Customers and employees at Shinhan Bank’s office on Ly Thai To Street, Hanoi (Source: VNA)Hanoi (VNS/VNA) - A National Assemblyresolution on non-performing loans will take effect on August 15 with lawmakershopeful it will help resolve much of the remaining bad debts held by commercialbanks and real estate projects across the nation.
Resolution 42 allows lenders to processcollateral as they see fit if debtors fail to cooperate with them on resolvingtheir bad debts.
Article 10 states that debtors’ collateral tobanks is not limited to residential construction projects, as there is no clearlegal restriction on other types of real estate, such as hotels, resorts, evenfactories and power plants, to be used in place of pledged assets.
As such, this allows for more flexible use ofcollateral, preventing debtors from defaulting for lack of valuable assets.
Resolution Article 7 also acknowledges creditinstitutions’ right to commandeer pledged assets from debtors, according totheir debt contract, unless the asset in question is being held by litigationcourts as evidence of a criminal offence on the debtors’ behalf.
This is considered an improvement on the 2015Civil Code, which does not stipulate recourse for pledged assets.
Article 8 of the Resolution allows moretransparent and simplified legal procedures in dealing with disputes overnonperforming loans.
Additionally, Resolution 42 now allows forfinancial institutions capable of purchasing and selling bad debts to do so,instead of restricting these activities to Government entities. Bad debts cannow be sold below their book values, meaning they are no longer toxic assetsthat have lost nearly all their value for commercial banks.
Thus, banks can now sell off collateral bad debtsat a lower value than they initially documented in their accounting tables,without fear of the sale being considered a loss, according to Chairman NguyenTien Dong of the Vietnam Asset Management Company (VAMC) who spoke at aconference last week on implementation of Resolution 42.
Overall, this can lead to bad debts being tradedmore frequently on the merger and acquisition market (M&A) in at least thenext five years, according to a representative of the State Bank of Vietnam(SBV).
Speaking at last week’s 2017 Vietnam M&AForum, Nguyen Huu Quang, deputy head of the NA’s Financial and BudgetaryCommittee, said that after three and a-half years, some 42,000 nonperformingloans held by 50 credit institutions had been purchased through VAMC, retrievingup to 53.2 trillion VND (2.3 billion USD) in value.
Since the beginning of 2013 till the secondquarter of 2017, up to 616.7 trillion VND (27.4 billion USD) worth of nationaluncollectible loans have been dealt with, according to SBV data. Out of this amount,up to 56.7 percent was solved by lending credit institutions, while 43.3 percentwas sold to other financial entities.
Quang said that initially, the Government wasaiming for commercial banks’ reconstruction, which gradually led to the needfor a separate resolution on bad debts instead of simply tweaking the existinglaws on credit institutions.
The SBV has voiced concern over the need forcommercial banks and other financial institutions to have more elbow room notonly in managing nonperforming loans, but also in issuing common stocks on themarket, which they claim Resolution 42 has yet to address.-VNA
Resolution 42 allows lenders to processcollateral as they see fit if debtors fail to cooperate with them on resolvingtheir bad debts.
Article 10 states that debtors’ collateral tobanks is not limited to residential construction projects, as there is no clearlegal restriction on other types of real estate, such as hotels, resorts, evenfactories and power plants, to be used in place of pledged assets.
As such, this allows for more flexible use ofcollateral, preventing debtors from defaulting for lack of valuable assets.
Resolution Article 7 also acknowledges creditinstitutions’ right to commandeer pledged assets from debtors, according totheir debt contract, unless the asset in question is being held by litigationcourts as evidence of a criminal offence on the debtors’ behalf.
This is considered an improvement on the 2015Civil Code, which does not stipulate recourse for pledged assets.
Article 8 of the Resolution allows moretransparent and simplified legal procedures in dealing with disputes overnonperforming loans.
Additionally, Resolution 42 now allows forfinancial institutions capable of purchasing and selling bad debts to do so,instead of restricting these activities to Government entities. Bad debts cannow be sold below their book values, meaning they are no longer toxic assetsthat have lost nearly all their value for commercial banks.
Thus, banks can now sell off collateral bad debtsat a lower value than they initially documented in their accounting tables,without fear of the sale being considered a loss, according to Chairman NguyenTien Dong of the Vietnam Asset Management Company (VAMC) who spoke at aconference last week on implementation of Resolution 42.
Overall, this can lead to bad debts being tradedmore frequently on the merger and acquisition market (M&A) in at least thenext five years, according to a representative of the State Bank of Vietnam(SBV).
Speaking at last week’s 2017 Vietnam M&AForum, Nguyen Huu Quang, deputy head of the NA’s Financial and BudgetaryCommittee, said that after three and a-half years, some 42,000 nonperformingloans held by 50 credit institutions had been purchased through VAMC, retrievingup to 53.2 trillion VND (2.3 billion USD) in value.
Since the beginning of 2013 till the secondquarter of 2017, up to 616.7 trillion VND (27.4 billion USD) worth of nationaluncollectible loans have been dealt with, according to SBV data. Out of this amount,up to 56.7 percent was solved by lending credit institutions, while 43.3 percentwas sold to other financial entities.
Quang said that initially, the Government wasaiming for commercial banks’ reconstruction, which gradually led to the needfor a separate resolution on bad debts instead of simply tweaking the existinglaws on credit institutions.
The SBV has voiced concern over the need forcommercial banks and other financial institutions to have more elbow room notonly in managing nonperforming loans, but also in issuing common stocks on themarket, which they claim Resolution 42 has yet to address.-VNA
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