According to experts, Resolution 42 on piloting bad debt settlement of credit institutions has been valid for four years. As the pilot has almost ended, it should be continued to be maintained and formulated into a law on bad debt settlement.

Mr. Doan Van Thang, General Director of Asset Management Company
of credit institutions gave a speech at the Seminar.

On the morning of June 23, in Hanoi, the Vietnam Banks Association (VNBA) coordinated with a number of agencies to organize a seminar titled "Bad debt in the Covid-19 pandemic: Solutions to support the banking industry and the business community".

Bad debt trading exchange will be established

According to Mr. Nguyen Quoc Hung, General Secretary of VNBA, Resolution No. 42/2017/QH14 on piloting bad debt settlement of credit institutions was promulgated by the National Assembly on June 21, 2017, effective from August 15, 2017.

More than three years into practice, it created a synchronous and effective handling mechanism to help credit institutions speed up the bad debt settlement process.

Agreeing with this, Mr. Doan Van Thang, General Director of Asset Management Company of Credit Institutions (VAMC), said that after Resolution 42, the Government, the Ministry of Finance and the State Bank of Vietnam State Bank (SBV) provided maximum support for VAMC's debt settlement and recovery activities. At the moment, there are 21 credit institutions that have settled outstanding loans for VAMC.

“Resolution 42 was issued along with regulations on asset auction, since 2018, VAMC has successfully auctioned nearly VND3,000 billion of debts and collateral. Currently, we have been approved by 21 credit institutions that have settled outstanding loans for VAMC to build a bad debt trading floor, which will be issued in the first quarter of 2021,” said Mr Doan Van Thang.

Don't let "worms ruin the soup"

However, according to experts and businesses at the seminar, Resolution 42 has nearly ended the pilot period, while the evolution of the Covid-19 pandemic in Vietnam has started again in recent months, affecting the production and business activities of enterprises, reducing the ability to repay bank loans, which will have a great impact on the bad debt situation and handling of banks.

In this regard, banking and finance expert Dr. Can Van Luc said that the bad debt ratio at banks is in the range of 1-3%, meaning that 97-99% of borrowers are in good conditions. However, being able to handle bad debts effectively will help the costs and loan procedures be much better.

In addition, this expert pointed out many shortcomings that still exist after more than three years of implementing Resolution 42, such as: the coordination is not synchronized between the authorities, many problems in handling financial collateral, difficulties in valuing and appraising debt, lack of an official debt trading market.

“The Government should propose the National Assembly to legislate Resolution 42 on the basis of reviewing, perfecting and systematizing relevant legal provisions because the bad debt is a constant problem of the banking industry. Moreover, facing the impact of the Covid-19 pandemic, bad debts have been increasing. Meanwhile, Resolution 42 will expire in over a year, which will put a lot of pressure on the system of credit institutions to deal with bad debts in the future," said Dr. Can Van Luc.

According to Lawyer Truong Thanh Duc, Director of ANVI Law Firm, the legal regulations have had a very good effect in dealing with bad debts. However, there are some "bad" points in the policy that need to be completed to ensure better handling of bad debts of the economy and bad debts of the banking industry.

Therefore, this lawyer also suggested that it is necessary to continue to prolong the effect of Resolution 42, but it is best to upgrade it to law and apply it until the court system to solve the bank's debt collection request, not only the shortening procedure.

Before the above recommendations, the representative of the Banking Association also agreed, because this will help the field of bad debt handling have its own legal document to adjust and the regulations on bad debt handling will have higher validity helping the banking industry and relevant State agencies to coordinate in dealing with bad debts more effectively.

Mr. Nguyen Quoc Hung also said Covid-19 has affected the entire economy in general and the financial resources of organizations and individuals wishing to buy debt, so the sale of bad debts of organizations was difficult.

Therefore, the Banking Association proposed the State Bank and competent authorities to complete the legal framework on debt trading soon and have preferential policies for units that buy and handle bad debts to contribute to promoting debt trading activities.