A bank clerk counting her clients' money. The banking sector is expecting a new law on bad debt settlement. Photo haiquanonline.com.vn

HÀ NỘI — The national legislature has requested the Government to write a draft to prepare for the expiration of Resolution 42 on bad debt settlement and hand in the draft no later than May 2023, but insiders say the deadline is tight.

Nguyễn Quốc Hùng, General Secretary of the Vietnam Banks Association, admitted that the resolution had helped banks financially.

The total on-balance sheet, off-balance sheet and hidden bad debts are currently at 6.3 per cent, an ideal ratio for economic recovery.

He underscored two possible ways to respond to the request.

The first is to pull off a brand-new draft on bad debt settlement to replace Resolution 42, and the second is to amend the Law on Credit Institutions. However, he admitted that both ways take time, and 10 months was not enough to get the job done.

"It is quite a tough job to come up with a complete draft on bad debt settlement in less than one year," he said.

Vũ Ngọc Lan, Deputy Director of the Legal Department under the State Bank of Vietnam (SBV), said Resolution 42 was legally connected with various legal documents, including the Law on Land, the Law on Realty Business and the Civil Code.

However, only three laws - the Law on Land, Law on Realty Business and Law on Housing - were to be revised in 2023. This means there will probably be legal conflicts between the revised laws and the other old documents.

"In case conflicts arise over the collateral settlement, SBV will give priority to the Law on Credit Institutions," she said.

She also held that the deadline of May 2023 is relatively tight, so the support of other ministries and agencies is needed for the draft development.

Cấn Văn Lực, Chief Economist of the BIDV Bank, opined that the resolution's expiration would leave a big legal gap that only a new law on bad debt settlement could fill.

"This time is different. If we rely on old legal documents, such as the Civil Code or the Law on Enterprises, to handle bad debts instead of making a separate law for themselves, it will make bad debt settlement more complicated," he said.

The economist estimated on-balance sheet bad debts at 2 per cent in 2022. Meanwhile, consolidated bad debts were projected to be around 6 per cent.

Đỗ Giang Nam, Deputy Director of the Vietnam Asset Management Company, revealed that his company had purchased VNĐ114.2 trillion (US$4.9 billion) of bad debts through special bonds and VNĐ11.8 trillion at market price since the resolution came into effect.

He also held that other ministries and agencies seemed to offer little help to bad debt settlement as they misunderstood it as the job of the banking sector.

"Bad debts are not a standalone issue of the banking sector but an issue of the economy as a whole. Bad debt settlement, accordingly, not only streamlines banks but also promote economic recovery," he added.   

Phan Đức Hiếu, Standing Member of the Economic Committee, asserted that the impact of the resolution was beyond financial figures.

"Not only has the resolution helped reduce bad debts but it has also improved asset efficiency, bringing great benefits to firms, banks and borrowers," he said.

However, he underlined the need to upgrade the resolution into law to improve its legal effects and safeguard economic actors.

The law, he said, should be developed in a way that balances the rights and responsibilities of banks and their borrowers. — VNS