Transactions at an office of SeABank in Hanoi. (Photo courtesy of SeABank)According to General Secretary of the Vietnam Bankers AssociationNguyen Quoc Hung, Resolution No 42 on piloting bad debt settlement will beextended only until the end of 2023. Therefore, the legalisation of theresolution provisions is absolutely necessary.
Data from the State Bank of Vietnam (SBV) showed the bad debtratio of the whole banking system by the end of February 2023 reached 2.91%, asharp increase compared to 2% at the end of 2022 and nearly doubling comparedto the end of 2021.
Total bad debts of the banking system by the end of February 2023 wereestimated to account for 5% of total outstanding loans, which was nearly equalto when Resolution 42 came into effect.
In the process of bad debt settlement, a very important issue isseizing collateral, which will become illegal when Resolution 42 expires as atthat time it must comply with the provisions of other laws.
Without regulations allowing them to seize collateral underResolution 42, banks may be afraid to grant credit, affecting the ability toaccess loans of firms and individuals.
Techcombank’s senior director of public relations Nguyen Thi VanHoai said the application of measures for collateral plays an important role inbanks’ credit activities, ensuring they can recover capital in the event ofdefaults. It is necessary to have a clear and transparent legal framework toprotect the lender and the secured party in cases the borrower is unable torepay or deliberately delays fulfilling the debt repayment obligation.
Dr. Phan Duc Hieu, member of the National Assembly’s EconomicCommittee, said there should be special regulations on dealing with bad debtsand a mechanism to increase the efficiency of handling the problem.
The law needed to take into account the interests of creditors andborrowers to ensure fairness, Hieu said.
In order to streamline regulations, especially after Resolution 42expires on December 31, 2023, the SBV has drafted the Law on CreditInstitutions (amended) to submit to the National Assembly for comments. Thedraft Law adds a chapter on handling bad debts and collateral, in order tolegislate Resolution 42.
The draft law also legislates a number of provisions in Resolution42 on piloting bad debt settlement of credit institutions related to the saleof bad debt and collateral; as well as the purchase and sale of bad debts withcollateral being land use rights, land-attached assets, and land-attachedassets formed in the future.
The addition of these regulations has so far received the supportof domestic and foreign banks and business communities.
According to Dr. Chau Dinh Linh from Ho Chi Minh City BankingUniversity, the legalisation of Resolution 42 will create a legal corridor toimprove the effectiveness of bad debt settlement.
When Resolution 42 is legalised, it will create a unified andsynchronous legal mechanism to help banks handle bad debts faster and moreeffectively as the current difficulties closely relate to many other laws, suchas the Law on Land (amended), the Law on Housing (amended), the Law on RealEstate Business (amended) and the Law on Electronic Transactions./.
VNA
