A logo of Việt Nam Asset Management Company (VAMC). VAMC can sell collateral of a non-performing loan (NPL) higher or lower than the principal balance of the NPL. — Photo VAMC
The State Bank of Việt Nam (SBV) last week announced it is collecting public comments on a draft circular regulating non-performing loans (NPL) trading and handling of the SBV’s Việt Nam Asset Management Company (VAMC).
The draft circular, which revises Circular 19/2013 dated September 6, 2013 of the SBV’s Governor, supplements regulations that VAMC can sell collateral of a NPL higher or lower than the principal balance of the NPL.
VAMC also self-implements or hires qualified price appraisal organisations to determine the offering price for competitive bidding, or the expected price for direct agreement with the debt buyer.
If necessary, VAMC can refer to the price purchase and sale of similar NPLs on the market (if any) to determine the offering price and the expected debt sale price.
In the case of auctioning NPLs, VAMC will comply with legal regulations on asset auctions.
In addition, the NPL purchase of VAMC from commercial banks must be in accordance with market price.
The draft circular also regulates that borrowers, whose NPLs sold to VAMC and production and business plans or investment projects are effective, are considered to be granted credit by credit institutions according to agreements and legal regulations.
VAMC only buy NPLs, which it assesses can be fully recovered and the collateral of the NPLs can be sold or the borrowers of the NPLs have the prospect of recovering their ability to repay the NPLs.
Though the asset quality of banks in Việt Nam was under control by the end of 2023, experts said more attention should be paid to the issue this year as bad debts are rising.
The experts made the recommendation because, while existing bad debts have not been resolved yet, new bad debts are expected to surge when Circular 02/2023/TT-NHNN on debt restructuring and debt repayment postponement expires in June 2024.
Commercial banks last month requested the SBV to consider an extension of Circular 02/2023/TT-NHNN in a bid to support economic recovery under the current challenging economic situation. They have been concerned over businesses' ability to meet the payment deadline on June 30, 2024.
The banks said an additional six months or even another year would be welcomed by most businesses, as well as the banking sector.
Dr Trần Dục Thức from HCM City University warned that provisions for risky debts were still increasing. This meant that despite support, banks' bad debts were still increasing.
According to Thức, bad debt will increase in 2024 when corporate bonds come to maturity. The sale of assets is facing difficulty so firms do not have money to pay bonds and bank loans. If banks do not consider an extension for existing debts, the debts will be transferred to a worse debt group. — VNS