Government reports on extending application of Resolution 42

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Governor of the State Bank of Vietnam Nguyen Thi Hong presented the report. Photo: quochoi.vn

At the National Assembly session on the morning of May 24, Governor of the State Bank of Vietnam Nguyen Thi Hong presented a report on the implementation of Resolution 42/2017/QH14 dated June 21, 2017 on the pilot of bad debt settlement of credit institutions and a report on extending the application of all provisions of this resolution.

The report clearly states that the implementation of Resolution 42 has brought about positive changes in the handling of bad debts, contributing significantly to the results of restructuring the system of credit institutions associated with the bad debt settlement in the 2016-2020 period.

However, this resolution only lasts five years and will expire after August 15, 2022. When the enforcement expires, all provisions on the mechanism on bad debt handling under Resolution 42 which is being implemented will be ineffective, and the bad debt settlement of credit institutions will comply with relevant laws.

According to the Governor, the lack of incentive mechanisms and policies to support credit institutions, one-member limited liability company for asset management of Vietnamese credit institutions (hereinafter referred to as VAMC) in handling bad debts and collateral will also prolong the bad debt settlement process. The bad debts settlement will be in accordance with relevant laws, which will make it difficult for credit institutions to continue handling bad debts, easily leading to disputes between credit institutions and customers.

In addition, if Resolution 42 will not be extended, difficulties, problems, inadequacies, and legal conflicts among legal documents of the banking industry and other legal documents will greatly affect the bad debt settlement process of the system of credit institutions, especially weak credit institutions.

Therefore, it is necessary to continue the effective policies brought by Resolution 42 in order to speed up the handling of bad debts and avoid disputes arising in practice.

Therefore, the Government has reported the National Assembly to approve the extension of the application of all provisions of Resolution 42 to December 31, 2023 and include this content in the joint resolution of the 3rd session of the 15th National Assembly.

The Government has also proposed to the National Assembly to assign the Government to direct the State Bank of Vietnam to assume the prime responsibility for, and coordinate with the Supreme People's Procuracy, Supreme People's Court, relevant ministries and agencies in studying and proposing legalization of regulations on bad debt handling together with reviewing and improving the Law on Credit Institutions and other laws related to settlement of bad debts and collateral, and submit the proposal to the National Assembly at the session of early 2023 for the latest.

Chairman of the Economic Committee of the National Assembly Vu Hong Thanh said most of members in the Economic Committee agreed with the extension of the application period of Resolution 42.

According to the Economic Committee, during the application of Resolution 42, the bad debt handling of credit institutions has made many progress, especially bad debts determined according to Resolution 42. However, the results of the bad debts are not really high, which shows that the economy still has potential risks. Some solutions under Resolution 42 have not been effective.

For bad debts in general, the Economic Committee said that the handling with risk provisions still accounted a high rate. Some sectors have a high proportion of bad debts compared to bad debts of the whole system such as: real estate (18.4%); consumer loans (accounting for 25.8%); BOT, BT (3.92%)...

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The Economic Committee suggested that there should be more active and drastic solutions to remove difficulties and problems associated with the responsibilities of specific agencies and organizations.