The chairman of the Vietnam Asset Management Company (VAMC) at a seminar on October 26 called for society to join hands in the settlement of bad debt.

For VAMC to succeed with the bad debt resolution, there should be an objective view of bad debt. “Bad debt is not caused by the banking system only but due to many reasons, with the banking system one of them,” said VAMC Chairman Nguyen Quoc Hung at the seminar on bad debt in Hanoi.

“Bad debt is seriously detrimental to economic growth, so the society should join forces with the banking system to handle it, considering it as the responsibility of the whole society and jointly resolve it in the spirit of transparency,” he added.

At the event, the VAMC chairman talked about the measures for tackling bad debt his company had adopted.

The most notable one is buying bad debt by issuing special bonds. Since 2013, VAMC has taken over more than 25,000 debts from 42 credit institutions, with a total principal of some VND262 trillion, at the price of around VND227.8 trillion.

Regarding debt recovery, VAMC has collaborated with banks to collect nearly VND38 trillion in various forms including the sale of mortgaged assets.

Currently, VAMC can only focus on reviewing and sorting the big debts.

By the end of this August, VND548.5 trillion of bad debt had been settled, with 57.2% written off by credit institutions and the remaining 42.8% handled via the sale of collateral, the State Bank of Vietnam (SBV) said.

At the workshop held by SBV, the Government Office and VAMC, the main problems in bad debt settlement were tabled.

Legal provisions are said to be insufficient and inappropriate, making it difficult to speed up the settlement of bad debt. The handling of collateral could face difficulties without the cooperation of the borrower and the guarantor.

There is a lack of specific regulations to quickly settle bad debt. The prevalent rules limit the rights of VAMC when dealing with bad debt through the sale of mortgaged assets.

In addition, there are currently no flexible and efficient market mechanisms for bad debt settlement, making it hard to attract potential investors in Vietnam.

The sale of some non-performing loans has been deadlocked as the prevailing rules restrict the mortgage and transfer of land use rights, and the conversion of land use purposes with foreign involvement.

There is also no clear legal framework to protect staff and ensure the transparency of this process, leading to certain restrictions that discourage credit institutions and VAMC to actively settle bad debt.

A number of solutions have been proposed. For example, settling bad debt needs actual cash to take place quickly and efficiently, said the central bank.

The measures to deal with bad debt should be diversified on the basis of openness and transparency. An information system should be organized to introduce bad debt and collateral to interested investors, laying the groundwork for a debt trading market in Vietnam.

Source:  Saigontimes