The Vietnam Asset Management Company (VAMC) will need more capital to further benefit from the National Assembly’s recent resolution on the settlement of non-performing loans (Photo: baodauthau.vn) Hanoi (VNA) - The Vietnam Asset ManagementCompany (VAMC) will need more capital to further benefit from the NationalAssembly’s recent resolution on the settlement of non-performing loans (NPLs),experts said.
The Resolution 42/2017/QH14 on piloting the baddebt settlement of credit institutions, which has taken effect from August 15this year, provides a thorough guidance on the procedures for recoveryand repossession of collateral.
According to the resolution, credit institutions,foreign bank branches, or the VAMC may directly repossess an NPL’scollateral held by a borrower or third party default, and foreclosure maybe aided by the police and other local authorities.
The new legal framework also provides incentivesto encourage NPL trades, as the NPL may be sold at a price lower or higher thanpar.
It also sets forth a framework for a secondarydebt trading market, which was high on the wish list of foreign and domesticinvestors alike.
Despite the effective policies, experts saidanother important issue is the financial resource for the VAMC to buy the NPLs,as the debts is extremely large. With the current charter capital of only 2trillion VND (88 million USD), the VAMC will not be able to do anything tohandle the huge debts.
Expert Tran Du Lich said that the VAMC’s capitalwas too modest compared with hundreds of trillions of NPLs that needed to besettled. According to the new resolution, VAMC must buy the NPLs based onmarket mechanism, so it cannot use its special bonds to buy the debts, as wasbeing done previously, he explained.
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Earlier, credit institutions sold their NPLs toVAMC in exchange for special bonds that matured in five or 10 years.
Though the VAMC is permitted to increase thecapital to 10 trillion VND by 2020 according to a project on restructuringcredit institutions in the period between 2016 and 2020, it is too late as theNPL settlement is urgent, the expert said.
To make available more capital for the VAMC to buythe NPLs, Lich suggested some solutions, including the use of Government’sloans from foreign countries and the issue of the central bank’s bills.
Some other experts proposed that the VAMC couldissue corporate bonds for all kinds of investors and use the capital to buy theNPLs.
After more than three years of operation, VAMCbought 25,631 NPLs totalling 282.1 trillion VND from 42 credit institutions ata purchase price of 245.67 trillion VND, but mainly paid by special bonds. Ofthe total, it has so far recovered only some 50 trillion VND.-VNA
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