Flawed regulations on handling collateral hinders bad debt settlement
Flawed legal regulations on collateral for debt collection have hampered bad debt settlement, participants said at a workshop in Hanoi on May 23.
A transaction at Maritime Bank (Photo: Maritime Bank)Hanoi (VNA) – Flawed legal regulations on collateral for debt collection have hampered bad debt settlement, participants said at a workshop in Hanoi on May 23.
The problem was pointed out by National Assembly (NA) deputies at the event held by Dai bieu Nhan dan (People’s Deputies) newspaper.
The State Bank of Vietnam (SBV) reported that the credit institution system handled 616.7 trillion VND (27.18 billion USD) of non-performing loans (NPLs) as of January 2017. The sum of handled bad debts has increased each year, from 74.68 trillion VND (3.29 billion USD) in 2012 to 118.49 trillion VND (5.22 billion USD) in 2016. Bad debts settled in January 2017 alone were valued at 5.14 trillion VND (226.52 million USD).
NPLs settled by credit institutions themselves were 349.7 trillion VND (15.41 billion USD), accounting for 56.7 percent of total bad debts. The remaining 43.3 percent were sold to other organisations and individuals.
About 53.24 trillion VND (2.35 billion USD) of debts collected through the Vietnam Asset Management Company (VAMC) from 2013 to March 31, 2017 were solved.
However, only 17.1 trillion VND (753.6 million USD) or 2.8 percent of the handled NPLs was collected through selling collateral, the SBV said.
Legal regulations did not protect the rights of credit institutions and VAMC and hindered the development of a bad debt market which includes sales and purchases of bad debts guaranteed by land use rights and land assets.
Legal regulations on collateral settlement haven’t ensured creditors’ rights to collateral seizure. Meanwhile, it takes up to two years to solve bad debts and collateral via courts, making expenses account for 29 percent of collected debt value.
At the workshop, participants said that if credit institutions can’t seize collateral will it substantially influence their debt collection capacity.
Nghiem Xuan Thanh, Chairman of Vietcombank’s board of directors, asked courts to streamline procedures for resolving disputes over collateral. He also called for police assistance in dealing with debtors who intentionally dodge debt repayment obligations.
Nguyen Duc Kien, Vice Chairman of the NA’s Committee for Economic Affairs, said the NA Standing Committee and the economic committee agreed on the need to issue a resolution on bad debt settlement, which is expected to be approved at the NA’s ongoing third session.-VNA
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