Banks warned about loans to big corporate customers
Banks lent large corporate customers more than 3.2 quadrillion VND by the end of 2020. (Photo: baodautu.vn)
The State Bank of Vietnam (SBV) has warned commercial banks about rising bad debts and loans from large corporate customers whose credit values top 500 billion VND (21.5 million USD) each.Although banks have tried to boost retail credit for inpidual customers in recent years, big corporate customers are still their main targets as a credit contract with a large enterprise can bring a profit hundreds of times higher than that of thousands of small credit contracts of inpidual customers.
The SBV said bad debts of large corporate customers in 2020 increased compared to the end of 2019. The total outstanding loans that banks lend to large enterprises exceeded 3.2 quadrillion VND, accounting for more than 30 percent of the total outstanding loans of the entire economy. Of which, bad debts accounted for 1.65 percent of the loans. Notably, bad debts for enterprises with outstanding loans of 5 trillion VND or more was 2.42 percent, higher than the average bad debt ratio of the banking system.
As many banks are increasingly dependent on large corporate customers, risks have increased.
Although the SBV did not specifically mention the 3.2 quadrillion VND loans, it is estimated that the large enterprises mainly operate in the real estate sector.
According to experts, real estate credit is not bad because the real estate market is a fundamental market and its development will lead to the growth of the entire economy. However, the SBV’s warnings about large corporate credit and real estate credit are understandable.
First, some banks are too focusing on a number of large enterprises. At many banks, real estate credit is not only reflected in huge corporate loans but also huge corporate bond investments.
Second, in terms of data, cross-ownership in the banking sector has decreased sharply, but in reality, this relationship is increasingly complex. General meetings of shareholders in the banking industry this year also witnessed many new bosses appointed who also run large real estate groups.
Third, banks could face liquidity difficulties if they lend too much capital for a few large enterprises, as in recent cases when banks have struggled with loans worth tens of thousands of billion dong to build-operate-transfer (BOT) enterprises that have failed to pay their debts due to difficulties in their business.
When lending to enterprises, banks always have tools to calculate and prevent risks. However, avoiding too much focus on large customers will spread risks, experts said.
Experts suggested to deal with the risks, under a project to restructure the system of credit institutions associated with bad debt settlement for 2021-25, the SBV should draft the restructuring with a focus on asset quality but not the size of banks. Many countries are also trying to develop small but quality banks, which lend to inpidual customers and small and medium-sized enterprises, instead of depending too much on big enterprises.
In addition, to reduce risks for banks, the SBV must gradually raise banks’ risk governance standards, require them to be more transparent about governance and improve the independence of the banks’ executive boards./.
Related News
Corporate bonds worth 1.1 billion USD issued in March
13:55 | 06/04/2023 Finance
SBV asks to issue revised decree on foreign ownership cap at Vietnamese banks
20:30 | 01/04/2023 Finance
Enterprises’ worry is being in the debt group for banks
13:39 | 31/03/2023 Import-Export
Vietnam adjusting policies to adapt to global minimum corporate income tax: Official
15:48 | 27/03/2023 Finance
Latest News
Tax revenue is estimated at VND 426,922 billion in the first quarter
09:56 | 06/04/2023 Finance
Nearly 400 complaints about insurance distribution through banks on Ministry of Finance hotline
14:47 | 04/04/2023 Finance
Central bank starts huge credit package for social housing projects
14:42 | 04/04/2023 Finance
In Q1, State revenue estimated to rise by 1.3%
13:28 | 04/04/2023 Finance
More News
Consider raising the level of penalties to ensure fairness and transparency in the stock market
13:27 | 04/04/2023 Finance
Central bank cuts policy interest rates to spur growth
17:43 | 02/04/2023 Finance
Ensure policies to attract investment when implementing global minimum tax
10:33 | 02/04/2023 Finance
Solutions to attract FDI when implementing the global minimum CIT
11:38 | 01/04/2023 Finance
Effective implementation of tax incentives as driving force for growth in trade turnover between Vietnam and Cuba
13:43 | 31/03/2023 Finance
Bringing the policies on reducing land rent and water surface rent into life
15:41 | 29/03/2023 Finance
The more delayed the investment disbursement is, the more accumulated the capital expenditure will be
10:22 | 29/03/2023 Finance
Ministry of Finance summarizes the 10-year implementation of the Resolution of the 8th meeting of the 11th Central Committee
10:20 | 29/03/2023 Finance
Deputy PM urges hastened procedures for cancelled IDA loans
14:25 | 28/03/2023 Finance
Your care
The system has not recorded your reading habits.
Please Login/Register so that the system can provide articles according to your reading needs.
Corporate bonds worth 1.1 billion USD issued in March
13:55 | 06/04/2023 Finance
Tax revenue is estimated at VND 426,922 billion in the first quarter
09:56 | 06/04/2023 Finance
Nearly 400 complaints about insurance distribution through banks on Ministry of Finance hotline
14:47 | 04/04/2023 Finance
Central bank starts huge credit package for social housing projects
14:42 | 04/04/2023 Finance
In Q1, State revenue estimated to rise by 1.3%
13:28 | 04/04/2023 Finance