VAMC clarifies debt auctions

Decree 17/2010/ND-CP from March 2010 regulated the principles, processes and procedures of asset auctioning. Do we need to create a specific mechanism for the VAMC?

The birth, structure and organisation of this financial entity are very unique. It has acquired huge amounts of bad debts from commercial banks.

Also, the VAMC’s tackling of collateral issues is highly different than other cases since the goal is for it to quickly settle bad debts and recoup capital. As such, Decree 53/2013/ND-CP, dated May 18, 2013, outlines the establishment and operation of the VAMC and requires the Ministry of Justice to organise the processes and procedures for bad debt auctions in cases where the different parties do not have agreements on issues dealing with collateral.

I would like to note that this mechanism will only apply to collateral on bad debts the VAMC has bought and in cases where there are no agreements on how to settle the collateral. Most other assets the VAMC will or already has purchased fall under current regulations on businesses’ state asset management.

Can you elaborate on the specific mechanism?

Apart from dealing with collateral following the agreements with banks and asset owners, and hiring professional auctioning services to tackle collateral, the VAMC is also responsible for auctions of collateral put up against VND10 billion ($476,000) loans that have since become delinquent and for assets that cannot hire professional auction services.

In this case, the VAMC’s general director is responsible for founding an Auctioning Council which will have the right to issue regulations stipulating the conditions and how to participate in auctions, participation fees, deposits, auctioning methods and the like. This mechanism will help the VAMC quickly clear bad debts and recoup capital.

According to the VAMC, there are very few bad debts below VND10 billion. Does this mean financial entities won’t have many opportunities to hold their own auctions.

That is right, but it is likely that the number of bad debts of this value with collateral will increase in the coming time as the State Bank has said the VAMC can buy bad debts down to VND3 billion ($143,000) from corporate customers or customer groups and bad debts of VND1 billion ($47,000) from individuals.

Is there a special mechanism for situations where the VAMC hires professional auctioning organisations?

As of now there are no explicit regulations on the criteria and models for selecting professional auctioneers so it’s handled differently in different areas. For example, Ho Chi Minh City prefers to use state organisations for auctioning state assets, while in Hanoi all sorts of auctioning organisations take part in selling state assets.

To ensure transparency and efficiency the VAMC has required disclosure of information involving sourcing professional auctioning organisations to participate at least two successive times in newspapers in localities hosting the collateral, in the Ministry of Planning and Investment’s Auctioning newspaper, on the State Bank portal and VAMC website. In cases where two agencies apply, the VAMC will select one.