VAMC special bonds are issued in VND with a maximum maturity of 5 years and zero coupon; they can be used to get re-financing loans from the Vietnam State Bank (SBV).According to the Decree on the establishment, organisation and activities of the Vietnam Assets Management Company (VAMC) legalised by the Government, VAMC can buy bad debts of credit institutions in two ways, including buying at book value by issuing specific bonds.
Using to get re-financing loans of SBV
The specific bonds have following features: they are issued in forms of certificates, book entries or electronic date; their par value is equal to price of bad debts; they are denominated in VND with 5 year maturity and zero coupon; they can be used to get re-financing loans from the SBV.
VAMC published special bonds in ways approved by the SBV. The latter regulates in details re financing based on specific bonds and amounts of re – financing loans over par value of special bonds.
The Prime Minister has decided re-financing interest rates on submission of the SBV. The SBV also regulates in details bond issuance of VAMC.
Risk provision of 20 percent annually
Credit institutions possessing special bonds must form risk management fund for these bonds as operational costs at proportion of minimum 20 percent of par value till their maturity to create financial resources for bad debts until bonds are repurchased by VAMC.
At special bonds’ maturity, if bad loans are still not solved or recovered completely, credit institutions must repurchase these loans using special bonds.
VAMC pays based on recovered money
Specific bond payment and bad debt repurchase will be conducted within 5 days counting from the day that value of risk provision for these bonds is equal to book value of relevant bad debts, or after 5 days counting from their maturity.
Accordingly, credit institutions selling bad debts must repay re financing loans related to specific bonds to the SBV.
In case bad debts are not completely recovered, credit institutions repurchase bad loans from VAMC based on book value of these loans, returning special bonds. VAMC will then pay them based on recovered money.
In case bad debts are completely recovered, credit institutions return specific bonds and VAMC will then pay them based on recovered money.
After receiving bad loans from VAMC, credit institutions will use risk provision for relevant specific bonds to handle with bad debt risk, at the same time keep account these debts in off balance sheet to monitor.
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