Central bank working on regulations for bad debt
HANOI: The State Bank of Vietnam (SBV) says it is collecting public comments on a draft circular regulating the trading of non-performing loans (NPLs) and operations of the SBV’s Vietnam Asset Management Co (VAMC).

The draft circular issued last week, seeks to revise the SBV’s regulations from 2013 stating that VAMC can sell collateral of a NPL higher or lower than the principal balance of the NPL.

VAMC also implements or hires qualified appraisal organisations to determine the offering price for competitive bidding, or the expected price for direct agreement with the debt buyer.

If necessary, VAMC can refer to the purchase price and sale of similar NPLs on the market (if any) to determine the offering price and the expected debt sale price.

In the case of auctioning NPLs, VAMC will comply with legal regulations on asset auctions.

In addition, the NPL purchases by VAMC from commercial banks must be in accordance with market prices.

The draft circular also regulates that borrowers, whose NPLs have been sold to VAMC and whose production and business plans or investment projects are effective, are considered to be granted credit by credit institutions according to agreements and legal regulations.

VAMC can only buy NPLs, which it assesses can be fully recovered and the collateral of the NPLs can be sold or the borrowers have the prospect of recovering their ability to repay the NPLs.

Though the asset quality of banks in Vietnam was deemed to be under control at the end of 2023, experts said more attention should be paid to the issue this year as bad debts are rising.

Experts made the recommendation because, while existing bad debts have not been resolved yet, new bad debts are expected to surge when current regulations on debt restructuring and debt repayment postponement expire in June.

Commercial banks last month requested the SBV consider an extension of the current regulations in a bid to support recovery in the face of the current challenging economic situation.

The banks have been concerned over businesses’ ability to meet the payment deadline on June 30, 2024.

The banks said an additional six months or even another year would be welcomed by most businesses, as well as the banking sector.

Dr Tran Duc Thuc of HCM City University warned that provisions for risky debts were still increasing. This meant that despite support, banks’ bad debts are still increasing.

According to Thuc, bad debt will increase in 2024 when corporate bonds mature.

Assets sales currently face difficulty so firms do not have money to pay bonds and bank loans.

If banks do not consider an extension for existing debts, the debts will be transferred to a worse debt group. — Viet Nam News/ANN
Banking,VietnamNPLs,VAMC,DebtTrading,CollateralValuation,MarketPricing,CreditRestructuring,DebtRepayment,BadDebtConcerns
The State Bank of Vietnam (SBV) says it is collecting public comments on a draft circular regulating the trading of non-performing loans (NPLs) and operations of the SBV’s Vietnam Asset Management Co (VAMC).