by THANH LIEM 26/06/2023, 02:38

Urgent requirement for the debt trading market

The financial capability and lending capacity of Vietnamese commercial banks have been considerably impacted by the difficulties of selling assets to collect debts.

Many banks attempted to collect debts by holding several auctions of collateral but failed.

>> Need a solution to open up the bad debt trading market

Experts advise hastily establishing and launching a debt trading market to assist banks with debt recovery and inject funds into the economy.

Difficult to sell assets

The Thanh Vinh Company's land usage rights and other assets related to four land plots will soon be put up for sale by BIDV Phu Tai in the city of Quy Nhon, in the province of Binh Dinh. Considering that this is the tenth auction, the beginning bid has also been decreased to slightly over VND 3.1 billion.

The 28th auction for the assets of the private company Thanh Tung has recently been announced by Agribank and will take place at 279 Ben Chuong Duong in the Co Giang neighborhood of District 1 of HCMC.

In the meantime, Sacombank held an auction for a debt owed by Van Phat Real Estate Investment Joint Stock Company in the amount of VND 596 billion, with a starting bid of VND 189 billion. The beginning price is VND 108 billion for Kim Kim Hoan My Trading and Service Co., Ltd.'s debt of VND 473 billion. The non-separable auction of all 18 loans tied to the Phong Phu Industrial Park project (Binh Chanh District, Ho Chi Minh City) has also been maintained by Sacombank…

These are just a handful of the many instances where banks attempted to collect debts by holding several auctions of collateral but were unsuccessful.

Experts claim that enterprises have been compelled to scale back output or possibly cease operations due to a lack of production orders. Bank loan quality has suffered as a result, and asset auctions are a "very bad" way for banks to collect debts.

However, the slowdown in the real estate market and other economic problems have made it difficult for banks to sell their assets.

>> A bad debt settlement law is urgently required

Completing the legal framework

In addition to the reasons listed above, analysts claim that the lack of a suitable debt trading market makes it difficult for banks to sell assets to collect debts.

The legal framework for this activity is still insufficient, the debt market has not yet drawn a wide range of participants, the goods on the debt trading market are not diversified, and the method of debt valuation lacks marketability, so in reality, the debt trading market in Vietnam is still quite primitive.

Dr. Can Van Luc, a member of the National Monetary and Financial Policy Advisory Council, stated that it would be important to swiftly complete the legal framework, beginning with the Decree on the debt trading market, in order to establish the debt trading market more sustainably. In addition to the two present methods of debt trading, direct negotiation and auction, a regulation might eventually be developed to increase market participants while also broadening the technique of debt trading. When modifying the Law on Land, the Law on Housing, and the Law on Real Estate Business, private investors—including international investors—must participate in the debt trading market.

Recently, the State Bank of Vietnam asked credit institutions to keep raising the quality of their loans, reduce their tier 2 subordinated debts, where strict attention should be paid to the quality control of loans for potential risk sectors; classify their assets, make and use provisions for risks in accordance with the law, and keep up their aggressive collection efforts for bad debts and debts that have used such provisions.