Right to keep but cannot decide
The Vietnam Banking Association (VNBA) has just sent a document to the Ministry of Natural Resources and Environment, the Ministry of Justice and the State Bank, proposing to remove difficulties when credit institutions (CIs) receive collateral such as real estate to handle bad debts.
According to VNBA, receiving real estate as a replacement for repayment obligations is an important measure in handling bad debts. This form takes place through an agreement to repay debts with customers or receive assets from the enforcement agency after many unsuccessful auctions.
The Law on Credit Institutions allows banks to hold real estate for a maximum of 5 years to handle debt collection. However, in many localities, the Land Registration Office and the Department of Natural Resources and Environment refuse to register changes, requiring credit institutions to have approval from the provincial People's Committee and change land use purposes. VNBA believes that this requirement is not consistent with the nature of receiving assets for debt settlement, which are not real estate business activities.
Many consequences of legal problems
Unable to register ownership, TCTD cannot sell or transfer real estate because it is not listed on the certificate. Purchase contracts were also notarized.
Assets received from enforcement are also difficult to handle because they have been unsuccessfully auctioned many times. Regarding accounting, according to the State Bank's regulations, assets are only recorded within the board when there are sufficient documents proving legal ownership, so TCTD is at a dead end.
In addition, the customer's debt obligations have not been erased from the book, posing a potential risk of dispute when real estate prices increase, the old owner may request a claim.
Proposal to remove
VNBA proposed that the Ministry of Natural Resources and Environment provide guidance to allow credit institutions to register for transfer rights or changes in assets in both cases: receiving through agreement and receiving from the enforcement agency. After registration, TCTD will proactively sell, transfer or buy back real estate for 5 years; violations will be handled according to regulations.
The Association also proposes that the State Bank issue guidelines on recording and accounting assets for debt assignment or repayment of obligations, and instructions on setting out risk reserves for held assets within 5 years. At the same time, coordinate with the Ministry of Natural Resources and Environment and the Ministry of Justice to resolve procedures for credit institutions to have the right to process and transfer assets to buyers.
VNBA expects the recommendations to be considered soon to unblock the bad debt handling process and protect the legitimate rights of credit institutions.
