Law on bad debt settlement necessary: experts
The Government must create a law on bad debts settlement to tackle difficulties during the process, experts said at a recent conference held by the State Bank of Vietnam.
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Nguyen Quoc Hung, chairman of the Vietnam Asset Management Company (VAMC), said on October 26 the company had bought non-performing loans worth a total of VND262 trillion (US$11.7 million) from 42 credit institutions since 2013.
However, it recovered nearly VND38 trillion, equivalent to 15% of the bad debts.
Hung attributed the modest result to limited human resources and the huge amount of bad debts which are guaranteed by various types of assets, saying that dealing with collaterals was not as effective as expected.
He said legal regulations of the debt trading market were not sufficient enough.
For example, VAMC buys bad debts from credit institutions but is not able to sell them to a third party except the Debt and Asset Trading Corporation, and the rights and liabilities of debt buyers and debt sellers as well as those handling collaterals are not clearly regulated.
Due to limited financial capacity, VAMC also wanted to be allowed to issue corporate bonds to raise capital, Hung added.
Le Xuan Nghia, former deputy chairman of the National Financial Supervisory Commission, said, “If we cannot give more money to VAMC to deal with bad debts, we must give it more power to do so by issuing a specific mechanism.”
Chairman of the National Assembly’s Economic Committee Nguyen Duc Kien said to formulate the law, it was necessary to have reports on provisions and articles related to collaterals in existing laws, such as the Civil Code, the Penal Code and the Law on Housing, which are creating obstacles.
Can Van Luc, senior advisor to the chairman of the Bank for Investment and Development of Vietnam, urged that a mechanism to trade bad debts at market prices needed to be worked out.
“Experiences from other countries show that bad debts will only be successfully addressed if a debt trading market is properly formed,” Lực said.
He added debt value must be assessed by an independent agency to ensure transparency and foreign investors should also be encouraged to participate in the market.
Luc said the Republic of Korea allowed foreign investors to trade debts by mandating a local company and Vietnam could do the same.
VAMC chairman Hung admitted that many international institutions and foreign investors came to VAMC to inquire about purchasing its bad debts, but they did not end up offering a deal after realising that VAMC lacked the rights to determine debt trade and collateral sale.
Since its establishment, VAMC has met with 35 international and 17 domestic investors, Hung said.
