11:08 | 10/06/2015 Finance - Banking
(VEN) - Talking to the Vietnam Economic News, Vietnam Asset Management Company (VAMC) Members’ Board Chairman Nguyen Quoc Hung said that the country’s legal framework needs to be improved with laws or resolutions of the National Assembly Standing Committee if the issue of bad debts is to be thoroughly resolved.
Real estate accounts for 80-90 percent of the assets VAMC is currently holding
VAMC has bought VND153.997 trillion in bad debts from 39 credit institutions through special bonds since 2013. Under the plan approved by the governor of the State Bank of Vietnam, VAMC will buy bad debts worth a total of VND80 trillion this year. By the end of 2015, VAMC is expected to manage more than VND200 trillion of bad debts.
VAMC has so far sold debts valued at VND2.306 trillion of 10 customers from five credit institutions, recoveringVND1.773 trillion. It has also sold collateral worth VND490 billion related to 13 debts. VAMC has classified lists of debts and collateral for sale to domestic and foreign investors. Real estate accounted for 80-90 percent of the assets VAMC is currently holding.
According to Hung, the liquidity of credit institutions remains quite stable so the economy’s activities are not worrisome. For VAMC, collateral is mainly in the form of real estate, while the property market is improving so bad debts were likely to be resolved.
A legal corridor for resolving bad debts needed
The government issued Decree 34/2015/ND-CP amending some provisions of Decree 53/2013/ND-CP (Decree 34/2015/ND-CP became effective on April 5, 2015). Decree 34/2015/ND-CP has increased VAMC’s chartered capital from VND500 billion to VND2 trillion while allowing VAMC to issue bonds to buy bad debts at market prices, permitting credit institutions to use VAMC bonds to participate in open market operations (OMO) and refinancing via the State Bank. The decree allows VAMC to issue special bonds with a maximum term of 10 years to buy bad debts from struggling or under-restructuring credit institutions.
Decree 34/2015/ND-CP provides VAMC with improved benefits, but these are not big enough for VAMC to handle bad debts promptly and effectively. Hung said that VAMC was still facing many difficulties in handling bad debts, as it has to take collateral through the court. If the processes are not handled promptly, bad debts will simply move from credit institutions to VAMC.
There is no market for trade in debts, with such trade largely managed through the law on foreign investment and land and real estate laws. It is necessary to have a law or National Assembly resolution on trade in bad debts, Hung suggested./.
By Lan Ngoc