The law for bad debts: Bottleneck could be removed?

Restructuring the credit institutions and dealing with bad debts will have new legal steps. Source: The Internet.

Expected

In the report on the draft, the SBV said that following the implementation of restructuring projects and dealing with bad debts of credit institutions, despite many achievements, there are still many limitations such as: Many CIs have to set up the big risk reserves which make the less business performance, even many CIs suffer losses; The balance sheet bad debt ratio has been controlled at less than 3% but the bad debt tends to increase in scale, as of 31st December, 2016, the balance sheet bad debt ratio, the bad debt that managed by the Vietnam Asset Management Company (VAMC) and the potential bad debts are likely to be up to 8.86% of total outstanding loans due to the handling of collateral assets and the handling of bad debts still meet many obstacles etc.

Along with that, the law on dealing with bad debt, security assets still have many inadequacies. For example, about the right to seize property, the Civil Code 2015 has removed the right to seize the secured property of the secured party, unless otherwise stipulated by the law. Regarding the right to receive security property as land use right and assets attached to land, it is related to the provisions of the Land Law: In the process VAMC has dealt with the purchased debt, the borrower agrees to add the collateral property as the land use rights and assets attached to land, but according to the provisions of the Land Law 2013, VAMC is not entitled to receive mortgages of land use rights.

With the above inadequacies, at the Government meeting on legislative development on April 11, the Governor of the State Bank of Vietnam Le Minh Hung said that most legal obstacles related to the provisions of the law, so that in order to thoroughly address these shortcomings, difficulties, and problems, it is necessary to promulgate separate Laws to handle difficulties and problems in the process of restructuring the weak CIs and dealing with bad debts.

“The issuance of separate laws on the restructuring of CIs and dealing with bad debt is an urgent requirement to create a legal framework for treating weak CIs and dealing with bad debts, and institutionalizing the Party's and State’s policies and procedures; at the same time, this is also an urgent requirement of practice to effectively restructure CIs that link to dealing with bad debts, contributing to laying the foundation for sustainable, safe and effective development of the system of CIs, to protect the legal rights of depositors", the SBV leader stated.

Wait for specifics

Lawyer Truong Thanh Duc, Chairman of the Basico Law Firm said that this law will bring about great effect because of solving the most critical problems in the reality of restructuring the CIs and dealing with bad debt. Accordingly, the draft will increase the right of initiative for credit institutions, because according to the current regulations, the handling of assets, asset sale depends mainly on the court that will take the time to process, customers will seek a way to oppose.

"However, the present time cannot predict anything because it is just a draft that was announced by the State Bank for comments. This draft also collect comments, submit to the Government, amend, take the more waiting time to issue and take effect etc., so there may be some changes”, said Lawyer Truong Thanh Duc.

Agreed with the point of view, economist Dr. Nguyen Minh Phong said that with the inadequacies in the restructuring of CIs and the handling of bad debts today, "every law is good". Wilt laws and legal corridors, the problem solving will be effective, specifically, reduce the overlapping, conflict between the current law.

Also at the above-said Government meeting, Prime Minister Nguyen Xuan Phuc expressed his sympathy with the SBV when enacting separate laws to deal with the long-standing bottlenecks of the banking sector. The PM said that "if delay, the process of socio-economic management will be affected". Therefore, the Prime Minister agreed with the plan to develop two documents to submit to the National Assembly, including a draft resolution of the National Assembly on the handling of bad debts and the draft law that amending many laws (Law on Credit Institutions and related laws).

Thus, the restructuring and handling of bad debts of credit institutions in the coming time are expected to be highly effective when the legal corridors are strictly and specifically regulated.