Banks hold more risk funds
HA NOI (VNS) - Some commercial banks had more risk provision funds than before to secure the banking system and fight bad debts, State Bank of According to Thoi Bao Kinh Doanh (Business Times), An Binh Bank's Q2 financial report showed that the bank raised the sum for risk funds in H1 this year by 10 times to VND107.64 billion (US$5.1 million) from VND11.54 billion ($540,340) in H1 last year. The larger risk funds trimmed An Binh's pre-tax profit in H1 by 80 per cent to VND170.35 billion ($7.997 million) from VND214.36 billion ($10.06 million) in the same period last year. Vietcombank, one of the country's largest four banks by assets, spent merely half of pre-tax profit, equivalent to VND2.4 trillion ($108.6 million), to build risk provision funds in the first six months of this year. VIB transferred 75 per cent of pre-tax profit, or VND447 billion ($21 million), to risk funds in H1. "If banks insist on credit growth by any means without proper risk provisioning, they will have both bigger profit figures and higher risks at the same time," said VIB's general director Han Ngoc Vu. Market observers said that although several banks spent more on risk provisioning, they could not precisely describe the system. However, these moves indicated an increasing attention of credit institutions to ongoing bad debt problems. The bad debt ratio in Vietnamese commercial banks rose in the first half of the year to 4.84 per cent by late June 2014 from 3.61 per cent by late 2013. The SBV reported last week that total bad debts stood at VND240 trillion ($11.3 billion). Experts said that the motivation behind the banks moving toward risk provisioning was to get themselves more prepared ahead the official implementation of new debt regulations in Circular No 09/2014/TT-NHNN by the central bank. The circular on the classification of bank assets, setting up of risk provisions, and use of provisions against credit risks forces an increase in risk provisioning. The document allowed banks to continue restructuring existing loans and keep them in the same debt group until April 1, 2015 instead of reclassifying them using more rigorous standards by June 1, 2014 as planned previously. In While the Government, the State Bank of The central bank in the document No 5342/NHNN-TTGSNH dated July 24 urged the Credit Information Centre (CIC), corporate rating agencies, and internal creditworthiness bodies at credit institutions to build up a comprehensive and consistent creditworthiness assessment system. The SBV said that a better creditworthiness rating system will simplify paperwork of loan applications and improve the capacity of lending enterprises without assets as collaterals. The move was made keeping in mind |
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