VCN - The story of bad debts handling and the role of the Vietnam Asset Management of the credit institutions Company(VAMC) in the implementation of this task is attracting attention of the National Assembly. National Assembly delegate Nguyen Van Thang (Hanoi), also Chairman of the Board of joint-stock commercial Bank of Industry and Trade of Vietnam (VietinBank)shared some information with the press on this issue in the National Assembly corridor on 25/10/2016.
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|Mr. Nguyen Van Thang. Photo: T.Binh|
How do you assess the handling of bad debts in the banking system lately?
Commercial banks’ (CB) bad debts are the debts that occurred when the economy had problems from 2009 to 2011.
In this situation, the State Bank (SB) had issued multiple solutions to support businesses, for example in 2011 a document that allowed businesses to restructure the debts of enterprisestemporarily experiencing difficulties, and were able to recover according to SB’s assessment. This solution is in my assessment is a very good one.
Next, the SB submitted to the Government for the establishment ofthe Vietnam Asset Management of the credit institutions Company - VAMC (established under Decree No. 53/2013/ND-CP).
At that time, VAMC performed its task to buy the bad debts of commercial banks for two major purposes. First, it is one of the measures to remove difficulties for enterprises; second, the solution for commercial banks.
Because if let banks tocontinue removing bad debts of approximately 300,000 billion VND would affect the financials and reduce banks' resources to support the businesses, and the economy. As our capital market development currently is limited,therefore it can be said that 80% of the capital needs for the business of enterprises is from banks.
Thus the mission of the VAMC in the recent period to buy the bad debts of the banks was justified.
Can you suggest any solutions to effectively handle the current bad debts?
Currently, the bad debts of commercial banks are around 80%, it is very difficultfor VAMC to handle. Since problems mostly come from legal issues and procedures. Therefore, the handlingkey point is to create to disassemble mechanism for these debts, because the debtsare tied to properties, and the propertiesare difficult to handle due to the lack of legitimacy, so it is needed the disassemblingfromauthorities.
According to my experience, I think there should be a joint circular of ministries or other documents in order to remove legal obstacles, and then we could quickly handle the bad debts that are tied to properties.
Resource (for bad debts handling), I think that the mechanism is still the most important. If we have aproper mechanism, we would not even have to spend money to handle it,VAMC will have mechanisms to handle it themselves.
Forthe VAMC operation, there are some forms, first is the purchase and sale of bad debts in order to support banks, second is to buy bad debts in thetrade form, (i.e. Buyout). With these two mechanisms, I think VAMC would be able to solve the current difficulties. Thereby helping the banks use their nonmarketable capitals to serve the economy.
So in the solutions you just mentioned, which is most important?
I think that it is still the disassembly mechanism. In fact, debts are associated with assets, people who buy the debts will also look into the assets of the debts. There are usually 2 main types of assets: Real estate and machinery, equipment. To machinery, I suppose there would not be so many problems. But to real estate, there are many obstacles and require the participation of ministries.
There are a lot of small details and I would not list them all, butfrom previously bad debtshandling experience, there is a joint circular to handle it (Circular No. 16/2014/TTLT-BTP-BTNMT-NHNN between the Ministry of Justice, Ministry of Natural Resources and Environment, the State Bank). And credit institutionsare supported greatly from this collaboration. I think at this point, we should also have such a document, which shows clearly the responsibilities of each ministrywhen the assets are related to the responsibility of those ministries.
On 24/10/2016, in the discussion about the draft Law on Property Auction, some participants proposed to add some provisions on bad debt auction and the bad debtspledged assets of the VAMC into law, what is your point of view about this?
I think that the provisions of the law have to ensure relative equality between objects.
Specifically relating to the Law on Property Auction, I think the VAMC is a company established by the Government and its mission is tohandle bad debts, not for profit, therefore to some extent, VAMC hasplayedits role as a center for auction or Auction Company to conduct an auction.
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The only problem is that it should be specified what subjects VAMC is allowed to auction. For example, it only has the right to auction the propertiesthat are bad debts bought fromcommercial banks, to support commercial banks to handle bad debts.
I think it is
And for other content that is not covered by government regulations (for VAMC), then VAMC must comply with the Law.
ByThai Binh / Luong Ngoc
Thai Binh / Luong Ngoc