Vietcombank ascribes high bad debts to auditing standards

Vietcombank attributed its high bad debt ratio to its international auditing standards in evaluating bad debts.

The bank recently released its financial statements for Q3/2011, where it posted its NPL ratio of 3.90%, the
highest among local commercial banks. However, the bank’s deputy CEO,  Nguyen Van Tuan, made it clear that
high bad debt figure lied in different evaluation standards applied for local banks.

At Vietcombank, loans are classified as special-mention loans as soon as borrowers’ businesses show signs of weakening but not until they are overdue like other banks, according to Tuan.

He expalined that when all banks apply the same loan classification and evaluation standards, Vietcombank may not lead the whole banking system in bad debts.

High bad debt ratio of Vietcombank was partly due to the bank’s prudence in reserving for loan losses, Tuan said, specifying that the bank currently set aside VND8 trillion in provisions for credit losses. VCB’s bad debt ratio is likely to be lower at year end when the bank uses a portion of its credit risk provisions to clear bad debts.