“Bad debt” is no longer so bad
According to VAMC Asset Management Company, from 2017, when Resolution 42 In effect, up to now, more than 266.3 trillion dong of bad debt has been handled, 4.7 times higher than in the previous period. In particular, the amount of recovered debt also increased 1.9 times, estimated at 121 trillion dong.
Another important figure that cannot be ignored is the on-balance sheet bad debt ratio of the banking system, which has decreased from 2.51% to 1.49% by the end of 2021.
With many breakthrough solutions of Resolution 42, banks have “easier to breathe” in dealing with bad debts, the bad debt picture of banks also has a few brighter colors.
When Resolution 42 came into effect, up to now, more than 266.3 trillion dong of bad debt has been handled. Illustration.
Looking forward to continuing to extend Resolution 42
VAMC said that many of the collaterals for bad debts are land that has been abandoned for many years due to disputes, which have been restructured for restoration.
The land area of more than 9,500 m2 in District 2, Ho Chi Minh City was originally an apartment project, converted into an international hospital, but due to business losses, it became bad debt. After nearly 3 years of building the mat, the project has been bought by the investor, poured capital and is gradually reviving.
The bad debt is worth more than 1,460 billion VND, if not bought by the new investor, it will still lie in the sun and rain in the city center. But only next year, this place will form a high-class apartment complex.
Some banks proposed to extend Resolution 42 for another 3 years. Illustration.
Bad debts found new owners, and banks also got rid of debt burden. Therefore, banks are looking forward to extending Resolution 42 for another 3 years. Because otherwise, bad debt pressure will likely continue, especially in the context of the epidemic causing potential debt to increase.
Mr. Phan Dinh Tue – Deputy General Director of Sacombank said: “Prolonging Resolution 42 is necessary, demonstrating the consistency and stability of policies in the banking and financial sector and debt settlement measures. Especially in the current period under the influence of COVID-19, bad debt may increase, so it is necessary to extend it.”
“Resolution 42 needs to be extended for VAMC to perform its role of buying bad debts for credit institutions with bad debt ratios above the allowable threshold to give them enough time to overcome difficulties. VAMC will continue to coordinate with other credit institutions. credit institutions to ensure credit operations of the banking industry and provide capital for the normal economy,” said Nguyen Tien Dong, Chairman of the Board of Directors of VAMC Asset Management.
Proposal to amend regulations on shortened procedures when dealing with bad debts
In addition to extending the time and expanding debts, an important amendment mentioned in the Resolution is the application of simplified procedures in dispute settlement related to the handling of collateral.
Although Resolution 42 has mentioned this issue, in reality, there are almost not many cases where the summary procedure can be applied. According to VAMC, during the past 5 years, only 5 cases were carried out in a shortened order, but only 2 cases were successful.
Sending more than a dozen sets of documents to apply for processing according to simplified procedures, but during the past 5 years, no case has been resolved by Agribank. If it is shortened, the time will not exceed 1 year, and now many disputes last 4-5 years.
“Suspension to give the bank the right to collect debts takes time, the execution of the judgment is prolonged, leading to cases of bankruptcy declaration, which still cannot be handled in 4-5 years”, Mr. Nguyen Xuan Hung – General Director Director of Agribank AMC said.
The biggest contradiction when dealing with bad debts is collateral. Therefore, many opinions also believe that it is necessary to balance the interests of both banks and borrowers. Because the collateral of bad debts is mostly real estate, the value from borrowing to bad debt often increases higher.
Mr. Truong Thanh Duc – Director of ANVI Law Firm said: “It is necessary to harmonize the relationship between the interests of the client – the person with the collateral, which also needs to be protected, to avoid the situation of devaluation and devaluation. causing difficulties and damage to guests, it is necessary to have detailed regulations”.
The biggest contradiction when dealing with bad debt is collateral because when it comes to assets, it means money and interests of the parties. So why is it almost impossible to apply the reduced procedure? What needs to be changed in the new regulations to improve the efficiency of bad debt handling?
Resolution 42, which is considered an important key to solving the “clot” of bad debts, has been piloted since 2017 and will expire on August 15. Why is it necessary to extend, how will the extension of Resolution 42 affect the operations of banks?
Around the above issues, item Focus of the program Financial Flow This week with the exchange of Dr. Can Van Luc – Member of the National Monetary and Financial Policy Advisory Council, Director of the BIDV Banking Research and Training School, had detailed analysis!
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