Removing bottlenecks in bad debt settlement

14:39 | 22/06/2017 Finance - Banking

(VEN) - Nguyen Toan Thang, Secretary General of the Vietnam Banks Association, talked about bad debt settlement in an interview with Viet- nam Economic News’ Thuy Linh.

removing bottlenecks in bad debt settlement

There are many bottlenecks in bad debt settlement, including inadequacies in the legal framework. How will a draft resolution on bad debt settlement and a draft law amending many laws help improve the handling of bad debts?

The banking system has made greater efforts in deploying solutions for the restructuring of credit institutions and dealing with bad debts. Unhealthy banks have been identified, restructured and prevented from collapsing and slipping out of control, ensuring the stability and safety of the system. Credit institutions have been active in improving their asset quality, monitoring their credit quality and dealing with bad debts.

However bad debt settlement has been difficult for various reasons, including the insufficient legal framework, mechanisms and policies. Therefore, the State Bank of Vietnam proposed to the government and the National Assembly to deliberate a draft resolution on bad debt settlement and a draft law amending many laws in the third plenary session of the 14th National Assembly.

What are the solutions to support quick and definitive settlement of bad debts?

Collateral is one of the keys to deal with bad debts. A draft resolution on bad debt settlement will help handle collateral in a quick and convenient manner. Credit institutions must have the right to seize collaterals when borrowers violate commitments. After the seizure of collaterals, credit institutions are allowed to sell them at market price, which may be lower than the book value. Credit institutions transfer ownerships to buyers and are given priority in payments for debt obligations.

These are the prerequisites needed to form the debt buying and selling market in line with international practices, contributing to creating favorable conditions for asset management organizations and debt settlement companies, including the Vietnam Asset Management Company (VAMC) to quickly resolve bad debts purchased from credit institutions.

What is your expectation on bad debt settlement?

Bad debts and their settlement are the problems of not only the banking sector, but also the whole economy. Bad debts have many negative impacts on the country’s socioeconomic development. The insufficient legal framework, mechanisms and policies have posed difficulties for bad debt settlement. After a draft resolution on bad debt settlement and a draft law amending many laws are approved by the National Assembly, which clearly define the responsibilities of each ministry and department, bad debts are expected to be handled in a quick and definitive manner.

Thuy Linh