Illustrative image (Source: VNA)Hanoi (VNA) - The State Bank of Vietnam (SBV) will co-operate with relevant agencies to mapout a "special" law to boost bank restructuring and settle bad debtsin 2017, according to SBV Governor Le Minh Hung.
Hungsaid the new law on supporting banking sector restructuring and resolving baddebts would mention all legal regulations related to the activity. Obstacles inthe existing legal regulations would also be addressed under the new law toremove hindrance in resolving bad debts.
Witha detailed and adequate legal framework, he expected it would be easier for thebanking system to implement restructuring.
“Thecentral bank would report to the National Assembly to convert into lawregulations related to the seizure of mortgaged assets to guarantee the rightsof the lenders,” Hung said, adding that this is currently the most criticalissue while dealing with bad debts.
Besidesthe recoupment and provision for bad debts, if the regulations were approved bythe National Assembly, the settlement of bad debts would be greatlyaccelerated, he said.
Accordingto experts and credit institutions, non-performing loans (NPLs) with mortgagedassets account for up to 90 per cent of the country’s total NPLs. However,creditors are facing obstacles in settling mortgaged assets due to anincomplete and unsuitable legal framework.
Theysay efficient collateral settlement requires a legal system, with uniformity,transparency and consistency. It must also be respectful of the legitimaterights of creditors. The law must create a legal framework for the partiesinvolved, especially for the creditors, to be able to enforce their legitimaterights under the agreement.
Theinstitutions said many legal regulations have no detailed instructions ondealing with mortgaged assets. It, therefore, takes a long time to deal withthe assets. In addition, they said, the slow judgment process also negativelyimpacts credit institutions’ business performance and leads to wastage of timeand money while recouping toxic debts.
Underthe new law, Hung said, the central bank would also suggest adding regulationson stake ownership of credit institutions to tighten banking ownership, thusavoiding the necessity to deal with cross-ownership and manipulation in thebanking system. Individual groups, which would like to buy credit institutions’stake, must prove their legal income sources and cannot allow the use oflending sources in whatever form.
Recently,many violations in the banking industry have stemmed from individual groupsthat invested in banks just to serve the interests of their own backyard firms.
Informationrelated to bank managers must be published and violation cases would beprohibited from taking part in managing and executing banks permanently, Hungsaid.
Dueto the existing incomplete and unsuitable legal framework, a larger number ofbad debts are still stuck at the central bank-run Vietnam Asset ManagementCompany (VAMC), which is entrusted to buy bad debts from credit institutions.
Accordingto the Government’s financial watchdog National Financial SupervisoryCommission, VAMC has, so far, recouped just 15 percent of the NPLs purchasedfrom credit institutions and still has some 224 trillion VND (9.86 billion USD)on standby to be sold.-VNA
