A warehouse for lease in HCM City. Collateral management could be a new service for the logistics industry in Việt Nam. — VNA/VNS Photo Hồng Đạt

HÀ NỘI — Collateral management services in Việt Nam have ample room for growth, given that the country has 880,000 sqm of warehouse capacity in the North and 3,033,000 sqm in the South.

This was the remark made by Phạm Thị Lan Hương, Head of the Logistics Committee, Vietnam Logistics Business Association, in the seminar "Collateral management services: a new service for logistics industry" held yesterday.

She said there are three possible methods of collateral management in the logistics sector. The first method involves bank-affiliated warehouses, the second borrowers' warehouses but with a third-party's security service, and the last third-party's warehouses. 

The second method would carry high risks to lenders because security service providers in Việt Nam are generally small in size. They are not well-positioned to be able to compensate lenders for any loss or damage to the collateral.

The third method would be less risky because it transfers the liability for the collateral to a third party, which is usually a logistics company with a good financial position. 

"The third method is gaining in popularity in recent years. We hope that Vietnam Logistics Business Association and International Financial Corporation (IFC) would take action to bring it to prominence," Hương said.

Bùi Ngọc Toản, SME Department, VietinBank Tràng An, said banks only accept commodities that can be managed, monitored, and realised as collateral. Commodities that are either unpopular, with volatile prices and values, difficult to liquidate, or prohibited by law would not be used as collateral. 

"At the peak of the COVID-19 pandemic, some companies put up medical masks as collateral for loans but we declined on grounds of their volatile prices," Toản said.

He also said two types of companies could assume the role of collateral custodians, namely security service providers and warehouse lessors.

Legally, qualified security service providers are required to have a business registration in the security sector for at least two years and have their staff trained and re-trained frequently.

Jinchang Lai, Principal Operations Officer, IFC, said collateral management companies' (CMC) services normally include identification of collateral and monitoring and control of collateral. 

Two common types of monitoring and control contracts are Stock Monitoring Agreements (SMA) and Collateral Management Agreements (CMA).

Under SMA, a CMC undertakes periodic monitoring and quantification of goods stored in warehouses at the request of a lender. The CMC is not responsible for the physical control of the warehouses and not liable for any loss of goods.

Meanwhile, CMA is a three-party agreement with the CMC taking complete, unique, and exclusive control over the warehouses. It is responsible for entries and exits and reliable for any loss of goods. — VNS