A teller counts money at an ABBank office in Hanoi (Photo: VNA) The National Assembly (NA) approved Resolution 42 on piloting the bad debtsettlement of credit institutions in 2017, however, the policy will expire onAugust 15 this year.
Under a resolution draft made public this week for comments, the SBV hasproposed extending the application of the pilot resolution until August 15,2025. During the extension, the Government will be responsible for studying andproposing to develop a new law on bad debt settlement of credit institutions.
To meet the current legal regulations related to procedures and deadlines, theGovernment will propose the NA allow the application of the shortenedprocedures to pass the extended resolution at the NA’s meeting in May2022, according to the draft.
According to the SBV, after five years of implementing the resolution, the baddebt settlement of credit institutions has achieved positive results.Accordingly, from August 15, 2017 to November 30, 2021, 373.3 trillion VND ofbad debt was recovered according to Resolution 42. On average, some 5.66trillion VND of bad debts were handled monthly during the application ofResolution 42, against about 2.14 trillion VND previously.
However, the outbreak of the COVID-19 pandemic has negatively affected thecredit quality of the credit institution system. Bad debts have been increasingsince 2020 and reached more than 2 per cent by the end of November 2021.Many warnings showed bad debt will continue to rise again due to thepandemic’s impacts.
The SBV, therefore, has proposed to legislate the policies specified inResolution 42 into a new law to continually enable the banking industry tosettle bad debts of credit institutions. The issuance of a new law on baddebt handling will help credit institutions maintain and accelerate thehandling of bad debts to avoid potential risks for the economy.
Experts have so far also suggested streamlining Resolution 42 to betterdeal with bad debts.
According to banking expert Can Van Luc, one of the major problems when dealingwith bad debts currently is the handling of collateral. The right to seizesecurity assets of a credit institution is one of the key contents inResolution 42, but it does not specify regulations when the borrowersdo not cooperate. Therefore, as Resolution 42 will expire next year, Lucsaid it is necessary to have a law on bad debt settlement with a stronger legalframework.
Lawyer Truong Thanh Duc, director of ANVI Law Firm, said Resolution 42 has agood effect in dealing with bad debts, however, the policy still needs to befurther streamlined to improve the handling of bad debts of the bankingindustry./.
VNA
