In an attempt to enhance the flexibility of the Vietnam Asset Management Company (VAMC) in dealing with non-performing loans (NPLs), on 31 March 2015 the Government issued Decree 34/2015/ND-CP (Decree 34) amending some provisions under Decree 53/2013/ND-CP (Decree 53) on the establishment, organisation and operation of VAMC. Decree 34 came into force as of 5 April 2015.
Decree 34 streamlines the process of managing NPLs by enabling VAMC to purchase NPLs at market price, in addition to issuing special bonds at the book value of the NPLs. This is one of the areas that has been highlighted as a key to facilitating foreign investment in VAMC directly, or in portfolios of NPLs purchased from VAMC.
Decree 34 focuses on the following key areas:
Increased capabilities of VAMC in purchasing NPLs at market price
The capabilities of VAMC in purchasing NPLs at market price are strengthened as follows:
More power for VAMC to manage NPLs and collateral
Under Decree 53, only VAMC itself can initiate recovery proceedings against borrowers, or other obligors or guarantors. However, pursuant to Decree 34, VAMC can authorise or transfer its right to conduct proceedings to the credit institution that has sold the corresponding NPLs to VAMC. This should provide more flexibility for VAMC and credit institutions alike in managing NPL portfolios and taking legal action.
Flexibility related to Special Bonds
According to Decree 34, credit institutions have the right to repurchase the underlying NPLs from VAMC prior to the maturity of the Special Bonds issued for those NPLs. This right was not provided for in Decree 53.
Moreover, Decree 34 has removed the requirement that credit institutions maintain loss provisions of no less than 20 percent of the face value of the Special Bonds per annum.
The tenure of the Special Bonds is also increased from five to 10 years to purchase the NPLs of credit institutions under receivership or "special control" of the SBV.
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