VietNamNet Bridge – A lot of commercial banks have been put on tenterhooks not only because of the bad debts of hundreds of trillions of dong owed by businesses, but also because they cannot ask money back from other banks.
A director of a joint stock bank in the south said his bank lent 200 billion dong to another bank for one week. The borrower should have paid debts a couple of weeks ago. However, the bank has been repeatedly asking for the delay in debt payment.
According to the banker, the banks – borrowers always try to delay the debt payment, reasoning the instruction by the State Bank of Vietnam that the banks with weak liquidity need to prioritize to settle the debts in the market 1 (the market of commercial banks and borrowers who could be individuals or institutions. Market 2 refers to the interbank market, where banks borrow and lend money to each other).
“We have been doing everything we can to ask for the money back. We negotiated with the borrower, and we lodged complaints to the State Bank. However, to date, we still have not recovered debts,” he complained.
Many other big banks have also complained that they have to act as “unwilling creditors” of many small banks. A senior executive of the Bank for Investment and Development of Vietnam (BIDV) has also revealed that some joint stock banks still have not paid debts, though the loans became due a long time ago.
The interbank transactions, by the nature, are the ones aiming to satisfy the urgent liquidity demand of credit institutions for very short terms (overnight, several days or some weeks). In general, the loans are provided without collaterals.
However, recently, the banks with weak liquidity have been seeking long term loans in the interbank market. Unable to mobilize capital from the public, the banks have to borrow in the interbank market at any costs.
According to Tran Anh Vuong, President of Bac Viet Steel Corporation, he has heard about the overdue debts among commercial banks, which has become so popular in the interbank market.
Vuong said that it is really unfair that businesses always have to satisfy the strict requirements set by banks to be eligible for accessing bank loans. Especially, they have to mortgage assets at the banks for loans, and any overdue debts would be classified as bad debts. Meanwhile, Vuong said, banks have been lending to each other based on very easy regulations.
Governor of the State Bank of Vietnam Nguyen Van Binh has confirmed the lending in masses and the delay in debt payment. He also said that while banks always imposed strict terms on businesses, they always keep flexible in lending each other, with no collaterals, and no interest rate required.
One of the reasons behind this, according to the governor, is the misunderstanding that banks would never go bankrupted or dissolved because they are always backed by the State Bank. Therefore, they are very easy in lending to each other.
“They think that the State Bank would come forward and buy back the bad debts to rescue the banks. However, I have to remind you that this is just a misconception,” he said.
In some cases, Binh said, banks still decided to lend money, requiring sky high interest rates, even though they could see the big problems of the borrowers. Meanwhile, in principle, bankers never should lend money to those, who need money at any costs.
“We recently have instructed commercial banks to make provision against the loans to other banks as well, and to provide loans after considering the loans thoroughly,” Binh added.