Asset firms prompt legislation for debt resolution

Monday, Sep 28, 2015 21:23

A bank employee counts money. Viet Nam's debt management firms will propose legislation to hasten bad loan resolution. -- Photo

HA NOI (Biz Hub) — Viet Nam's bad debt managers will propose legislation to overcome a regulatory vacuum hampering sale of billions of dollars in soured loans at banks and state companies, Bloomberg reported.

Since the start of 2014, the Viet Nam Asset Management Company has recouped less than seven per cent of the VND211 trillion (US$9.4 billion) in bad debt it bought since it began operating in 2013, according to Chairman Nguyen Quoc Hung.

Without a debt market or legal framework to sell to foreigners, the company known as VAMC, can only sell properties originally pledged as collateral for the non-performing loans or prod the borrowers to pay, Bloomberg reported last week.

"We need some sort of special mechanism, or separate regulations which can help us overcome all legal entanglements in the investment law, the land law and other related laws to be able to sell debt," Hung told Bloomberg in an interview in Ha Noi, adding, "Without such special rules, we cannot sell any debt."

The VAMC will sign a co-operation agreement with the finance ministry's Debt and Asset Trading Corporation, or DATC, by the end of 2015 "to lay the foundations for a debt market", Hung said.

The two agencies expect the government to soon have regulations on debt trading, he said.

At stake is Viet Nam's ability to get past an overhang of bad debt that has hindered access to bank credit, posing an ever present risk to the economy's recovery. The State Bank of Viet Nam (SBV) aims to bring down bad loans at the country's lenders to below three per cent of total lending by the end of September, compared to about 17 per cent in 2012.

"By selling debt to the VAMC, banks will meet the central bank's end-September deadline, but the question is how fast the VAMC can resolve the debt they bought," Bui Kien Thanh, an independent economist in Ha Noi, told Bloomberg.

"It will be tremendous progress if VAMC could get needed regulatory changes because under current laws, VAMC cannot do much. However I would not expect that to happen anytime soon," he said.

The VAMC will join DATC in proposing needed regulatory changes to the government to quicken the bad debt resolution process at banks and companies, Hung said.

SBV Governor Nguyen Van Binh said the process should not be sped up too hastily because some measures, such as reducing the prices of debt to attract more investors, may cause the assets of thousands of enterprises to be undersold. This will push the firms into even more difficulties with more employees losing their jobs.

He added that as bad debt is a key issue for the economy, its settlement requires comprehensive solutions on the national scale from business support, consumption and investment acceleration, to property market assistance.

Hung told Bloomberg that the VAMC has recouped VND8.3 trillion ($368.88 million) out of VND77.2 trillion ($3.43 billion) in bad loans that it has bought so far this year.

He expects to recoup another VND4 trillion ($177.78 million) by end-2015, bringing the total to around VND12 trillion ($533.33 million), more than double the VND4.9 trillion ($217.78 million) last year. — VNS

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