VMAC BUILDS STRATEGY FOR DEBT TRADING

The Việt Nam Asset Management Company (VAMC) is planning to develop a new strategy for buying and selling bad debts in Việt Nam this year, in which it will play a central role to promote the development of the debt trading market.

The company expected to submit the plan to authorities for approval and bring the market into operation next year, it said in the newly released five-year development plan.

At the same time, the VAMC would build a legal framework for the establishment and operation of a bad debt trading platform in 2020-21, it said.

The Vietnamese Government has taken many measures to clean up toxic assets in the banking system. Under the central bank’s plan, asset management companies will take the helm to tackle piles of non-performing loans (NPLs) at banks.

The VAMC, set up in July 2013, is in charge of cleaning up bad debts in the banking system. Since its establishment until the end of last year, the company had bought NPLs worth nearly VNĐ339 trillion (US$14.55 billion) at book value from credit institutions through the issuance of special bonds.

In 2018 alone, the figure reached almost VNĐ31 trillion. The company also recouped VNĐ34 trillion worth of bad debts last year, lifting the total value recovered during 2013-18 to VNĐ115.6 trillion, it reported.

For debt purchases at market prices, the value was more modest at VNĐ2.8 trillion last year and nearly VNĐ6 trillion in the last five years.

The VAMC said this year it had started to focus on buying bad debts from weak credit institutions which may cause risks to the banking system and those with bad debt ratios of more than 3 per cent.

It expects to buy VNĐ50 trillion worth of bad debts and another VNĐ4.5 trillion of NPLs according to market prices in 2019.

In the five-year plan, the company expects to buy bad debts worth at least VNĐ330 trillion ($14.2 billion) by 2020. The figure of bad debts purchased at market prices will reach at least VNĐ20 trillion.

The company will also focus on buying bad debts at the market price mechanism during the 2021-23 period.

Regarding debt settlement, it hopes to basically complete the handling of bad debts purchased in the previous period (excluding bad debts purchased through issuance of special bonds to weak credit institutions) by the end of 2020.

VAMC said it would prioritise large bad debts to minimise management and collateral costs and shift focus from issuing special bonds to buying bad debts at market prices. At the same time, it would select each debt or buy in batches to speed up the process of bad debt restructuring through the company.

To implement the strategy, VAMC is asking for the Government to pump more money to raise charter capital from the current VNĐ2 trillion to VNĐ5 trillion in 2019 and VNĐ10 trillion in 2020-21.

It also hopes to mobilise capital from domestic and international organisations and individuals in accordance with the law.

Source: VNS