Handling of collateral: Must be drastic

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There are cases of handling security assets which spent nearly 30 times of price decrease and processing time of up to 5 years. Photo: Internet

This is the view of experts at the seminar "The right of collateral handling of Credit Institutions (CI)" by the State Bank of Vietnam (SBV) held on June 6-12 in Hanoi.

Speaking at the opening of the conference, Deputy Governor Nguyen Kim Anh said that the disposal of collateral of credit institutions systems shows many barriers, obstacles and inadequacies from misconceptions about the right of collateral legally handling of credit institutes which were secured. Moreover, although the legal provisions remain relevant, there are many contradictions, overlapping, and distances to the way of understanding, also incorrect application of the law by concerned organizations and individuals.

Specifically speaking about the difficulties of credit institutions, Mr. Pham Manh Thang, Deputy General Director of Vietcombank said, according to the bank's statistics, in 2016, with collateral as housing (35% of cases), means of transportation, machineries and equipments (33% cases), the average time for enforcement agencies to handle debt collection is over 24 months. But there are cases requiring nearly 30 times discount with processing time of up to 5 years.

"In many cases, enforcement agencies were not really forceful during the execution of the judgment because the debtors were not willing to pay or have "relationships" with local authorities. This is not only costly but also prolongs the cost of debt collection, also is a significant impact to the business of credit institutions", Mr. Thang said.

Therefore, in order to effectively handling collateral, experts suggested that we should built a legal system is in a synchronized way, transparency, consistent, respectful of the legitimate rights of credit lenders; build a legal framework for stakeholders, especially the credit lender can enforce their legal rights under the agreement; establish the mechanisms and methods to allow the parties to choose a way to handle conveniently, and maximize the value of debt collection from collateral. At the same time, this legal system must be strictly implemented by authorities, agencies, involved organizations and parties to each transaction.

Approaching the problem from the perspective of law, lawyer Nguyen Thi Phuong, Deputy Chairman of the Bank Legislation Club of Viet Nam Bank Association said that "the right to handle collateral of credit institutions" is a civil right. Therefore, credit institutions are made to handle the collateral under their will with the preconditions which are not contrary to the fundamental principles of civil law and to not abuse rights which can cause damage to another person, and to not exceed the limits of exercising of that right...

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Currently, the Civil Law 2015 (effective from 1-1-2017) does not have specific provisions for seizing collateral.

Therefore, the Deputy Governor of the State Bank requested the Ministry of Justice to collaborate with agencies and related units in order to research, add detail instructions on the rights of the secured party for the handling of collateral in case of dispute between the parties.