May, 07 2014 08:34:00

VAMC tackles challenges of buying bad debts

An employee arranges money at a bank in Ha Noi. Bad debts accounted for approximately 9 per cent of total loans by the end of February. — VNA/VNS PhotoTran Viet

HA NOI (VNS) — Agreement and sharing are critical in the current stage of handling purchased bad debts in Viet Nam, which helps save enterprises, avoid clashes and losses for all related parties.

Vice President of the Viet Nam Asset Management (VAMC) Nguyen Quoc Hung told Viet Nam News in a telephone interview yesterday, in a response to rumours that the company still faces issues in handling purchased debts.

The asset manager, which was formed last July to acquire bad debts, has purchased about VND45 trillion (US$2.13 billion) of bad debts, of which the principal debt was an estimated VND37.68 trillion ($1.78 billion).

Hung claimed that VAMC plans to restructure VND14.7 trillion ($696.68 million) of bad debts by 145 borrowers that have not gone bankrupt and to collect debts, sell collaterals and take legal actions against VND6.8 trillion ($322.27 million) of debts by 343 borrowers.

"We are definitely working to handle debts in the best possible manner, but it is not as easy as it sounds," Hung noted. "We could not apply practices in Malaysia or South Korea to handle bad debts in Viet Nam because these countries have different frameworks and different social situations."

Hung noted that VAMC will set time and space for borrowers to think, to cooperate and to voluntarily hand out assets before it takes immediate action against them. Initially, there were three borrowers who understood the message and were willing to comply.

"Of course, agreements take time," he added.

The vice president also stressed that timing and pricing sales of collaterals were challenges.

"Who will buy if we sell high, who will incur losses if we sell low? When will be the right time to act?" Hung questioned.

Industry experts suggested that related parties should share risks and economic values, or handling bad debts will come to a complete standstill.

If VAMC has to legally handle bad debts, it requires the collaboration of security forces, legal bodies and state administration units.

In the meantime, VAMC is waiting for guidance from the Ministry of Justice to legally conduct sales of collaterals.

According to the State Bank of Viet Nam, bad debts by the end of February accounted for approximately 9 per cent of the total loans. Handling bad debts, according to experts, is the definitive task that must be attended to in 2014-2015.

Prime Minister Nguyen Tan Dung set up an inter-disciplinary steering board to lead the mammoth projects of restructuring credit institutions by 2015 and solving bad debts of the system.

"The establishment of the committee shows a strong determination and commitment of the Government to deal with bad debts," Hung added.

The board is designated to advise the Prime Minister to implement and coordinate measures to reschedule and solve bad debts of the banking system. Also, the board will help ministries and municipal bodies supervise, detect and handle issues emerging from the policy practices related to bad debts at credit institutions.

Viet Nam's banking restructuring plan towards 2015 was initiated last April in the provision of improving the resilience of the money system, which is one of the three key reforms of the economy besides state-owned enterprises reform and public investment reform. — VNS

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