Foreclosure an emerging option to resolve bad debts

September 16, 2017 | 11:59

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Since the National Assembly's Resolution No.42/2017/QH14 on the pilot settlement of bad debts of credit institutions was enacted, credit institutions are more aggressive in resolving bad debts by foreclosing on collaterals.

VAMC became a pioneer of foreclosure by seizing Saigon M&C Tower

Recently, Vietnam Bank for Agriculture and Rural Development (Agribank) announced that on September 21 it will seize a substation in Haiphong as collateral for a loan taken up by Vinalines-Dong Do Ship Repair Co., Ltd. The reason for foreclosing is that Vinalines-Dong Do has failed to pay its debts in accordance with the credit contract signed with Agribank, according to newswire vnexpress.

Earlier, Vietnam Asset Management Company (VAMC) has become a pioneer in foreclosing on collaterals when it seized Saigon One Tower in Ho Chi Minh City at the end of August.

Previously, VAMC bought the debts of several enterprises, including Saigon One Tower JSC, the developer of Saigon One Tower, from other commercial banks. The total principal and interests of these enterprises were more than VND7 trillion ($308 million). VAMC has been urging them to pay debts in vain. Thus, seizing Saigon One Tower was a solution to resolve the hefty bad debts.

Similarly, in September, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has seized collaterals from 11 clients, including both individuals and organisations, after they defaulted on debts payments. In general, since the end of August, Techcombank announced seizing 32 collaterals consisting of properties and vehicles.

Dr Nguyen Tri Hieu, a banking expert said that in the coming period, solving bad debts via foreclosures on collaterals will be more flexible because Resolution 42 now stipulates that banks do not need court permission for the procedure.

However, the resolution has been effective for only a month, so Hieu said that it may be too early to see all the positive and negative effects. According to Hieu, during implementation, there may be problems like borrowers refusing to cooperate, especially if the collaterals are their homes.

“Can banks seize these borrowers’ only places to live and throw them out? The Vietnamese Constitution stipulates citizens’ right to have a home and the Charter of the United Nations also holds the right for children. Thus, in such cases, it is very difficult for banks to foreclose on collaterals,” Hieu said.

He added, “Banks and related agencies should implement the resolution strictly and have solutions to balance the benefits of banks and borrowers to avoid resorting to violence like gangsters.”

Currently, besides foreclosing, banks are speeding up the sales of collected collaterals to settle bad debts. On September 14, National Commercial Bank (NCB) held an auction to sell its collected collateral of a 2,100-square-metre land in the southern province of Binh Duong at the starting price of more than VND11.6 billion ($510,400).

Also, on September 19, Agribank will hold an auction to sell all the assets and land use rights of the V_Ikon project in Ho Chi Minh City with the starting price of VND319.5 billion ($14.1 million).

Similarly, Saigon One Tower, which has been seized by VAMC recently, will be sold through auction so that VAMC can collect debts. VAMC is establishing a council to appraise the tower and give a starting price. It is expected that the auction for this property will be held soon.