Foreign investors uninterested in buying bad debts
Foreign investors have been reluctant to buy Vietnam’s bad debts, after initial consideration.
Nguyen Quoc Hung, chair of the Vietnam Asset Management Company (VAMC), from January 1 to October 18, 2015, said that VAMC bought 13,065 debts from 39 credit institutions, originally worth VND91.963 trillion at VND82.681 trillion. The amount of money was paid in special bonds.
As such, from 2013 to September 30, 2015, VAMC issued VND191.333 trillion worth of special bonds to buy bad debts with the principal balance of VND225.518 trillion.
According to Truong Van Phuoc, deputy chair of the National Assembly’s Finance Supervision Council, the non-performing loan (NPL) ratio fell to below 3% by August, after three years of dealing with NPL.
Phuoc cited a report as saying that over VND400 trillion worth NPL were settled in 2012-2015, of which 28% was covered with provisioning and 45% was sold to VAMC, while 27% was settled through the other modes.
However, VAMC, while having taken over 45% of the banking system’s total NPL, has just recovered VND8 trillion. This means that it has bought large amounts of debt, but still cannot sell the debt.
Hung cited many reasons that have hindered the process of selling bad debts.
First, VAMC could not restructure clients’ debts in many cases.
Second, it met difficulties when dealing with borrowers’ assets: the owners of the assets did not turn up at the time when the assets were seized, or they have left their homes.
Third, under current regulations, it takes much time to sell borrowers’ assets to pay debts because of complicated procedures.
Fourth, VAMC cannot take the initiative in dealing with the bad debts it has bought with special bonds. It has no full power to determine the assets which are collateral for the bad debts it had bought.
When asked about the possibility of selling bad debts to foreign investors, Hung said a lot of foreign institutions and investors came to work with VAMC on buying Vietnam’s debts.
However, they did not make any further move after learning about Vietnam’s legal framework and the bad debt situation.
A lawyer noted that foreign investors have shown their great interest in Vietnam’s debt, but they would feel disappointed with required procedures on debt trading.
“It takes at least three to five months to sell an asset which is collateral for a loan on average,” he noted.
Tran Du Lich, a renowned economist, also noted that with the current mechanism, it takes too long to deal with mortgaged assets. Banks won’t be able to sell mortgaged assets if debtors stay uncooperative.
As such, from 2013 to September 30, 2015, VAMC issued VND191.333 trillion worth of special bonds to buy bad debts with the principal balance of VND225.518 trillion.
According to Truong Van Phuoc, deputy chair of the National Assembly’s Finance Supervision Council, the non-performing loan (NPL) ratio fell to below 3% by August, after three years of dealing with NPL.
Phuoc cited a report as saying that over VND400 trillion worth NPL were settled in 2012-2015, of which 28% was covered with provisioning and 45% was sold to VAMC, while 27% was settled through the other modes.
However, VAMC, while having taken over 45% of the banking system’s total NPL, has just recovered VND8 trillion. This means that it has bought large amounts of debt, but still cannot sell the debt.
Hung cited many reasons that have hindered the process of selling bad debts.
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| Nguyen Quoc Hung, chair of the Vietnam Asset Management Company |
Second, it met difficulties when dealing with borrowers’ assets: the owners of the assets did not turn up at the time when the assets were seized, or they have left their homes.
Third, under current regulations, it takes much time to sell borrowers’ assets to pay debts because of complicated procedures.
Fourth, VAMC cannot take the initiative in dealing with the bad debts it has bought with special bonds. It has no full power to determine the assets which are collateral for the bad debts it had bought.
When asked about the possibility of selling bad debts to foreign investors, Hung said a lot of foreign institutions and investors came to work with VAMC on buying Vietnam’s debts.
However, they did not make any further move after learning about Vietnam’s legal framework and the bad debt situation.
A lawyer noted that foreign investors have shown their great interest in Vietnam’s debt, but they would feel disappointed with required procedures on debt trading.
“It takes at least three to five months to sell an asset which is collateral for a loan on average,” he noted.
Tran Du Lich, a renowned economist, also noted that with the current mechanism, it takes too long to deal with mortgaged assets. Banks won’t be able to sell mortgaged assets if debtors stay uncooperative.