Bad debt at VAMC is actually double the bad debt on books The bad debt ratio of the banking system has been reported as dropping to 2.9 percent. However, the figure does not truly reflect the bad debt panorama.   A report of the National Finance Supervision Council shows that credit quality improved considerably in 2015 with the overdue debt of VND179.501 trillion, accounting for 4.4 percent of total outstanding loans (the figure was 5.3 percent in 2014. Meanwhile, the bad debt ratio was VND119.660 trillion, accounting for 2.9 percent of total outstanding loans; the figure was 3.7 percent in 2014). The bad debt of the three banks that the State Bank took over at zero dong made up 30.8 percent of total bad debts of the whole banking system. However, analysts pointed out that the reported figures do not count the amount of VND243 trillion bad debt stuck at the Vietnam Asset Management Company (VAMC). The amount of debt has been sold by commercial banks to VAMC and left in VAMC’s coffers. Chair of the National Finance Supervision Council Vu Viet Ngoan also said that banks still cannot reduce the bad debt burden though they have sold bad debts to VAMC, because they still have to make provisions for the debts. With high financial costs, banks’ profits are very modest. He said that if there is no better solution to the problem, bad debt will still be the ‘bottleneck’ of the banking system in 2016. The bad debt ratio of the banking system has been reported as dropping to 2.9 percent. However, the figure does not truly reflect the bad debt panorama. Nguyen Quoc Hung, chair of VAMC, told the press that from 2013 to 2015, VAMC bought VND245 trillion worth of bad debt from credit institutions and issued VND207 trillion worth special bonds. “As far as I know, the bad debt ratio reduced to 2.5 percent by the end of 2015,” Hung said. In 2015, VAMC collected VND17.78 trillion. From October 2013 to the end of 2015, it settled VND22.87 trillion, or 9 percent of principal. As such, if looking at the reported 2.9 percent of bad debt ratio, one would think the banking system is in good health. But in fact, most of the bad debts still have not been settled. Former Deputy Governor of the State Bank Le Duc Thuy said that if Vietnam applies international standards in classifying debts, the official bad debt ratio would be higher. According to Dau Tu Chung Khoan, foreign investors seem to have shrunk back and do not put high expectations on the possibility of buying bad debts from VAMC. The newspaper reported that about 60 investors once expressed their willingness to buy bad debts, but no deal has been made so far. “With the currently required procedures, no investor would dare buy debts,” said Hung from VAMC. CafeF