VietNamNet Bridge - General Director Nguyen Huu Thuy told Bloomberg that VAMC will give priority to purchase debts of the banks with the highest bad debt ratios and the debts that are guaranteed by real estate. The first transactions will be done in the next two weeks.

Speaking to Bloomberg yesterday, August 6, General Director of the Vietnam Asset Management Company (VAMC) – Mr. Nguyen Huu Thuy said in the next two months, VAMC will issue special bonds for about 10 banks with the total value of bad debts of about VND10 trillion ($474 million) to be purchsed. Then, the banks can use the bonds as collaterals for being refinanced from the State Bank of Vietnam (SBV).

"Within two weeks, we will buy the first bad debts. This will bring a positive message to help the market and investors will see the concrete progress and the determination in handling debts," said Thuy.

The CEO of the company with chartered capital of VND500 billion said the corporation will give priority to buy debts from the banks with the highest percentage of bad debts and the debt collateral is real estate.

Thuy added that VAMC will buy many different types of debts. According to him, most of the bad debts of Vietnam is in the Vietnam dong.

As a rule, banks with bad loans of over three percent have to sell the debts for VAMC. Thuy said that VAMC will buy the book value of debt and sell under the market value. The debt settlement company will also ask for the State Bank’s permission to buy bad debts at market prices after 2013.

"We will auction bad debts at market prices, thus there will be a discount compared to the input prices. In other words there will be people who have to suffer some losses. It will be the banks and their borrowers, who will have to share a portion of this loss," Thuy said.

Many international organizations have repeatedly expressed their interest in buying bad debts of Vietnam. In this regard, Thuy said VAMC had initial discussions and encouraged foreign investors to participate in property purchase. "Some international organizations have expressed their willingness to provide loans or grants to VAMC," Thuy revealed.

VAMC started operation on July 26, with a charter capital of VND500 billion ($25 million), as a limited liability company under the supervision of the State Bank. Governor Nguyen Van Binh said it is expected that VAMC will clean up around VND40 to VND70 trillion ($2-3.5 billion) of bad debts this year.

Na Son