VietNamNet Bridge - Under a new regulation, the Vietnam Asset Management Company (VAMC) can issue bonds to get money to buy bank debts at market prices. However, the bonds will be issued only to domestic credit institutions.

VAMC had bought VND6 trillion worth of debt from 6-7 banks by the end of the first quarter of the year, according to the company’s chair Nguyen Quoc Hung, and it is considering another $13 trillion debt. 

The figure, in Hung’s eyes, shows “satisfactory result”. He believes that the target of buying VND200 trillion worth of debts by the end of 2015 is within reach. When the target is reached, VAMC would be set to deal with the purchased debts.

As such, VAMC has taken over VND129 trillion worth of debts in book value from credit institutions. Of that amount, VAMC has settled VND6.2 trillion worth debt by collecting debt and distraining mortgaged assets.

What will VAMC do?

Hung said VAMC expects to settle VND40 trillion out of the VND200 trillion worth of debt to be bought by 2016. As such, VAMC will still have to keep VND160 trillion in its coffer.

The newly released Decree No 34, as analysts commented, has given more legal instruments to help VAMC to settle debts more quickly. 

The decree stipulates that the Ministry of Public Security, together with local authorities, will have the responsibility of joining forces with VAMC to seize the assets mortgaged by borrowers for the loans.

The new regulation is believed to help much in the debt collection, a process that has been going very slowly because of the lack of cooperation among involved agencies.

A banker noted that it is very difficult to reach a consensus among the three involved parties – banks, debtors and VAMC. If just one of the parties brings the cases to the court, the debt settlement process would be suspended.

How will the debt settlement process go?

There is a big difference between the asset management companies in other countries and VAMC, though the companies all aim to help settle debts. While the formers are set up and funded by the governments, the latter do not use money from the state’s budget. 

Under Decree No 34, VAMC can issue bonds to raise funds to buy debts at market prices. However, local newspapers quoted their sources as saying that only domestic credit institutions are allowed to buy VAMC’s shares.

If so, an analyst noted, there would be not many opportunities to “liberalize” the debts because the regulation will prevent foreign capital flow to the debt market.

“What Vietnam needs is cash to settle debts. Meanwhile, cash is the thing foreign institutions have,” he noted.

TBKTSG