Update mortgage law, experts say

At the conference on credit institutions’ rights to settle mortgaged assets, participants said NPLs with mortgaged assets account for up to 90% of the country’s total NPLs. However, creditors are facing obstacles in settling mortgaged assets due to an incomplete and unsuitable legal framework.

The institutions said many legal regulations have no detailed instructions on dealing with mortgaged assets. Therefore, it takes a long time to deal with the assets.

In addition, the slow judgment process also negatively impacts credit institutions’ business performance, wasting time and money to recoup toxic debts.

Deputy Governor of the State Bank of Vietnam Nguyen Kim Anh admitted that the efficient collateral settlement requires a legal system with uniformity, transparency and consistentcy. It must also be respectful of the legitimate rights of creditors.

The law must create a legal framework for the parties involved, especially for the creditors to be able to enforce their legitimate rights under the agreement.

“It is also necessary to establish mechanisms that allow the parties to choose a way to handle the debts with regard to mortgaged assets quickly, conveniently and effectively. At the same time, the legal system must be strictly adhered to by the involved parties,” Anh said.

At the conference, participants said while handling mortgaged assets, the first priority must be to protect the interests of creditors rather than debtors and this must be specified in the provisions related to secured transactions and settling of collateral.

Expert Nguyen Dinh Anh said economically, the credit institutions’ right in settling mortgaged assets includes their right to use the assets to offset losses caused by bad debts. But when creditors handle the assets, they receive no co-operation from debtors and sometimes the relationship becomes confrontational or even fiercely conflicting.

“The right to handle collateral cannot be executed quickly, efficiently and effectively unless the awareness of the rights, benefits and obligations of all involved parties in the credit relationship is established properly based on feasible and suitable legal basis, in accordance with actual conditions in Vietnam, as well as proximity to international practices and standards,” Anh said.

Lawyer Nguyen Thi Phuong, deputy head of the Vietnam Banks Association’s Legal Club, said the right to settle mortgaged assets of credit institutions is a civil right. Therefore, the institutions have the right to settle the collateral according to their will with the preconditions not being contrary to the fundamental principles of the civil law and not causing damage to other persons.

Participants at the conference also proposed that the Ministry of Justice work closely with the State Bank of Vietnam, the Ministry of Environment and Natural Resources, the Ministry of Public Security, the Ministry of Finance and the Supreme People’s Court to submit plans to the Government for issuance of a decree on solving mortgaged assets early.

According to the participants, the 2015 Civil Code, which will take effect on January 1, 2017, has no specific provisions for the seizure of mortgaged assets. The Ministry of Justice, therefore, should co-ordinate with agencies and relevant agencies to study and supplement detailed instructions on the rights of the secured party for the settlement of collateral in case the guarantor becomes uncooperative or opposes it.

Deputy Governor Anh said that the central bank and relevant ministries and agencies would scrutinise all the recommendations proposed at the event to streamline the legal framework involved in settling mortgaged assets to assist credit institutions in solving bad debts legally.