Organization of Vietnamese AMC in doubt

Questions rise about funding Asset Management Company.

Vietnam’s resolve to clean up its banking system will be tested by how the government executes plans to set up an AMC this month that will take over bad bank loans.

Alain Cany, Ho Chi Minh City-based co-chairman of the Vietnam Business Forum Consortium said everything depends on the implementation.

“If they are serious about finding ways to capitalize this asset management company, and they describe what banks will have to do and what they will receive in exchange and how the government will mobilize funds, that would be great news and may get banks lending again,” he said.

Vietnam’s government is under pressure to solve the bad debt problem that has reduced domestic consumption and pushed economic growth downwards to a 13-year low in 2012.

The government is very likely to approve before March 23 a decree to establish the AMC, said media sources. State Bank of Vietnam Governor Nguyen Van Binh has said Vietnam plans to resolve about half the banking system’s bad debt this year.

Binh also urged commercial lenders to reduce lending rates to below 13%. The bad debt ratio at Vietnam’s banks dropped to 6% of total outstanding loans as of Feb. 28, from about 8% last year.