The State Bank of Vietnam (SBV) is seeking comments on the draft of a new Decree and Circular regulating the business of buying, selling and handling bad debts of the Asset Management Company of Vietnam Credit institutions (VAMC). In addition to regulations on normal conditions, the draft also proposes a mechanism for handling "exorbitant" bad debts.
According to general regulations in the draft Circular (Article 17) and the draft Decree (Article 8), for VAMC to buy bad debts using special bonds, that debt must meet many conditions such as: being accounted for within the board, having legal collateral, borrowers still existing and achieving the prescribed minimum value.
However, Clause 3, Article 17 of the draft Circular and Clause 4, Article 8 of the draft Decree clearly state: "The Governor of the State Bank decides that the Asset Management Company purchasing bad debts from a Vietnamese credit institution does not fully meet the conditions specified in Clause 1 of this Article to ensure the safety of operations of a Vietnamese credit institution and promptly handle bad debts".
According to the comparison table of the draft Circular, this regulation amends the authority compared to before (Circular 19 requires the SBV to submit to the Prime Minister for decision).
This change of authority is to comply with the provisions of the draft Decree replacing Decree 53.
The comparison table also explains that the proposal to buy bad debts without conditions often comes from the need to handle debts at weak and disadvantaged credit institutions, proposed by units in the SBV (such as the Department of Credit institution Management and Supervision) and not from VAMC, to ensure operational safety and speed up the handling of bad debts.
Currently, these drafts are still in the process of collecting comments before being officially issued.
