Starting 2016, the Vietnam Asset Management Company (VAMC) will mainlybuy non-performing loans (NPLs) from credit institutions at market valueand restrict using special bonds for the purchase.
According toVAMC Chairman Nguyen Quoc Hung, from next year, VAMC will also focus onselling collateral assets and NPLs that it bought from lenders.
VAMCcurrently issues special bonds in return for bad debt, which banks mayuse as collateral to secure funding from the central bank.
Italso mainly buys bad debt at book value determined by lenders who priceproperties backing loans higher than current market rates. Propertiesare collateral for about 95 percent soured loans bought by VAMC.
Fromnext year, VAMC will also organise bidding to sell collateral assets byorder of the court in accordance with Circular 18/2014/TT-BTP.
Itwill also contribute capital and transfer the purchased soured loansinto capital contributed to restructure firms that are capable ofrecovery.
In addition, it will also restructure solvent NPLs and act as a guarantee for debtors.
Ifbacked by strong financial status, VAMC also plans to buy stakes atcredit institutions to qualify for taking part in the institutions'restructuring.
This year, VAMC targets to use special bonds tobuy at least 100 trillion VND (4.67 billion USD) NPLs, apart fromselling at least 10 trillion VND (467.28 million USD).
It is also conducting a pilot purchase of bad debt worth roughly 5 trillion VND (233.64 million USD) using market valuations.
Accordingto experts, legal complications play a major role in the slow progressof bad debt handling, as it contains insufficient links between judicialand executive agencies, creating bottlenecks in capital flows and baddebt handling.
Lawyer Truong Thanh Duc, Chairman of law firmBasico, said that a major stumbling block in handling bad debts is thesector's legal framework, with conflicting laws allowing debtors topostpone repayments.
Tran Thi Hong Hanh, Secretary-General ofVietnam Banks Association, noted that the law has not kept pace withproblems arising in handling bad debts.
Hanh said there areconflicts between different laws. For example, the civil law allows landto be used as collateral, but the land law does not permit it, whichcan lead to a credit agreement between a bank and a debtor beingannulled in court.
Nguyen Huu Nghia, head of the BankingSupervision Agency at the State Bank of Vietnam, observed there are manyregulations in the civil law, civil procedure law, civil lawenforcement, land law, and construction law that hinder the handling ofbad debts by financial institutions as well as VAMC and these must beaddressed.-VNA
According toVAMC Chairman Nguyen Quoc Hung, from next year, VAMC will also focus onselling collateral assets and NPLs that it bought from lenders.
VAMCcurrently issues special bonds in return for bad debt, which banks mayuse as collateral to secure funding from the central bank.
Italso mainly buys bad debt at book value determined by lenders who priceproperties backing loans higher than current market rates. Propertiesare collateral for about 95 percent soured loans bought by VAMC.
Fromnext year, VAMC will also organise bidding to sell collateral assets byorder of the court in accordance with Circular 18/2014/TT-BTP.
Itwill also contribute capital and transfer the purchased soured loansinto capital contributed to restructure firms that are capable ofrecovery.
In addition, it will also restructure solvent NPLs and act as a guarantee for debtors.
Ifbacked by strong financial status, VAMC also plans to buy stakes atcredit institutions to qualify for taking part in the institutions'restructuring.
This year, VAMC targets to use special bonds tobuy at least 100 trillion VND (4.67 billion USD) NPLs, apart fromselling at least 10 trillion VND (467.28 million USD).
It is also conducting a pilot purchase of bad debt worth roughly 5 trillion VND (233.64 million USD) using market valuations.
Accordingto experts, legal complications play a major role in the slow progressof bad debt handling, as it contains insufficient links between judicialand executive agencies, creating bottlenecks in capital flows and baddebt handling.
Lawyer Truong Thanh Duc, Chairman of law firmBasico, said that a major stumbling block in handling bad debts is thesector's legal framework, with conflicting laws allowing debtors topostpone repayments.
Tran Thi Hong Hanh, Secretary-General ofVietnam Banks Association, noted that the law has not kept pace withproblems arising in handling bad debts.
Hanh said there areconflicts between different laws. For example, the civil law allows landto be used as collateral, but the land law does not permit it, whichcan lead to a credit agreement between a bank and a debtor beingannulled in court.
Nguyen Huu Nghia, head of the BankingSupervision Agency at the State Bank of Vietnam, observed there are manyregulations in the civil law, civil procedure law, civil lawenforcement, land law, and construction law that hinder the handling ofbad debts by financial institutions as well as VAMC and these must beaddressed.-VNA
