According to Nguyen Tri Hieu an economic expert, management agency will clearly be responsible if the bank loses money, so the new lending will be difficult to explode until the disease is under control.
At the online conference “Enhancing bank credit to support businesses and people to overcome difficulties caused by the Covid-19 pandemic” held last week, Nghiem Xuan Thanh, Chair of Vietcombank’s Board of directors, said that businesses that did not have access to capital because they did not have a guaranteed business plan, equity capital.
“For those businesses who have not been able to access capital yet, we have explained and provided information on associations and organisations, and reported to the State Bank of Vietnam (SBV) to take the initiative in communication. Banks can only increase digitisation to better serve customers, not reduce credit standards, because there will be many risks later,” Thanh said.
Sharing the same issue, Le Duc Tho, Chair of the Board of directors of VietinBank frankly shared: “For customers who are eligible and have good business plans, the bank will have to make efforts to support their development. We cannot loosen the credit conditions, because it can affect the economy later.”
Talking to the Securities Investment Review, a senior SBV official said: “It is no coincidence that lending will be mentioned by bank leaders at the meeting. This story will still be hot in the future.”
Leaders of a bank analysed, under normal conditions, the number of businesses and individuals who got a bank loan to total demand never reached 100 percent for many reasons such as not meeting the loan conditions, incompatible with the risk appetite of the credit institutions (CIs), the CIs have no money to lend (its ability to provide capital is limited, depending on mobilisation), the ability to meet loan conditions of customers. “If borrower’s conditions decrease, even in bankruptcy, logically, the number of borrowers will be less than normal conditions, meaning that the number of borrowers who will not be borrowed will be much higher, so the concerns from the businesses will certainly increase, not decrease,” the leader said.
The results of a survey on business trends of CIs in the second quarter of 2020 conducted by the Department of Statistics Forecasting (SBV) said that in 2020, the overall risk level of customer groups increased compared to last year.
In the first quarter of 2020, the overall risk level of customer groups was assessed to have a slight increase with 16.2 percent of credit institutions that perceived the risk was quite high. In the second quarter of 2020, 58.1 percent expected the overall risk of customer groups to be stable, 26.7 percent were concerned about the risk of slight increase, while 14.3 percent estimated the risk to reduce. “Currently the whole system calls for credit institutions to lend for businesses, but the business environment conditions are still very bad, so many businesses will certainly go bankrupt and five to seven years later, many bank officials will face the possibility of being penalised for a loss of capital loans”, PhD. Nguyen Tri Hieu, economic expert stated the point.
In fact, about seven to eight years ago, businesses forced credit institutions in various ways, leading to the consequence that many bank officials went to the court three to four years later.
Credit institutions have experienced this situation, so it is unlikely that businesses will easily force banks to lend.
“Circular 01/2020/ TT-NHNN (stipulating the restructuring of loan repayment, exemption and reduction of interest and fees, debt group maintenance at credit institutions and foreign bank branches in order to support customers affected by Covid-19 issued on March 13, 2020) has been carefully calculated by SBV, drawing experience from the 780 period (Decision 780 on debt classification for debts with adjusted repayment term and debt extension was issued by SBV on April 23, 2012″, a senior SBV leader shared.
Nguyen Toan Thang, general Secretary of the Banking Association, said that credit institutions need to closely monitor the situation of businesses to provide effective support. This helps the CIs avoid bad debts, reverse debts, and then cause bad debts later. Once fully aware of the nature of business operations, CIs need to publicise ineligible cases for lending, avoid misunderstandings, and let businesses understand that banks are not the only source of support during difficult period.
“In the current context, credit institutions must prevent bad debts,” he said.
The report of BIDV Securities Company (BSC) has just released a review, with the current disease situation, the economic support package will help businesses reduce the pressure of repaying principal and interest in difficult times, which can then be turned back to production after the disease is controlled.
Even so, there is still a need to continue monitoring disease trends in order to further assess the impact on the asset quality of the banking industry.
“The disease affects the profitability of manufacturing and service industries (currently accounting for about 82 percent of lending structure), thereby affecting the ability of businesses to repay their debts. With a conservative assumption, BSC revised its forecast to increase the system’s bad debt ratio to 1.7%, up from the original 1.4 percent assumption. Besides, the provision expenses also increased due to the fact that the decrease in asset quality made the banks’ provisions higher,” the report emphasized.
In response to the comments, SBV Governor Le Minh Hung asked the CIs to pay more attention to the media, promptly responded to the recommendations of businesses, associations, and publicly announced the handling results, new lending results, and debt restructuring.
