A government agency stands out building debt trading floor

Please tell me, how do you assess the results of bad debt processing by the banking system up to this point?

According to published information, the bad debt of the banking system has fallen to 2.18%. In terms of numbers, this result shows that banks have reduced the risk of bad debt. This is a very positive thing. However, after 5 years bad debt has decreased only 1.4%, in my opinion the results are not really positive. The problem is that banks still take risks, while still lending for real estate, consumer goods, securities ... These create a lot of risk, so bad debt remains above 2%. For low risk, safe credit, the bad debt must not exceed 1%.

I also think that the bad debt figure as disclosed may not reflect the whole of bad debt across the system. At present, bad debt in the economy is still at VAMC, if adding both bad debts in the banking system and the bad debt at VAMC, it is not 2.18% but more. Therefore, it is necessary to take a holistic view, because the bad debt is in VAMC's book system is still bad debt of the bank. The bank still has to handle this bad debt and it continues to affect the bank's financial system. In my opinion, it is impossible to separate VAMC bad debt from the banking system's books. So, in my opinion, to report only bad debt on the bank's book system is still one-sided.

In your opinion, are there any problems that have not been solved in the process of handling bad debts recently, especially after Resolution 42?

In dealing with bad debt since the issuance of Resolution 42, it can be said that this resolution opens new steps to deal with bad debts in legal terms but in reality there are many obstacles, one of the major obstacles is asset disposal. Resolution 42 allows banks to recover assets even when the borrower opposes or does not cooperate, but in reality if the debtor does not cooperate, the repayment process is very difficult. In addition, one of the difficulties is the financial system which allows investors to mobilize capital to develop real estate projects. However, when the real estate is recovered by the bank the people have paid enough. Once they have paid enough money, they must of course be the owner and certainly will not let the bank settle the debt owed to their owned assets. Normally, people have fulfilled their financial obligations, so their apartment has to be disposed of at the bank. But in many cases it is not. Many problems arise from this problem, leading to the recovery of assets to secure bad debt treatment.

Dealing with the problem of bad debt must have a real debt trading market. To form a debt trading market like this, according to you, what problems really need to paid attention to?

I think that commodities, buyers and sellers in the debt trading market, including bad debts in Vietnam, are not lacking, but one agency that organizes this market is not available. The State Bank seems not yet ready to assume the lead in debt trading. I think that a government agency needs to build a debt trading floor; VAMC must become the first member and the most likely member of debt trading.

However, there is a lack of legal framework for the formation of the debt trading market. Resolution 42 just paved the way for the formation of this market, not the market regulation. There should be regulations on market operations similar to the stock market; there should be a committee in place to manage and supervise the operation, requirements and regulations for market participants, and the sale and purchase of goods. In addition, there is a need for infrastructure for this market.

The formation of a debt trading platform also means that there must be a place to auction debt, all the information about the debt is transparent: Debt where, in what form, its original value and how much is the market value? ... The parties will trade in these debts through auctions.

In the US, the debt trading market is open, regular and large, with no floor for debt trading. Anyone can buy debt; banks can buy and sell their debt. In Vietnam, it cannot be, because the purchase of debt should be in the framework of strict regulations, so it is necessary to set up the floor for the debt to be traded officially. Later when the market has grown, it can be expanded.

VAMC is the agency responsible for trading bad debt of the bank, its chartered capital was VND2,000 billion, while market value was VND3,000 billion. With the modest capital scale mentioned above, it is difficult to boost debt trading at market price. In your opinion, how should this issue be resolved?

VAMC’s own capital is too small, if using that capital to buy bad debt, after only buying a few apartment buildings it is exhausted. Therefore, it must raise capital for this agency to even buy and sell debt, this agency must be able to borrow foreign capital. Thanks to chartered capital, VAMC buys loans from banks and can sell them to other investors. But the problem is that the borrowing is difficult, because the loan must be responsible for repayment, but the capital itself is too low to borrow the large capital needed unless the debts of this agency are guaranteed by the State Bank. If it is self-borrowing based on the financial ability of enterprises, it is very difficult to borrow, but if not borrowed, it is not able to buy the bank's large assets. That is the point I have mentioned five years ago.

VAMC should be equipped with large capital to afford debt trading. Currently VAMC buys bad debt by issuing special bonds, this is just like "parking for bad debts" rather than buying off the sale. Therefore, the first thing, the charter capital of VAMC needs to be increased to a minimum of 20 trillion. This can also be attributed to the company. There are two ways, one is equitization with domestic investors. Secondly, if you want to raise capital widely, you can count on mobilizing foreign investors and accept the swap. If VAMC wants to be fully controlled, the sale of shares will be limited. If the market economy, foreign investors will be accepted. This should be calculated.

Finally, from a personal point of view, I think that VAMC plays a key role in the debt trading market for creating a debt trading floor. It must be privatized to have the ability to create a debt trading market as Resolution 42 has introduced.

Thanks Sir!