With a shabby facade, bars on its windows and flanked by a hair salon and a knockoff clothing store, the Vietnam Asset Management Company (VAMC) looks more like a backstreet pawnshop than a much-heralded bad-debt bank.
This no-frills office with PVC sofas, chintzy 1980s decor and no elevator houses what's been the central bank's shoestring saviour for wayward banks and risky borrowers who ran up $20 billion in bad debt in 2012 and almost brought a promising economy to its knees.
Even as more debts sour at lenders in Southeast Asian neighbours Thailand and Indonesia and also in China, Vietnam's $295 billion banking sector has slashed non-performing loans (NPLs) to 2.9 percent of total loans by September from 17.2 percent in 2012.
VAMC and its 100 staff have, since its July 2013 launch, helped banks get $10 billion in NPLs off their books. In return, banks have received $8.5 billion in special bonds which they can pledge with the central bank to obtain liquidity.
"We save anything that can be salvaged, those that can be profitable over time, we give them time," VAMC chairman Nguyen Quoc Hung told Reuters. "We handle the most frightening NPLs first... and those that can be fixed, we find ways to fix them and help businesses."
The VAMC doesn't actually buy the NPLs but only houses them and helps banks restructure them or sell them off. The risk thus stays with the banks, who must fully write off unrecovered debts over time by making provisions from their annual profits.
Vietnam's bad debt fight has been aided by an economy outperforming much of Asia's, with forecast 6.5 percent growth this year, driven by strong exports, factory output and consumption, and record foreign investment, mostly into manufacturing. Firms are being lured by its looming accession to Pacific and European Union free-trade pacts.