According to the reporter's investigation, commercial banks are currently rushing to sell mortgaged assets to process and recover debts. The assets for sale are not only land, townhouses, apartments, cars, machinery, and equipment, but also stocks and future assets.

Actively handle bad debt

International Bank (VIB) is in need of handling many real estate assets in provinces and cities - including apartments, residential land, private houses, agricultural land... Meanwhile, at the Bank for Agriculture and Rural Development of Vietnam (Agribank), the entire principal and interest debt of more than VND 58.8 billion of NHP Import-Export Production Joint Stock Company has just been put up for sale. Notably, this company's loan is secured by 1 million NHP shares, with a par value of VND 10,000/share.

The Bank for Investment and Development of Vietnam (BIDV) also announced the selection of an organization to auction the debt of Hang Ha Joint Stock Company, secured by mortgaged assets being all assets formed from the Duc Giang International Maternity Hospital project (Hanoi).

At a recent seminar on bad debt held in Ho Chi Minh City, Dr. Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association (VNBA), stated that despite the banking industry's efforts, bad debt is still increasing in the context of a prolonged economic downturn. Recently, the State Bank of Vietnam has extended the debt restructuring deadline for individuals and businesses until the end of 2024, instead of June 30, to create conditions for customers to overcome difficulties, thereby giving the banking industry the opportunity to recover debt. "However, bad debt is still at risk of increasing rapidly in the coming time when the real estate market is still difficult and transactions are limited," said Dr. Nguyen Quoc Hung.

State Bank of Vietnam's aggregated data shows that the system's on-balance sheet bad debt by the end of June 2024 was at 4.56%, higher than the 2.03% at the end of 2022. Total on-balance sheet bad debt, debt at the Vietnam Asset Management Company (VAMC) that has not been processed, and potential debt of the system were at over 6.4%.

Mr. Le Trung Kien, Deputy Director of Department 4 of the Banking Inspection and Supervision Agency under the State Bank of Vietnam, said that the total bad debt on the balance sheet, debt at VAMC that has not been handled and potential debt of the credit institution system at this time decreased compared to 6.9% at the end of 2023 but increased compared to 4.21% at the end of 2022.

Mr. Dao Minh Tu, Permanent Deputy Governor of the State Bank, said that the current bad debt is the result of a long process, especially since the COVID-19 pandemic. Bad debt is caused by many objective factors of the economy, not only due to the weakness of the banking industry. "Bad debt tends to increase at a fairly high number, requiring common responsibility to handle it, including lending banks and borrowers. The State Bank will have more active handling measures, ensuring credit quality, controlling and reducing the bad debt ratio, increasing provisions to ensure system safety" - Mr. Dao Minh Tu affirmed.

Resolving difficulties in asset handling

Debt collection by banks is facing many difficulties. Mr. Do Giang Nam - Chairman of the VNBA Debt Settlement Club, member of the VAMC Board of Directors - said that real estate accounts for about 70% of total assets securing loans, and at some banks it can even be 80% - 90%. In the context of a sluggish real estate market and weak liquidity, even though banks are pushing to liquidate assets to collect debts, it is still difficult to solve, even having to reduce prices dozens of times but still sluggish.

VAMC has coordinated with credit institutions to focus on synchronously implementing many measures to handle purchased debts such as urging debt collection, debt restructuring... Activities of filing lawsuits, enforcing judgments, selling debts and secured assets, and organizing asset auctions have also been carried out.

However, some key provisions in Resolution 42/2017 of the National Assembly regulating the pilot handling of bad debts were not codified in the Law on Credit Institutions 2024, which limited the rights of debt handling entities. Specifically, the Law on Credit Institutions 2024 added provisions on handling bad debts and secured assets but did not have provisions on the right to seize assets of banks. The Civil Code and guiding documents also only stipulate the obligation to hand over secured assets of the asset holder, without giving the right to proactively seize assets to the secured party.

"The expiration of Resolution 42/2017 has created a legal gap, lacking a mechanism allowing credit institutions to seize collateral. Local authorities and police agencies also do not have a legal basis to support the handling of collateral as before. Thus, if customers do not hand over assets, banks must switch to handling bad debts according to the procedural mechanism, causing a delay and increasing costs" - Dr. Nguyen Quoc Hung analyzed.

To speed up the handling and recovery of bad debts and avoid them becoming a "blood clot" in the economy, banks have proposed adding regulations allowing the secured party of bad debts to seize the secured assets. This also helps to eliminate the procrastination of customers and asset owners in coordinating the handling of secured assets. In addition, regulations on the coordination and support mechanism of local authorities and police agencies with banks in seizing assets of bad debts should be added.