This judgment comes from Dr Vu Viet Ngoan, Chairman of the National Financial Supervisory Commission on the role of the Vietnam Assets Management Company (VAMC), on the sidelines of the National Assembly meeting. “We should not expect too much from VAMC,” he added.
The Vietnam Government issued Decree 53/2013/ND-CP on the establishment of VAMC for Vietnamese credit institutions. Accordingly, VAMC will buy bad loans of credit institutions at book value by issuing special bonds. Moreover, VAMC will buy bad loans of credit institutions at market value by different financial resources other than special bonds.
According to Dr Ngoan, in this context, the State Budget cannot help handle bad debts, and more money cannot be printed for fear of inflation, therefore “establishing that VAMC is a necessary and proper solution.”
However, the question is whether VAMC can completely handle bad loans. Dr Ngoan said that we cannot require too much of VAMC’s establishment. Because VAMC alone cannot solve every problem, instead there should be many other comprehensive solutions, first of which is macro-economic stabilisation.
Regarding the opinion that VAMC will solve bad loans of only commercial banks, not of enterprises, Dr Ngoan assessed that when VAMC is established, credit institutions will exchange or sell bad loans to VAMC, which means enterprises can have easier access to banking loans.
“To say it differently, instead of using risk provisioning fund, with VAMC, credit institutions can handle bad debts faster when they can get loans from the State Bank.”
Moreover, Dr Ngoan informed that VAMC will buy bad loans of credit institutions for 5 years. During these 5 years, credit institutions will have to establish a risk provisioning fund of 20 percent to be able to repurchase bad loans. In case VAMC cannot sell the bad loan after 5 years, the credit institution has to repurchase that loan.
Besides, Dr Ngoan noted: “At this time, credit institutions are facing many difficulties so it is hard for them to be responsible for selling assets themselves, especially when asset owners (borrowers) are reluctant to sell. Therefore, in my opinion, VAMC should have more authority to handle assets.”
“More authority” means bringing VAMC more conditions and measures to solve bad loans and sell assets as soon as possible. VAMC should be exempted from tax on selling assets (including corporate income tax). Besides, methods of handling, selling or auctioning assets should also offer favourable conditions for VAMC.
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