VietNamNet Bridge – The Governor of the State Bank of Vietnam (SBV), Nguyen Van Binh, confirmed that the arrest of Nguyen Duc Kien did not have any connection to the Asia Commercial Bank (ACB) and other banks, but the central bank had prepared for ensuring the safety of the banking system.

Kien arrest stirs up the public, vibrates stock market

The central bank governor Nguyen Van Binh.

Binh was the second cabinet member who was grilled at the 10th session of the National Assembly Standing Committee on August 21. However, his part attracted public attention because of the arrest of banker Nguyen Duc Kien on August 20.

According to the agenda, the governor would explain about credit institutions’ bad debts and the banking restructuring plan. However, after the question about bad debts of Chairman Phung Quoc Hien of the NA Committee for Finance and Budget, deputy Do Van Duong of HCM City raised a question about the arrest of Nguyen Van Kien, who owns shares in many banks.

Duong said that bad debts of credit institutions are caused by many reasons, including some commercial joint stock banks’ attempt to sway the credit market. Duong wanted to know whether Governor Binh knew about this situation and what would he do to deal with it.

Governor Binh said he only got information from the police that Kien was arrested for setting up three companies which committed illegal business operations.

The governor confirmed that the arrest of Kien does not impact ACB because Kien is not involved in running ACB. He added that Kien is the Vice Chair of the founding council of ACB but the position of this council is not mentioned in any legal document.

Under the law, commercial joint stock banks only have the board of directors and the board of management, Binh said.

“Mr. Nguyen Duc Kien is not on the board of directors or the board of management of ACB so the arrest of Kien does not affect ACB,” the governor confirmed.

However, the central bank would support ACB and other credit institution in case depositors withdrawing money en masse, he said.

NA Deputy Chair Nguyen Thi Kim Ngan said depositors could be assured with the governor’s answer.

Deputy Duong also questioned the deputy chief of the People’s Supreme Procuracy Nguyen Hai Phong about the legal foundation for the arrest of Nguyen Duc Kien. NA Deputy Chair Kim Ngan asked the People’s Supreme Procuracy to send written answer to deputy Duong.

Bad debts

The most expected information from the Governor at the question & answer session is the official statistics of bad debts of Vietnam’s banks.

Earlier, the number reported by banks was VND117.7 trillion (around $5.885 billion), accounting for 4.47 percent of the outstanding debt balance. However, the SBV’s inspectorate said the number was up to VND202 trillion ($10.1 billion) or 8.6 percent of the outstanding debt balance. Meanwhile, at the NA session in March, Governor Binh said the rate was about 10 percent.

In the report sent to the NA Standing Committee before the question & answer session, Binh admitted that bad debt was quickly increasing since 2008. He said the accurate number of bad debts will be determined based on the data of the SBV Inspectorate, not from reports of banks.

He added that after investigating nine weak credit institutions, the bad debt rates at these banks was alarming. According to reports by credit institutions, their bad debt rates are up to 2.5 percent and all of them got profit. When the central bank inspected these institutions, some of them had the bad debt rate up to 30 percent and event 60 percent.

He said that by June 30, 2012, bad debts of state-owned commercial banks was 3.76 percent while it was 4.73 percent for joint stock commercial banks.

He announced the rates of bad debts of the five largest state-owned commercial banks: Vietnam Industrial Commercial Bank (Vietinbank), Bank for Agriculture and Rural Development (Agribank), Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development (BIDV) and Mekong Delta Housing Development Bank (MHB).

Among them, Agribank has the highest bad debt rate of 6.14 percent while Vietinbank has the lowest rate of 2.45 percent.

Binh affirmed that the data released by the SBV Inspectorate is reliable and it was accepted by many international organizations. However, the date is only accurate until June 6, 2012.

The governor said the SBV could not immediately know the accurate number of bad debts because it needs time to check. In many cases, data depends on reports of banks. He promised to send updated statistics to NA deputies after the question and answer session.

Deputy Nguyen Ngoc Phuong from Quang Binh province asked the governor about the responsibility of the central bank and the governor for the high rates of bad debts and violations in the banking system

Binh admitted the responsibility of the SBV and himself for high bad debts, but he said that the rates of bad debts are not too high compared to other countries in the region.

“Credit institutions put aside VND70 trillion ($3.5 billion) for credit risks and 84 percent of debts have mortgages, which are worth 135 percent of debts,” Binh said.

However, the governor’s explanation is said to be similar to that of the SBV’s chief inspector over one month ago, about bad debts.

Before the break, NA Chairman Nguyen Sinh Hung asked Binh when would the bank settle bad debts, by December 31, 2012, or June 30 2013, and would bad debt reduce and if it reduces, how much is it?

Many deputies were interested in the question and said that this is a difficult question for Binh.

Binh admitted that the question was difficult. He said bringing the rate of bad debts down to the safety level (3 percent) should be seen as a target. “I believe that the situation will be improved. By the end of this term, bad debts of banks will reduce to the standard level,” he committed.

Chung Hoang