Sir, how effective is the handling of bad debts by credit institutions currently?
- To ensure the safety of the system of credit institutions and support businesses to overcome difficulties, the Government has issued Decree 53/2013/ND-CP on the establishment, organization, and operation of Vietnam Asset Management Company Limited (VAMC) and assigned the State Bank of Vietnam (SBV) to be established with the mission of both handling bad debts of credit institutions to ensure system safety, promote credit growth and remove difficulties for businesses.
VAMC has clearly shown its role in "cleaning" the balance sheet for credit institutions, while removing difficulties for businesses that have bad debts but are recoverable by providing additional loans to gradually repay old debts, as well as new loans.
Although achieving certain results, VAMC's operation also has objective limitations. For example, with an initial charter capital of only 500 billion VND and later increasing to 5,000 billion VND, compared to the scale of hundreds of trillions of VND of bad debts of the credit institution system, this financial resource is still very limited to be able to "buy outright" at market prices in a strong way...
In Resolution 79-NQ/TW, the Politburo identified VAMC as playing a key role in handling bad debts, improving financial capacity and reducing risks for the banking system. According to you, what is the significance of this for VAMC's role and position?
- Resolution No. 79-NQ/TW clearly stated that VAMC and DATC are two of the units that need to improve capacity and operational efficiency to support the restructuring process, especially financial restructuring, handling bad debts of the SOE sector and commercial banks according to market mechanisms.
VAMC needs to carry out a revolution in thinking to transform from a unit "buying debt to hold" to a real debt handling entity and lead the market. To accomplish this task, I believe that VAMC needs to build a comprehensive project:
First, VAMC cannot only perform the task of simply buying debt and then reverse authorizing credit institutions, but must organize the analysis, evaluation and recovery of bad debts (including debts purchased with special bonds). Continue to restructure and operate the bad debt exchange (already existing) in the true sense and consider this a top priority to create transparency.
In addition, VAMC needs to strongly develop brokerage, consulting, auction, asset valuation and especially attract foreign investors to participate in the Vietnamese bad debt trading market.
Second, it is necessary to continue to increase charter capital by at least 15,000-20,000 billion VND so that VAMC has enough internal strength to buy bad debts at market prices, creating a fast capital turnover instead of just buying with special bonds; on the other hand, it is necessary to promote and resolutely restructure human resources and management methods.
Third, to suit the new functions and tasks, it is necessary to create a clear legal corridor for VAMC's debt trading activities. To do so, it is necessary to propose to the government to consider amending Decree 53/2013/ND-CP, in the direction of granting VAMC special powers in seizing and handling collateral, going beyond ordinary civil lending relations.
Fourth, it is necessary to focus resources on promoting digital transformation, applying AI in supporting the analysis of bad debt data and collateral of purchased bad debts. At the same time, proactively exploit and connect bad debt data from group 3 and above from credit institutions, as well as from CIC, to organize analysis, assessment and counter-support for credit institutions in handling bad debts as well as collateral of bad debts.
What do you expect VAMC to transform in the future to become a professional asset restructuring center, capable of valuing and providing financial advice for the entire system?
- I expect VAMC to become a professional, independent debt handling entity and a true companion of credit institutions. To achieve that stature, it is necessary to clearly define the role and establish "special powers" for VAMC.
If we do not soon amend the legal corridors (especially Decree 53/2013/ND-CP) to give VAMC a "strong enough" legal corridor, it will be very difficult for us to handle bad debts substantively. VAMC must be positioned as a professional, independent debt handling unit with special powers to protect the safety and sustainability of the entire national financial system.
Thank you very much, sir!
