Vietnam is taking measures to clean up bad debts in the banking system. (Photo: debtwave.org)
The State Bank of Vietnam, the country’s central bank, is building a legal framework for the launch of debt trading services, including debt trading floors, part of larger efforts to accelerate the handling of non-performing loans (NPLs).
According to the draft decree, asset management companies (AMCs) at banks' helm could operate as professional debt traders. Under the current legislation, AMCs can purchase debts of other credit institutions only.
Another important content of the draft regulation is the set of conditions on debt trading floor services.
The regulation defines debt trading floor as the place where purchase and sale of debts are carried out, adding to consultancy and brokerage of purchase and sale of debts.
To be eligible for debt trading and debt trading floor services must meet certain requirements on minimum legal capital, personnel and infrastructure.
The Vietnamese government has taken a number of steps aimed to tackle piles of NPLs at banks.
The Vietnam Asset Management Company (VAMC) was set up in July 2013 to clean up bad debts in the banking system. However, the firm has seen as a store for the NPLs it has purchased because it lacks legal power to handle collateral.
VAMC bought some 243 trillion dong ($10.85 billion) worth of NPLs at book value from its establishment to the end of 2015. It had recouped 22.88 trillion dong ($1.02 billion) worth of bad debt, or 9.3% of total NPLs it purchased, said VAMC Chairman Nguyen Quoc Hung.
The bad debt ratio in the banking system was brought down to 2.72% at the end of November 2015 and around 2.6% at the end of that year, Mr. Hung told the SBV
-run Banking Times.