Central bank eyes debt trading business
The central bank is seeking to lay the grounds for the development of a secondary debt market in an effort to accelerate the handing of bad debts.
The lack of a debt trading market is a bottleneck in the process of handling toxic debts, Nguyen Quoc Hung, chairman of the Vietnam Asset Management Company (VAMC) said. The VAMC was founded under the central bank's umbrella in 2013 with a charter capital of VND500 billion (US$22.2 million) to resolve bad debts.
The VAMC and the Ministry of Finance's Debt and Asset Trading Corporation are Vietnam's motivating force in handling bad debts but still struggling to resolve the pile of toxic debts in the economy due to various reasons such as limited capital and incomplete legal framework.
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Although the bad debt ratio is reportedly cut to below 3%, non-performing loans remain a pressing issue.
"Only with a debt trading market, can non-performing debts be handled thoroughly and radically," Hung said.
Hung said that Vietnam needs a legal framework for handling bad debts as many foreign investors and funds are now looking to participate in the country's debt restructuring and handling process.
The central bank's draft about debt trading business aims to develop a legal framework for the launch of debt trading services, including the foundation of debt trading floors where debt trading, consultancy and brokerage take place.
Under the draft, debt trading companies must have a minimum legal capital of VND100 billion (US$4.45 million) and VND1 trillion for debt trading floor.
