more effectively, without sudden impacts on business results due to the financial space for current credit institutions to handle existing bad debts is not much. Because banks have to strengthen and focus resources on handling outstanding bad debts to stabilize asset quality. However, this organization believes that extending Circular 02 should not be more than 1 year, avoiding the situation of potential bad debts continuing to be difficult to control and risks to the banking system in the future becoming more serious.
Affirming the need to extend Circular 02 because the market is still difficult, the domestic and international economies have not fully recovered, customers need more time to restructure and repay debts, but Mr. Vo Minh, Director of the State Bank of Vietnam Branch in Da Nang, proposed a very careful consideration of the extended time of Circular 02, cannot be extended emotionally but must be based on thorough analysis, forecasting of the recovery capacity of the economy and the people. Regarding the banks, specific surveys need to be conducted because only the banks understand the “health” of their customers.
Similarly, Dr. Nguyen Quoc Hung, Secretary-General of the Vietnam Banks Association, said that extending regulations to reschedule, defer debts needs to carefully evaluate the applied objects in the direction of finding every solution resolution for businesses capable of recovery. However, for weak businesses, they must resolutely not restructure debts but boldly transfer bad debts and handle secured assets. According to Mr. Hung, loosening policies need to be carefully considered to ensure the safety of the system, protect the rights and interests of millions of people who deposit money at credit institutions.
Agreeing with this opinion, Assoc. Prof. Dr. Nguyen Huu Huan, Lecturer at the University of Economics Ho Chi Minh City, also proposed to consider the necessity of extending Circular 02’s time and whether it needs to be applied to all objects or not. In terms of time, this expert also agreed that it should be extended for about 1 year for businesses to recover, and thereby have cash flow to repay debts. For the extended objects, according to Assoc. Prof. Dr. Nguyen Huu Huan, the bank evaluates which group of customers has the ability to recover, they should apply. With weak customers, they should deal with them immediately because extending for 6 months or 1 year doesn’t make much sense.
In response to the above proposal, from the management perspective, Deputy Governor Dao Minh Tu stated that in 2024, the banking industry will continue to implement policies to restructure repayment terms and maintain debt groups as prescribed in Circular 02. However, faced with the difficulties that the economy and business community have to face, Deputy Governor Dao Minh Tu agrees with the need to consider extending Circular 02 further. But the additional extension time of 6 months or 1 year needs careful consideration. “The spirit is to extend the effectiveness of this Circular, but we have to consider whether the internal issues of the Circular need to change or just change in terms of time. This thing needs to be balanced between supporting the business economy, but also to ensure safety, to ensure the quality of the debts of the credit institutions that are not incurring bad debts, causing consequences later,” Deputy Governor Dao Minh Tu said.
