Bad debt still needs the "beautiful" progress

Thanks to the addition of important legal bases, the bad debts have been "easier breath". Picture: collected.

To improve gradually

It can be seen that, the State Bank of Vietnam (SBV) achieved important results in improving the institution in 2017. This was reflected in the adoption of the Law on amending and supplementing a number of articles of the Law on Credit Institutions and the issuance of Resolution 42/2017/QH14 on the pilot implementation of bad debts of credit institutions by the National Assembly. Under Resolution 42, the treatment of bad debts was expected to speed up quickly. This Resolution approved the legal support for the treatment process of guarantee property behind the bad debts; Move the difficulties and obstacles in the debt purchasing of the Vietnam Asset Management Company (VAMC), and allow the banks to allocate the estimated interest and difference when purchasing the bad debts flexibly.

According to a representative of the State Bank of Vietnam, since the effective resolution of Resolution 42, with taking part thoroughly and issuing the guiding documents to direct and organize the implementation, the credit institutions had reviewed all debts, classified the debts actively, coordinated with the related units to deal with the bad debts and positive results were achieved initially.

According to the preliminary assessment report, up to November 30th, 2017, the whole system processed 39.9 trillion VND and it was estimated to deal with over 50 trillion VND of bad debts by December 31st, 2017 under Resolution 42; In particular, six credit institutions were selected to focus on managing the treatment of bed debts, including Agribank, BIDV, VietinBank, ACB, Sacombank and Techcombank, by November 30th, 2017, 20.44 trillion VND were treated, accounting for 51.3% of total bad debts in the whole system.

As such, the number of treated bad debts having been handled is very good, creating the premise and belief for the next steps in dealing with bad debts. However, Mr. Nguyen Van Thuy, Deputy Head of the Board of General Supervision, the National Financial Supervisory Commission, said that the treatment results had not been as expected because the sale of bad debts with the market price was limited, the restructuring of weak banks and the banks that bought at "0 dong" price was slow.

Not only that, the SBV itself acknowledged that the synchronous implementation as well as coordination from branches and levels was still slow; the banks were still having difficulties when seizing the assets due to lack of cooperation by the client, or resistance of the securer, the borrower. Some authorities in many places had not cooperated, had not joined with the banks because there was no guidance to assign the responsibilities.

Typically, the handling of bad debts in the real estate sector depended on the guarantee property, so despite Resolution No. 42, the handling of guarantee property at the banks still faced many difficulties. For example, the customers who mortgaged the property rights arising from the investment cooperation contracts with the investors to carry out the real estate projects were not the project owners. Meanwhile, the project had not been completed, so the banks could not apply a property seizure solution for handling. The handling must be the initiation measure, in cases where there were the judgments, the enforcement of judgments to sale by order of the Court the property which were the property rights was also difficult.

Need to promote

In order to implement drastically the treatment of bad debts under Resolution 42, the Governor of the State Bank has asked the units of the State Bank to focus on directing the credit institutions to implement effectively the project "Restructure the system of Credit organizations linked to the treatment of bad debts in the period 2016-2020”. In addition, the credit institutions should organize the drastic and effective implementation of the contents and solutions in the restructuring plan in association with the handling of bad debts up to 2020 which was approved, ensuring the proposed roadmap. They should work out the plans and accelerate the application of capital standard Basel II, the rules of risk management under the international practices and standards in parallel with stepping up the application of information technology; Increasing transparency and publicity in operation.

However, some experts assumed that Resolution 42 opened the door to seize the guarantee property in the absence of debtor cooperation, but the Resolution had not given the creditor the right to dispose absolutely, the law was still in favor of protecting the borrowers. Therefore, the difficulties still hang on the heads of the bankers, so they need the support from relevant authorities, such as the court, to speed up the progress and the amount of bad debt recovery.

In particular, the specialists still emphasized the promotion of strong and substantial development of the bad debt trading market; Because, in the current situation, many people wanted to buy debt, want to sell debt, but it was difficult to implement due to the regulations. According to the financial expert – the economist, Dr. Can Van Luc, the legal regulations had not been “in vain” due to poor and non-strict performance, so it was necessary to add the participants, the methods of debt trading and even bad debt securitization. Therefore, the focal point should be the Ministry of Finance to promote the subjects involved in the debt trading market such as: the associations, the debt trading companies, the entrusted enterprises in the debt purchasing from foreign investors… In addition, the management agencies should promote the secondary market development, the banks increase the capacity of their asset management companies (AMC)…

In addition, the experts also said that the treatment of bad debt needed newer and more effective progress from the whole system, because the treatment of bad debt needed the investment of resources and human resources to accelerate the process of debt processing, the guarantee property of the bad debts, ensuring the target of bad debt treatment according to the approved plans.