Economic Sector

Last updated: Tuesday, February 19, 2019


Bad Debts Aggressively Handled

Posted: Wednesday, April 19, 2017

The Government of Vietnam is showing determination to comprehensively handle bad debts to promote the economic growth.

The Prime Minister has signed Resolution 27/NQ-CP on action plans to implement Resolution 05-NQ/TW, dated November 01, 2016, of the fourth conference of the 12th Central Committee of the Communist Party of Vietnam Resolution 24/2016/QH14, dated November 8, 2016 of the National Assembly about the plan of restructuring the economy in the period of 2016-2020.

Prime Minister Nguyen Xuan Phuc announced on April 14 that the government will submit two important documents to the National Assembly, including the draft Resolutions of the National Assembly on bad debts and a draft law that amends many other laws, including the Law on credit institutions and other relevant laws. This is a meeting of the Government on the draft law on restructuring of credit institutions and bad debts and the plans to supplement to the draft Planning Law.

According to the State Bank of Vietnam, the restructuring of the operational system of the credit institutions have been identified and restructured to ensure the stability and safety of the system and control the credit quality and bad debts.

However, until the end of 2016, the NPL ratio of the operational system of the credit institutions remained high, focusing primarily on the commercial banks, having poor performance. The bad debt settlement is hard because this relates to the major violation cases.

According to the State Bank of Vietnam, some limitations on the jurisdiction of the government, the central bank has negatively affected the bad debt settlement process of the State Bank of Vietnam. The recovery and restructuring of the credit institutions are facing many difficulties because there is no legal basis to apply appropriate solutions to the situations of poor credit institution and lack of financial solutions to support for the weak institutions.

The provisions of law exposing many shortcomings that limit the progress and effectiveness of the handling and recovering the bad debts, regarding the seizure of assets, property rights, land use rights and assets, execution fees, and property transparencies.

Because of these problems, the promulgation of the law on the restructuring of credit institutions and bad debts is urgent to create a legal framework to recover institutions with poor performance and bad debts.

The action plan of the Government to implement Resolution 5 has targeted to reduce the NPL ratio of the credit institutions and the NPLs were sold to the VAMC and the bad loans are classified to set below 3 per cent.

The government has assigned the SBV to urgently organise the restructuring system of the credit institution that are having bad debts in the period of 2016-2020 after approval; basically complete the restructuring of the credit institutions, accelerating the settlement of bad debts to be consistent with the market mechanism, based on the precautionary principles, to ensure the interests of the depositors as well as the stability and safety of the system. SBV has been assigned to restructure the credit institutions and bad debts in 2017.

Bao Chau

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