Specifically, SBV instructed commercial banks to apply a broad range of measures under the Resolution No.42 with regard to pilot treatment of bad debts.
Banks have to step up efforts in dealing with bad debts.
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Concurrently, credit institutions have to be active in cooperating with local governments and related administrative agencies, especially law enforcers and court during the process of recovering bad debts, with an aim to seize as many of collaterals as possible.
Banks are also expected to coordinate with Vietnam Asset Management Company (VAMC) to come out with the best solutions in removing difficulties and obstacles in handling bad debts, as well as collateral of bad debts sold to VAMC.
VAMC set the target of handling VND140 trillion (US$6.1 billion) worth of bad debts it had purchased in 2018.
Additionally, VAMC strives to purchase at least VND6.6 trillion (US$289 million) at market value through solutions and measures stated in the plan of restructuring credit institutions in association with handling bad debts in period 2016 – 2020 approved by the Prime Minister.
By the end of 2017, VAMC has purchased more than 26,000 debts from 42 credit institutions worth VND307 trillion (US$13.4 billion) at original value for price of VND277 trillion (US$12.1 billion), announced the Deputy Governor of the SBV Nguyen Kim Anh at VAMC’s meeting reviewing the company’s target in 2018.
VAMC also signed a contract with 5 credit institutions in purchasing debts at market value worth VND3.1 trillion (US$136 million), meeting the target set by SBV. The asset management firm successfully purchased debt of VND32 trillion (US$1.4 billion) in return for special bonds.
Resolution No.42 is expected to create legal certainty and resolve the inadequacies of the former regulations regarding the process of handling bad debts. Some notable components of Resolution No.42 are the inclusion of a new method for handling bad debts and new approaches for dealing with collateral composed of land use rights, as well as assets attached to land, land formed in the future, and real estate projects.
The fact that Civil Code 2015 does not mention the seizing of collateral raised concerns for credit institutions, before Resolution No.42 was released, that the drafters intentionally abandoned this method for handling collateral. However, Resolution No.42 clarified Article 7, and creates the right to seize the borrowers' collateral with detailed provisions.
Resolution No.42 lists several conditions for seizing collateral, specifically: (i) a case occurs that brings it under the scope of handling collateral under Article 299 of the Civil Code; (ii) the security agreement clearly indicates the right to seize the collateral; (iii) the transaction has been registered; (iv) the collateral is not in dispute; and (v) information regarding seizing assets has been published for at least 15 days (for real estate assets).
There are problems, however. First, the mortgagor can prevent the mortgagee's seizure of collateral. The mortgagor can accomplish that simply by engaging in actions which put the collateral in dispute within fifteen days of the publication of information regarding the seizure. Another problem under this rule is that only credit institutions, organizations, and companies that trade and handle bad debts are allowed to seize the collateral, while others (such as debt collection services) receive no such authorization, and only to the extent that the seizure does not violate legal prohibitions.
