Customers and employees at Shinhan Bank’s office on Ly Thai To Street, Hanoi (Source: VNA)Hanoi (VNS/VNA) - The Vietnam Asset Management Company(VAMC) will need more capital to further benefit from the National Assembly’srecent resolution on the settlement of non-performing loans (NPLs), expertssaid.
The Resolution 42/2017/QH14 on piloting the bad debt settlement ofcredit institutions, which has taken effect from August 15 this year, providesa thorough guidance on the procedures for recoveryand repossession of collateral.
According to the resolution, credit institutions, foreign bankbranches, or the VAMC may directly repossess an NPL’s collateral heldby a borrower or third party default, and foreclosure may be aided by thepolice and other local authorities.
The new legal framework also provides incentives to encourage NPLtrades, as the NPL may be sold at a price lower or higher than par.
It also sets forth a framework for a secondary debt tradingmarket, which was high on the wish list of foreign and domestic investorsalike.
Despite the effective policies, experts said another importantissue is the financial resource for the VAMC to buy the NPLs, as the debts isextremely large. With the current charter capital of only 2 trillion VND (88million USD), the VAMC will not be able to do anything to handle the hugedebts.
Expert Tran Du Lich said that the VAMC’s capital was too modestcompared with hundreds of trillions of NPLs that needed to be settled.According to the new resolution, VAMC must buy the NPLs based on marketmechanism, so it cannot use its special bonds to buy the debts, as was beingdone previously, he explained.
Earlier, credit institutions sold their NPLs to VAMC in exchangefor special bonds that matured in five or 10 years.
Though the VAMC is permitted to increase the capital to 10trillion VND by 2020 according to a project on restructuring creditinstitutions in the period between 2016 and 2020, it is too late as the NPLsettlement is urgent, the expert said.
To make available more capital for the VAMC to buy the NPLs, Lichsuggested some solutions, including the use of Government’s loans from foreigncountries and the issue of the central bank’s bills.
Some other experts proposed that the VAMC could issue corporatebonds for all kinds of investors and use the capital to buy the NPLs.
After more than three years of operation, VAMC bought 25,631 NPLstotalling 282.1 trillion VND from 42 credit institutions at a purchase price of245.67 trillion VND, but mainly paid by special bonds. Of the total, it has sofar recovered only some 50 trillion VND.-VNA/VNS
The Resolution 42/2017/QH14 on piloting the bad debt settlement ofcredit institutions, which has taken effect from August 15 this year, providesa thorough guidance on the procedures for recoveryand repossession of collateral.
According to the resolution, credit institutions, foreign bankbranches, or the VAMC may directly repossess an NPL’s collateral heldby a borrower or third party default, and foreclosure may be aided by thepolice and other local authorities.
The new legal framework also provides incentives to encourage NPLtrades, as the NPL may be sold at a price lower or higher than par.
It also sets forth a framework for a secondary debt tradingmarket, which was high on the wish list of foreign and domestic investorsalike.
Despite the effective policies, experts said another importantissue is the financial resource for the VAMC to buy the NPLs, as the debts isextremely large. With the current charter capital of only 2 trillion VND (88million USD), the VAMC will not be able to do anything to handle the hugedebts.
Expert Tran Du Lich said that the VAMC’s capital was too modestcompared with hundreds of trillions of NPLs that needed to be settled.According to the new resolution, VAMC must buy the NPLs based on marketmechanism, so it cannot use its special bonds to buy the debts, as was beingdone previously, he explained.
Earlier, credit institutions sold their NPLs to VAMC in exchangefor special bonds that matured in five or 10 years.
Though the VAMC is permitted to increase the capital to 10trillion VND by 2020 according to a project on restructuring creditinstitutions in the period between 2016 and 2020, it is too late as the NPLsettlement is urgent, the expert said.
To make available more capital for the VAMC to buy the NPLs, Lichsuggested some solutions, including the use of Government’s loans from foreigncountries and the issue of the central bank’s bills.
Some other experts proposed that the VAMC could issue corporatebonds for all kinds of investors and use the capital to buy the NPLs.
After more than three years of operation, VAMC bought 25,631 NPLstotalling 282.1 trillion VND from 42 credit institutions at a purchase price of245.67 trillion VND, but mainly paid by special bonds. Of the total, it has sofar recovered only some 50 trillion VND.-VNA/VNS
VNA
