Credit institutions and foreign banks to submit bad debt plans

Update: April, 22/2016 - 09:00
"VAMC plans to settle roughly VND30 to VND35 trillion (US$1.33 billion to $1.55 billion) of purchased bad debts this year through retrieving the debts and selling the debts and mortgaged assets," Hung said

HÀ NỘI Viet Nam News -— The State Bank of Việt Nam (SBV) has requested credit institutions and foreign banks to intensify their credit quality and bad debt management and submit their bad debt handling plans.

They are to submit the plans for 2016 before April 28.

The move aims to ensure the bad debt ratio is at a safe level of below 3 per cent of outstanding loans, especially when the credit growth this year is targeted higher than last year at between 18 per cent and 20 per cent.

Under the Document No 2588/NHNN-TTGSNH sent to credit institutions and foreign bank branches across the country, the central bank instructed credit organisations to implement bad debt treatments in accordance with Directive No 02/CT-NHNN dated February 23, 2016, on strengthening the safety of the banking system through restructuring of credit organisations, bad debt management, and monitoring and maintaining bad debts at a safe level.

The directive also mentioned that credit institutions should focus on speeding up bad debt handling through measures such as risk contingency plans, selling bad debt to the Việt Nam Asset Management Company (VAMC), supervising debt collection, and settling mortgaged assets and monitoring credit, apart from bad debt and overdue debt management.

As most of the bad debts purchased by VAMC are still stuck at the company, VAMC Chairman Nguyễn Quốc Hùng told Đầu Tư Chứng Khoán (Securities Investment) newspaper that his company this year would closely work with credit institutions to completely settle the purchased debts.

“VAMC plans to settle roughly VNĐ30 to VNĐ35 trillion (US$1.33 billion to $1.55 billion) of purchased bad debts this year through retrieving the debts and selling the debts and mortgaged assets,” Hùng said, and added that the amount is nearly double that of last year.

Besides issuing roughly VNĐ40 trillion of special bonds to buy bad debts from credit institutions, VAMC would also start a pilot programme to buy bad debts at market prices, Hùng said.

“VAMC will use VNĐ2 trillion to purchase roughly VNĐ5 trillion of bad debts at market price this year,” Hùng said.

He said that the company this year would also work on a plan to turn bad debts into capital contribution so that it could be implemented early.

However, Hùng expected legal frameworks related to handling of bad debts to be streamlined to make it easy for VAMC.

Echoing Hùng, Nguyễn Hồng Hải, deputy director of the Ministry of Justice’s Civil and Economic Law Department was quoted by Đầu Tư Chứng Khoán as saying that the State should be consistent and more intensive in implementing measures and guidance to promote the settlement of bad debts.

Hải suggested that a Law on Asset Registration should be planned to establish a transparent information and legal procedure system.

Besides publicising the legal status of assets, protection of a bona fide third party should also be mentioned in the law to ease the settlement of bad debts, Hải said.

He also urged the Government to issue detailed guidance soon on applying shortened procedures to handle bad debts with mortgaged assets so that the court would not have to collect documents and evidences related to the cases. - VNS