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To better handle bad debts | Economy

The treatment of bad debts must go hand in hand with the restructuring of credit institutions. Photo : VNA

Hanoi (VNA) – The deputies of the National Assembly were unanimous in extending the deadline for the application of Resolution No. 42 dating from 2017, relating to the management of bad debts of credit organizations.

During the 3rd session of the 15th National Assembly, held from May 23 to June 16 in Hanoi, the deputies took stock of the implementation of resolution No. 42/2017 of the National Assembly on the management of the regulation bad debts of credit institutions. This text, which entered into force on August 15, 2017, expired in January 2022. MEPs affirmed the need to extend the deadline for the application of all its provisions until the end of 2023.

The said resolution, adopted by the National Assembly (14th legislature), greatly contributed to improving the macro-economic situation of the country. It has enabled better treatment of bad debts as well as the restructuring of credit institutions. Experts say bad debts are like clotted blood in the veins of the economy that could hamper development and threaten national financial security if not dealt with in time. Thus, the extension of this resolution is imperative.

First encouraging results

The application of Resolution No. 42 has contributed to perfecting the legal framework to enable credit institutions to carry out sound operations on the markets. It has also reduced the presence of bad debts on the markets. After five years, credit organizations across the country have settled more than 380 trillion VND in debts identified as bad. Despite this success, difficulties persist in the treatment of these debts and the restructuring of credit institutions.

Resolution No. 42 allows the processing of bad debts purchased by the Vietnam Asset Management Company (VAMC) from credit institutions. The purpose of the operation is to authorize this company to buy back these debts at the market price, in accordance with the regulations in force, and even at a price lower than the value expressed in the financial documents.

Eligible doubtful debts may indifferently relate to operations carried out in Vietnam or abroad. The VAMC is authorized to convert these sums into bonds and then put them back on the market. It has the right to sell bad debts to organizations and individuals. Buyers have permission to use their mortgaged property right to the bad debt bank. Finally, the resolution achieves a breakthrough in the treatment of bad debts by authorizing credit institutions to recover mortgaged property from the bank for bad debts.

The State Bank of Vietnam (BEV) intends to improve credit quality and permanently address the problem posed by a high bad debt ratio. A position intended to lay the sound foundations of the Vietnamese banking system and to ensure it better chances of sustainable development.


According to the Governor of the BEV, Nguyên Thi Hông, the issuance of credits is still encouraged in priority sectors such as agriculture, aquaculture, auxiliary industry, export, high technologies and SMEs. . The overall trend in outstanding credit is in line with macroeconomic conditions and BEV guidelines. It goes hand in hand with a marked improvement in production and trade activities.

Increase credit efficiency

The BEV affirms that it wants to continue to strictly control the loans granted to the real estate sector, to communication projects carried out by BOT (Build-Operate-Transfer) and BT (Build-Transfer) agreements, as well as to large accounts for medium or long terms. Vietnam is aiming for credit growth of around 14% this year, keeping an eye on macroeconomic developments and the activities of the banking system. Governor Nguyên Thi Hông has just signed a report responding to questions posed during the 3rd session of the 15th National Assembly and related to credit management and control in sectors that present risks such as securities lending, issuing corporate bonds and real estate.

In April 2022, credits reserved for the stock market sector represented around 0.5% of the total outstanding loans of the national economy, mainly short-term loans (98%). The total corporate bond balance of credit institutions at the end of April 2022 was 320.4 trillion VND, representing a small proportion of the total credit balance (2.86%). This proves that the corporate bond investment activities of credit institutions are still under control.

In order to control the risks related to corporate securities and bonds and to guarantee the security of the system of credit institutions, the BEV is taking measures to gradually improve the legal framework, with stricter regulations. It will also strengthen its inspection and strict monitoring activities for the granting of credit by credit institutions in the stock market and corporate bonds in order to quickly detect potential risks and take appropriate measures.

Regarding real estate credit, the Central Bank indicated that at the end of April 2022, its total outstanding amount had reached nearly 2.29 trillion VND, up 10.19% compared to the end of 2021 and represented 20.44% of the total outstanding credits of the national economy. Its bad debt ratio was 1.62%. The BEV seeks to improve the legal framework and closely monitor the growth of outstanding loans in order to quickly detect risks and take the necessary measures, helping to ensure the safety of credit institutions.

To streamline the national economy

Although the restructuring of credit agencies has yielded positive results, the process continues to face several challenges in terms of credit mechanisms, policy and administrative procedures. National Assembly Speaker Vuong Dinh Hue stressed the importance of healthy and efficient development of credit institutions.

During the interpellation session on the banking sector within the framework of the 3rd session of the 15th legislature of the National Assembly, Vuong Dinh Huê insisted on the need to improve the role of Vietnamese credit institutions and their ability to meet international standards, in addition to ensuring their performance and transparency. The head of the legislature called on the cabinet, central bank governor and ministers to proactively, flexibly and synchronously use policies to control inflation, ensure macroeconomic stability, and foster economic recovery . He also stressed the need to continue efforts to lower interest rates on loans, and to improve the legal framework to ensure the security of the activities of credit institutions.

It is also important to rigorously implement the project for the restructuring of credit institutions and the treatment of bad debts for the period 2021-2025. -CVN/VNA

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