VietNamNet Bridge – The State Bank of Vietnam has just issued Circular 19 regulating operations of the Vietnam Asset Management Company (VAMC), giving it the mandate to auction bad debts at credit institutions.
VAMC will find ways to sell the debts it buys from credit institutions to organizations and individuals at market value to recover capital. Trading will be conducted in an open and transparent manner.
The enterprise will sell debts via auction or competitive tender with at least three independent buyers taking part. If VAMC fails to carry out the two methods mentioned above, it can sell debts via direct negotiations with buyers.
The debt sale price will be calculated by comparing bidding prices or referring to prices of equivalent debts or those whose values are assessed by VAMC and other independent organizations to reduce losses during the process of solving bad debts.
According to the circular, VAMC can entrust credit institutions to recover debts, handle debts and mortgaged assets, reschedule loans, adjust payment conditions, or convert debts into capital contributions. It can also invest in mortgaged assets, manage the debts that have been sold to VAMC and supervise assets related to the debts.
Notably, VAMC can use debt as a capital contribution. It can use the debts and other legitimate capital and assets to turn debts into chartered capital and contributed capital in indebted businesses. The enterprise also can contribute capital directly to join the financial restructuring process of debtors.
The enterprise can reschedule debt payment deadlines if debtors have met all requirements.
VAMC may provide support for the debtor through investment and other financial support and issue guarantees for the debtor to take out loans from credit institutions.
To have bad loans purchased by VAMC at market value, the debt must be considered recoverable, the assets used as collateral for the debt can be liquidated, and debtors have viable plans to repay the debt.
The market prices should be negotiated between the parties, and based on the re-evaluation of the debt conducted by an independent body.
The circular also enables VAMC to use special bonds to purchase bad debts in gold, Vietnam dong and foreign currency from credit institutions.
For debts in gold, the two sides will apply the gold buying price quoted by Saigon Jewelry Company (SJC) at the time of signing debt trading contracts. For those in U.S. dollar, VAMC will apply the inter-bank exchange rate announced by the central bank at the contract signing time.
Lenders with a non-performing loan ratio of 3% and above will be required to sell the loans to VAMC. The circular will take effect on September 16.