VietNamNet Bridge - The National Assembly has approved a resolution on dealing with bad debt, a move expected to help remove the ‘blood clot’ causing congestion to the national economy.

NA deputies on June 21 ratified the resolution on dealing with banks’ bad debts, to take effect on August 15, 2017, described as a necessary tool to force the bad debt ratio of credit institutions to under 3 percent.

According to the State Bank, there are noteworthy points in the resolution. Credit institutions, foreign bank branches, and bad debt trading institutions can buy/sell bad debts in an open and transparent way in accordance with the laws. 

The buy/sell prices are market prices which can be higher or lower than the principal.

Bad debt trading and settlement institutions can sell bad debts to legal entities and individuals, including those who don’t have the function of debt trading. 

This means that the debt trading subjects have been expanded, while the debt buy/sell prices now depend on market prices.

The National Assembly has approved a resolution on dealing with bad debt, a move expected to help remove the ‘blood clot’ causing congestion to the national economy.

Also according to the central bank, as the outstanding loans are predicted to increase by 16 percent, the non-performing loan (NPL) ratio in the next five years (2017-2022) would be VND350 trillion. 

In order to keep the NPL ratio at unde 3 percent, the total NPL to be dealt with in the next five years would be VND640 trillion. This means Vietnam would have to deal with VND130 trillion in NPL.

Applauding the new resolution, Huynh Minh Tuan from VnDirect Securities said it would be an important solution to clear away congestion in the economy, which agencies have been trying to do in the last five to six years, but the effects remain modest.

This is because the resolution gives more rights to credit institutions to liquidate mortgaged assets, thus helping to avoid prolonged lawsuits related on debt collection and reduce capital costs.

Analysts said credit institutions will get the biggest benefits from the resolution. 

Meanwhile, bank share prices would increase thanks to the improvement in banks’ business performance. A series of real estate projects which have been frozen or left idle will be revived.

Other business fields, especially the stock market, will also benefit because banks, free from bad debts, will push up lending and more capital will be pumped into the economy. 

Bank share prices have soared following the news about the resolution on bad debt settlement. The statistics showed that the prices of most of 10 listed bank shares are on the rise. STB shares of Sacombank have seen prices increase in 12 out of the last 17 trading sessions, from VND12,650 to VND14,300 per share.

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