Banks are still struggling with handling collateral in bad debt recovery. Photo: collected

Security assets are “unsecured”

In principle, when a customer sets a credit relationship with a bank, if the loan is secured by assets, the customer must sign a contract to mortgage the property.

When the customer fails to pay the debt according to the signed credit contract, the bank has the right to handle the mortgaged property to recover the debt.

However, a representative of a commercial bank said that many secured transactions of credit institutions, in which the security asset was the land use right, were declared invalid by the Court because transactions related to the property previously declared invalid (transactions on purchase, inheritance, donation performed by the guarantor). This happens because credit institutions cannot know and have no conditions to know, and cannot foresee that disputes will arise regarding ownership and right to use assets between the guarantor and former owner. There is no legal provision that requires a credit institution to be responsible for verifying the transfer transactions before the property is certified by a State agency; as well as stipulating that the credit institution has the function and authority to verify the origin of asset formation according to that certificate.

A representative of another bank said that the bank had many difficulties in handling bad debts because customers used bankruptcy procedures to prolong the dispute settlement process, avoid debt repayment obligations, and cause difficulties in the handling of cases. Besides, some banks reflected that on-site appraisal procedures require the invitation of the parties, the statements must be signed by the involved parties, but in fact, in many cases, the involved parties did not cooperate, did not participate, or did not sign. Some assets were joint ones such as cars, ships, the bank can't find them unless the interested party shows the place.

At the seminar "Legal issues related to credit contracts, mortgage contracts and dispute resolution in court", Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Bankers Association (VNBA), said that the association received complaints from member credit institutions requesting intervention to protect interests from commercial, credit and banking disputes.

A representative of Agribank said that auctions are one of the methods of dealing with collateral and are considered the optimal choice of banks when handling collateral for debt recovery.

Therefore, on the information pages of banks, announcements of auction options and liquidation of collateral continuously appear, but many debts of great value even though the price has been reduced many times, which has been still "stale" for many years.

Needing a strong enough legal corridor

Mr. Nguyen Thanh Long, Chairman of the Banking Legal Club, said that in addition to the above problems, in addition to the limit ations and inadequacies in the provisions of the law, there are the errors of some bankers. In the process of loan appraisal, there are also many problems because the different viewpoints on dispute settlement of the proceedings from the acceptance stage to the settlement process at the Courts were different and not unified at all levels.

Therefore, he suggested that the Court uniformly apply the provisions of the Civil Code 2015 on the protection of third parties in the following situations: real estate transfer transactions on the basis of authorization/representation; extended to apply to other types of assets for which the transfer transaction had complied with the regulations on the transfer of that type of property, in case the transferor performed the asset transfer transaction due to being cheated, forced or confused.

But according to Mr. Nguyen Huu Chinh, Chief Justice of the People's Court of Hanoi, banks should pay attention to strict collateral appraisal; inspect and supervise mortgaged assets to avoid problems, leading to slow credit settlement.

Sharing the same view, Mr. Nguyen Quoc Hung said that banking activities associated with risks and bad debts may arise frequently, so it was necessary to have financial provisions for the handling of these bad debts. But with the current reality, if only the bank's efforts were not enough, it was necessary to have a strong enough legal corridor to protect the bank and the people who borrow money from the bank must be responsible for debt repayment.

Not only that, but when there is a full legal corridor, ministries, branches and local authorities also need to actively support in the handling bad debts of the banking industry.