Two Methods for Purchasing Bad Debts of Credit Institutions

According to the Decree 53/2013/ND-CP dated May 18, 2013, the Vietnam Asset Management Company (VAMC) is established by the State Bank of Vietnam (SBV) in the form of one-member limited liability company. It has the registered capital of VND500 billion. The company will buy non-performing loans of credit organisations; reclaim and deal with bad debts; restructure loans and adjust conditions for loan payment; manage purchased bad debts; advise and broker debt and asset purchase; issue credit guarantees for individual and institutions.

 

The company will purchase bad debts of credit institutions in two methods. It will issue zero-coupon bonds in exchange for banks’ bad debts. The bonds will have a maturity of five years and lenders can use them as collateral to get refinancing funds from the central bank.

 

Non-performing loans must meet five conditions: being bad debts of credit institutions as stipulated by SBV; being guaranteed assets; having legal documents; being existing customers; and having a balance that is higher than the level set by SBV’s regulations. The purchase of debts disqualified these conditions will be decided by the Prime Minister at the request of SBV.