Plan to set up asset management firm announced

The company, named Vietnam Asset Management Corp (VAMC), with a registered capital of VND500 billion, is set up in a bid to boost credit growth for the economy, according to the Decree No.53.

The VAMC, 100 percent of whose capital is owned by the government, will be operated by the SBV, and under the supervision of the SBV’s inspectorate, the decree says.

The company is tasked with buying bad debt from banks that are saddled with nonperforming loans, as well as maintaining and developing government-owned capital.

The VAMC will buy the bad debt through the special bonds it issues, which has a maximum maturity of five years at a zero interest rate. The bond is used to apply for refinancing loan from the central bank.

Bad debt was estimated at $7.8 billion, or 6 percent of the total outstanding loans of $130 billion, by the end of February, according to the central bank.

Banks, meanwhile, said nonperforming loans accounted for 4.51 percent of the total loans, according to a government report delivered at the National Assembly’s 5th session that opened Monday.

Strict requirements

The VAMC will only buy bad debt that meets all five requirements.

First, the debt belongs to the credit institutions, including those from credit loans or bond buying.

Second, the debt must have collateral. Third, the debt, as well as the collateral, must be valid with adequate papers. Fourth, the borrowers must still exist.

Finally, the bad debt balance of the borrowers cannot be lower than the required level of the SBV.

In case the nonperforming loans fail to meet the said requirements, the Prime Minister will decide if the VAMC should buy such bad debt or not.

The decree also stipulates that VAMC is allowed to buy bad debt at market prices using its capital rather than issuing the special bonds, in case the debt meets four other requirements.

First, the debt should meet the above five requirements.

Second, the debt is considered retrievable. Third, the assets used as collateral for the debt can be liquidated. Finally, the borrowers are capable of resuming their ability to repay the debt.

The market prices should be negotiated between the parties, and based on the reevaluation of the debt, the decree says.

The credit institutions should also consider granting new loans for borrowers whose bad debts are sold to the VAMC.

Great help

Nguyen Tri Hieu, a banking expert, said the new decree will strongly support borrowers who are stricken by bad debt.

When the debt is not sold to VAMC, even the banks do not know how to completely settle the issue, he said.

“On the other hand, if a business has its bad debt sold to VAMC, it will be able to borrow new loans,” he added.

Hieu, however, warned that the central bank should provide clear guidance on the conditions for borrowers to have their debt restructured.

“We should only restructure the debt for borrowers whose businesses are really able to recover and thus able to repay the debt, rather than those who have unclear debt repayment plans,” he said.

VAMC is expected to settle some VND100 trillion worth of bad debt, which is 200 times higher than its registered capital.

“To this end, the debt buying should mostly be done through issuing the special bonds,” Hieu commented.