VCN – Bad debts and dealing with bad debts have always been an important and urgent mission to remove bottlenecks in the economy. Therefore, it is not only the desire of the banking sector, but it is also the wish of the political system.
We should not leave banks alone in the battle with bad debts. Picture: internet
Facing thisissue, on 26th October2016, in Ha Noi, the State Bank of Vietnam collaborated with the Office of National Assembly, Vietnam Asset Management Company (VAMC) and to hold a workshop on “Handling bad debt – The bottlenecks need to be removed”.
Debt recovery speed slow
According to Dr. Nguyen Quoc Hung, chairman of VAMC, since 2013, VAMC has bought 25,062 debts from 42 credit agencies, with the principal balance of 263,053 billionvnd, and the purchase price of 227,848 billionvnd.
Most of the debts which were bought hadsecurity assets such as real estate, assets formed from loans including real estates, factories, industrial parks, projects, corporate bonds… in which, real estate with the value of security asset were above 256 trillionvnd, accounted for 63.5%.
About debt collections, since its formation, VAMC has collaborated with credit agencies to recovery debts of 37,938 billionvnd in various forms such as debt sale, security asset sale…and reached 15% of the principal balance.
The debt recovery speed was limited compared with the balance of the total debt. However, the proportion of customers to repay isup to 70%, the rest is the sale of debt or security, as Mr Hung said. The sale of security includes the sale of collateral, enforcement to recovery debt reached only 10,990 billionvnd, accounted for 28.9%.
Thus, the sale of security including enforcement to recovery debt is facing many difficulties if customers not agree and voluntarilyhand over their security assets.
Lack of mechanism
Answering about the reason of the limitations mentioned above, the VAMC leader admitted that there was a “bottleneck” from inside VAMC as restriction in human resource and finance, while its purchased debt volume was huge. In particular, its funding is limited and not accordance with the requirements of handling debt under its functions and mission, especially in selling-buying debt under the market value.
Besides, according to lawyer Truong ThanhDuc, dealing with bad debts was very tough due to various factors which are out of the banks control. Meanwhile, banks were alone in the battle with bad debts. Banks could not recovery debts if businesses did not have the money, and banks themselves could not recoveryand sale security assets of real estate.
This time, the story about “the bottlenecks” in security assets was recalled by the experts at the workshop. The bottleneck has been not removed due to the entanglement of law as it requiresthe customer’s agreement as well as various authorities and departments involved.
On the other side, bad debtsare not a new issue in Vietnam, it hasbeen discussed so many times, many solutions have been offered, nothing effective yet. Therefore, Dr. Can Van Luc, a banking expert said, it was time for creating breakthrough solutions, drastic and synchronous, to tackle bad debts, in which focussing on solving 4 legal issues onVAMC’s power and ability, market debt trading, and processing resource.
And according to lawyer Truong AnhDuc, current entanglements mainly lie in the Acts, therefore, in order to remove those problems, the Law needs to be fixed, for example, enact a law to solve bad debts.
Moreover, in the workshop, the experts emphasised the need for an objective look at bad debts, bad debts were not due to banking system alone but due tomany reasons, banks are one of them.
Thus Nguyen Quoc Hung made clear, we could not leave banks alone in handling bad debts, because bad debts had seriously effected economic growth. Therefore, society should join with the banking system to solve bad debts, with a spirit of openness and transparency.