Mechanism barriers
According to data from the State Bank of Vietnam (SBV), the NPLs ratio was 17.21% in September 2012 and was reduced to 2.56%, of the total outstanding loans, in February 2017. The reduction in NPLs ratio came as a result of the settlement of over VND611 trillion (US$26.88 billion) of NPLs and the selling of NPLs to the Vietnam Asset Management Company (VAMC).
However, the total NPLs contained in the balance sheets of credit institutions alongside unsolved NPLs sold to the VAMC, account for a high proportion of the total outstanding loans, standing at 5.8% in September 2016, equivalent to roughly VND 400 trillion (US$17.6 billion). If latent liabilities are taken into account, which have been converted and restructured under the SBV decision, NPLs will amount to more than VND 600 trillion (US$26.4 billion), equivalent to 10.8% of the total outstanding loans.
Many solutions and actions have been carried out over recent years but NPLs have yet to be resolved in a definite manner, which has been mainly due to the inadequacy of the mechanisms, policies and legal framework on addressing NPLs, according to SBV Deputy Governor Nguyen Kim Anh.
Therefore, the National Assembly should promulgate a new legal document to remove these difficulties and accelerate the process of restructuring the credit institution system associated with the settlement of NPLs in the 2016-2020 period.
Early completion of legal framework
Economist Vo Tri Thanh said that the Government and the National Assembly, as well as banks, investors and experts should recognise the necessity of issuing a separate resolution on handling NPLs, which ought to be considered for approval at the ongoing session of the 14th NA.
Explaining for the necessity of the resolution, Thanh said that the settlement of NPLs within the banking system is not effective and the problems concerning NPLs remain serious, causing many negative impacts on the economy.
In addition, the slow settlement of NPLs will lead to higher costs for the banking system. "It must be said that the process of dealing with weak banks and NPLs is very difficult, not only due to internal problems within the economy, but also due to the lack of resources. Maybe the biggest difficulty is to be aware of the importance of the issue along with the development of a proper legal framework," Thanh noted.
According to Director of the SBV's Legal Department Doan Thai Son, despite regular amendments and supplements, the legal system in general and the legal system relating to economics have revealed many inadequacies, particularly in regards to the regulations on protecting the rights of creditors.
Inadequacies of the legal system and problems arising in the implementation of legal regulations make the mechanism of protecting creditors' rights inefficient, which is not a reliable support for the parties concerned in protecting their legitimate rights and interests.
Chairman of the Board of Directors of Vietcombank Nghiem Xuan Thanh said that Vietcombank now has more than 790 cases, related to assets pledged, taken to the court. However, the weakness of the existing legal system on pledged property has reduced the effectiveness of the handling of pledged assets of credit institutions.
Article 63 of the Government Decree No.163/2006/NĐ-CP stipulates that a mortgagee shall be entitled to seize the mortgaged property in the case of a debtor refusing to hand over the mortgaged property after maturity. However, the 2015 Civil Code removes the right to seize the pledged property of the mortgagee, which in turn makes it very difficult to protect the interests of the mortgagee. Thus, the mortgagee must sue the debtor in court, severely affecting the progress and efficiency of debt recovery.
Many opinions from bankers, lawyers, economists and the National Assembly deputies suggest further improvements to the legal framework on the right to handle the collateral of credit institutions, as well as the rights to handle the collateral of judicial agencies at all levels.
It is urgent to complete the legal framework on dealing with NPLs, by issuing a specialised document in the form of a NA resolution, to institutionalise the policies of the Party and to fulfil tasks set out by the NA and the Government.
