Need a solution to open up the bad debt trading market

VCN - According to data from the State Bank of Vietnam (SBV), the bad debt ratio on the balance sheet of the whole system by the end of February 2023 has reached 2.91%, compared to 2% at the end of 2022 and nearly doubled by the end of 2021. Experts forecast this ratio to continue to increase when the bad debt trading market is still at the "starting line".
Green growth: An opportunity for Vietnam to become a pioneer country Green growth: An opportunity for Vietnam to become a pioneer country
Proposing to increase competition in the petroleum trading market Proposing to increase competition in the petroleum trading market
Towards a healthy financial market to restore the market’s confidence Towards a healthy financial market to restore the market’s confidence
Vietnam's bad debt trading market has not yet operated effectively. Source: Internet.
Vietnam's bad debt trading market has not yet operated effectively. Source: Internet.

Debt trading activities "sluggish"

The results from the financial statements of the first quarter of 2023 of 27 banks listed on the stock market show that many banks have a strong increase in bad debt up to 50-80%, in which some banks keep the debt ratio on total outstanding loans up to nearly 23%.

In the report of the State Bank to the National Assembly, the bad debt on the balance sheet is being controlled below 3%, but if the total bad debt on the balance sheet is included, the debt sold to the Asset Management Company (VAMC) has not been handled and potential bad debt of the credit institution system by the end of February 2023 is estimated to account for 5% of the total outstanding debt.

Nguyen Quoc Hung, General Secretary of the Banking Association (VNBA) said that the current situation of bad debts of credit institutions is very worrying, in the context of very difficult businesses, the global economy has a negative impact. Moreover, asset quality declined, but the problem of controlling bad debts of commercial banks faced many difficulties. The sale of collateral, especially large debts that must be sold at market prices, is difficult to implement in the frozen real estate market. Along with that, the legal corridor for debt settlement activities is still not synchronized and unified; difficulties and obstacles in the application of other legal provisions.

In the above context, experts say that if it is determined that bad debt is a separate problem of the banking industry, it is very difficult to handle the consensus of agencies and organizations to handle and recover debts strictly.

Therefore, the Government is submitting to the National Assembly a draft of the Law on Credit Institutions (amended) and will be included in the discussion program at the 5th Session of this 15th National Assembly, in which the bill will supplement added a chapter on bad debt handling. However, many experts are still concerned that bad debt handling is not satisfactory, when the draft focuses on solutions for banks, debt management and asset exploitation companies (AMC) to handle debts themselves, there is no solution to promote the debt trading market.

Data from the National Financial Supervision Commission shows that, in the past 10 years (2012-2022), credit institutions have handled nearly VND 1.57 quadrillion of bad debts, mostly by themselves. Bad debt settlement by selling debt (selling to VAMC and other organizations and individuals) accounted for 26.6%, of which mainly sold to VAMC.

Previously, in October 2021, VAMC announced to put the Debt Exchange Branch into official operation, headquartered in Hanoi. This exchange promises to attract the attention of credit institutions, debt management companies and many investors, thereby creating a vibrant and effective bad debt trading and settlement environment in Vietnam. But since then, the floor's activities are still very "sluggish" compared to the volume of bad debts of banks.

According to VAMC, the Debt Exchange has posted information and listed the debt and secured assets of the debt on its website with a total outstanding balance of about VND 38,000 billion. The floor has successfully implemented consulting contracts with customers with a total value of debts and collaterals reaching nearly 450 billion VND and collecting consulting service fees from customers of about 700 million VND.

Talking about the limitations of the Exchange, Vu Ngoc Minh, Director of the VAMC Debt Exchange, explained that due to the new and unprecedented model, the operation of the Debt Exchange still faces many difficulties and challenges, especially in the attraction of entities to participate in transactions, so specific policies and regulations are needed to encourage and attract many subjects to participate in bad debt trading.

Commenting on Vietnam's bad debt handling, Darryl Dong, senior country officer, International Finance Corporation (IFC) Vietnam said that bad debt is not bad and goes hand in hand with banking activities, a regulatory framework is needed to clean up and process it openly in an open market and have legitimate commercial transactions. Although Vietnam has discussed this issue a lot, so far there has not been a real market transaction of bad debt trading, mainly on the balance sheet between banks and VAMC. Vietnam is still at the "starting line" in opening the market for bad debt trading. The debt trading market is not really open for investors to participate in the market.

Opening the market properly

According to experts from IFC Vietnam, many countries in the region have opened their markets to deal with bad debts. India has a separate law on dealing with bad debts, banks do not need to go through complicated proceedings. The Philippines also offers cash incentives for 3 years to help banks deal with bad debts.

But Darryl Dong once again emphasized that Vietnam may not need such a specific tool but needs to open up its market.

According to this expert, Vietnam needs foreign investors to solve bad debt support. Vietnam needs new regulations that are good enough to attract experts and bad debt investors. This makes investors less interested in not being able to transfer ownership of collateral after buying bad debt. Therefore, Vietnam can create an indirect mechanism to deal with domestic collateral through agents, requiring investors to work with domestic representatives. This will create an effective and fair legal framework, opening a turning point to attract foreign investors to Vietnam.

Also on this issue, economic expert Dr. Le Xuan Nghia said that the most basic and effective solution to deal with long-term bad debts is to develop a bad debt trading market. At the same time, there must be regulations to increase the autonomy and self-responsibility of commercial banks, for example for banks to sell bad debts with a value of only 20-30% like banks in many countries are doing, or Allow the bank to write off the debt if they can afford it. Currently, many banks are selling bad debt as "good debt" or do not dare to sell bad debt at market price for fear of liability.

Up to now, the development of a separate law for dealing with bad debts has been recommended by many experts, but with the current regulations on law-making, it will not be feasible in terms of time, while this is an "urgent" problem of the economy.

Therefore, experts and banks expect that including a chapter on bad debt settlement in the Law on Credit Institutions (amended) is reasonable, but needs to be calculated comprehensively, with regulations that can be executed. In particular, it is necessary to note the compatibility relationship with other provisions of the law, especially the regulations on bankruptcy.

By Huong Diu/ Huu Tuc

Related News

Exchange rate risks need attention in near future

Exchange rate risks need attention in near future

VCN - Exchange rate developments in 2025 are considered to be quite complicated due to US policies related to trade and investment.
Aiming for 16% credit growth and removing credit room allocation

Aiming for 16% credit growth and removing credit room allocation

VCN - A representative of the State Bank of Vietnam (SBV) said that the SBV is gradually innovating its credit management methods, aiming to remove the mechanism of allocating credit room to each credit institution.
Outlook for lending rates in 2025?

Outlook for lending rates in 2025?

VCN - The economy is forecast to continue to recover strongly from the end of 2024 to 2025, helping credit demand increase rapidly, but lending interest rates may also be under increasing pressure.
Industrial production maintains rapid and throughout bounceback

Industrial production maintains rapid and throughout bounceback

VCN - The industrial production index in 11 months continued to recover rapidly and increase steadily in 60/63 provinces and cities, which is a good signal for the economy.

Latest News

Embracing green exports: a pathway to enter global supply chains

Embracing green exports: a pathway to enter global supply chains

This shift presents both a challenge and an opportunity for Vietnamese businesses to innovate and enhance their competitive edge in the international arena.
New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

The ministry proposes to issue a decree on the establishment, management and use of the Investment Support Fund to stabilise the investment environment, encourage and attract strategic investors and multinational corporations.
Việt Nam’s durian exports to China plummet by 80%

Việt Nam’s durian exports to China plummet by 80%

This sharp decline has had a direct impact on Việt Nam’s fruit and vegetable export revenue, which stood at US$416 million in January 2025, marking a 11.3 per cent decrease month-on-month and a 5.2 per cent drop year-on-year.
Coconut exports reach 14-year high

Coconut exports reach 14-year high

In 2024, fresh coconut and coconut product exports surpassed US$1 billion, marking the highest figure in the past 14 years.

More News

Shrimp exports grow in the first month of 2025

Shrimp exports grow in the first month of 2025

According to data from the Việt Nam Association of Seafood Exporters and Producers (VASEP), shrimp products recorded a 13 per cent increase in export value in January 2025, reaching a total of $273.3 million.
Rice export prices drop, but decline expected to be short-term

Rice export prices drop, but decline expected to be short-term

Việt Nam’s rice export prices have declined, reaching their lowest level in three years.
Key agro products expected to maintain export growth this year

Key agro products expected to maintain export growth this year

At present, agricultural exports, such as rice, coffee and seafood, have steadily secured a stable place in major global markets.
EU issues 12 warnings against Việt Nam’s food and agricultural exports

EU issues 12 warnings against Việt Nam’s food and agricultural exports

The Việt Nam SPS Office has reported that some Vietnamese export products failed to meet the EU’s stringent standards.
Việt Nam to impose VAT on low-value express-imported goods

Việt Nam to impose VAT on low-value express-imported goods

Việt Nam will end a previous policy that exempted imported goods valued under VNĐ1 million (US$39.4) from taxes when shipped via express delivery.
Vietnam kicked off the year with a strong start in trade, exceeding US$63 billion in the first month

Vietnam kicked off the year with a strong start in trade, exceeding US$63 billion in the first month

VCN - Data from the General Department of Vietnam Customs indicates a softening of both exports and imports in January 2025, relative to the same month in 2024.
Import and export turnover reaches about US$29 billion in the second half of January 2025

Import and export turnover reaches about US$29 billion in the second half of January 2025

VCN - Vietnam's total import and export turnover in the second half of January 2025 (January 16-31, 2025) reached US$28.9 billion, the latest preliminary statistics of the General Department of Vietnam Customs reported.
Market edges up slightly as liquidity remains low

Market edges up slightly as liquidity remains low

Market breadth remained positive, with 161 gainers outnumbering 144 decliners.
Business regulations must be trimmed for development of enterprises: Experts

Business regulations must be trimmed for development of enterprises: Experts

The General Statistics Office (GSO)'s socio-economic report for January 2025 reveals that while over 33,400 newly established or resumed businesses entered the market - marking a 15% increase compared to January 2024 - more than 58,300 businesses withdrew from the market, representing a growth of 8.1% on year.
Read More

Your care

Latest Most read
Embracing green exports: a pathway to enter global supply chains

Embracing green exports: a pathway to enter global supply chains

This shift presents both a challenge and an opportunity for Vietnamese businesses to innovate and enhance their competitive edge in the international arena.
New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

The ministry proposes to issue a decree on the establishment, management and use of the Investment Support Fund to stabilise the investment environment, encourage and attract strategic investors and multinational corporations.
Việt Nam’s durian exports to China plummet by 80%

Việt Nam’s durian exports to China plummet by 80%

This sharp decline has had a direct impact on Việt Nam’s fruit and vegetable export revenue, which stood at US$416 million in January 2025, marking a 11.3 per cent decrease month-on-month and a 5.2 per cent drop year-on-year.
Coconut exports reach 14-year high

Coconut exports reach 14-year high

In 2024, fresh coconut and coconut product exports surpassed US$1 billion, marking the highest figure in the past 14 years.
Shrimp exports grow in the first month of 2025

Shrimp exports grow in the first month of 2025

According to data from the Việt Nam Association of Seafood Exporters and Producers (VASEP), shrimp products recorded a 13 per cent increase in export value in January 2025, reaching a total of $273.3 million.
Mobile Version