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Nguyen Duc Do, Deputy Director of the Institute of Economics and Finance

In your opinion, how will the COVID-19 epidemic affect banks' bad debts?

In theory, this current epidemic will make it difficult for businesses to operate, so it is possible that bad debt will increase. However, the increase depends on how long the epidemic lasts. If it takes 1-2 more months, banks can recover quickly, but if it lasts for 1-2 more quarters, it will cause bad effects. In addition, whether a bad debt will increase or not, it depends on the level of debt of businesses. At present, the business sectors heavily affected by the COVID-19 epidemic are tourism, agriculture, import and export, etc.

The State Bank has issued a writtenrequest to credit institutions to proactively grasp the situation of production and business, review customers who are borrowing loans due to COVID-19 to restructure the debt repayment period, interest rate exemption and reduceborrowing. Does this raise concerns about NPLs, sir?

First of all, this is a very timely direction of the banking industry to support those affected by the COVID-19 epidemic. However, this is an encouraging instruction, not mandatory, so banks can take the initiative, depending on the business situation to offer reasonable support plans. In addition, the State Bank also requires credit institutions to control debts, ensure strict, safe and right subjects. Therefore, the right banks can limit the increase in bad debt.

If not affected by the disease, how do you assess the bad debt situation in 2020 of the banks?

In 2019, the bad debt volume of the credit system has decreased because the banking industry has introduced many solutions so far to handle the bad debt effectively. However, in 2020, not only affected by the disease, but also the banking industry is affected by the world economy growing slowly, the economy is adjusting in cycles.After a period of very high growth has leveled off, inventory is high, so businesses adjusted production; real estate leveled off, and credit growth slowed down. Therefore, the prospects for the banking industry renot as bright as in 2019, so when an epidemic breaks out, there will be more negative impacts and bad debts. Therefore, in my opinion, it is likely that bad debt this year will increase compared to the previous year, and whether the increase will be more or less dependent on the domestic and foreign economic situation as well as the operation strategy of both the banking industry and credit institutions.

At Vietcombank, although the bad debt dropped sharply to over 5,700 billion dong, the bank's risk provision balance still increased by 123 billion dong to over 10,400 billion dong. Photo: Internet

As mentioned, this year's bad debt is likely to increase, so what are the measures that banks should take to minimize this?

Recently, solutions and laws on dealing with bad debts of the banking industry have been basically completed and promoted positive effects. Therefore, this year, we still do not have a more breakthrough solution to this problem. In previous years, authorities and experts mentioned a lot of bad debt trading market, but so far, due to legal basis, it has not been implemented. Therefore, the handling of non-performing loans is still the banks that are still dealing with their own bad debts, based on the relevant legal documents, including National Assembly Resolution 42/2017 / QH14 on piloting the handling of bad debts of credit institutions.