Vietnam: Bad debt disposal

Author: | Published: 24 Aug 2017
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Nishimura & Asahi

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Otemon Tower 1-1-2 Otemachi
Chiyoda-ku, Tokyo 100-8124
Japan

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+81 3 6250 6200

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Handling bad debts has been emerging as an issue in Vietnam's banking system over recent years. A high ratio of bad debts, which amounts to approximately 5.85% of the system's total outstanding loans, has caused an adverse effect on overall economic development.

The Vietnam National Assembly has been taking steps to reduce the bad debts of credit institutions, including those sold to the Vietnam Asset Management Company (VAMC), to less than three percent of the total outstanding loans by 2020. As part of these efforts, on June 21 2017, the National Assembly passed Resolution 42/2017/QH14 on handling bad debts of credit institutions on a pilot basis. The Resolution will be implemented for five years only, from its effective date of August 15 2017, and addresses only bad loans that materialised within a certain period.

The Resolution allows credit institutions and the VAMC to transfer real estate projects that were asset-secured for bad debt if the following criteria are satisfied:

  • The real estate project has been approved by competent authorities in accordance with legal regulations.
  • The relevant decision on land allocation or land lease has been issued.
  • No related dispute on land use rights has been accepted or dealt with by the competent court.
  • The project is not being seized for the purpose of securing the enforcement of a court judgment or the performance of administrative decisions.
  • There has been no decision on the revocation of the project or the land.

The transferee must satisfy conditions required by law on real estate business and the inheritance rights and obligations of the transferor, and conduct relevant procedures to continue implementing the project.

The Resolution eases the conditions for transferring real estate projects under the Law on Real Estate Business for real estate projects being mortgaged to the credit institutions. To transfer these projects, no land use right certificate is required; site clearance and compensation do not necessarily have to be completed; and, in certain cases, construction of the technical infrastructure is not required to be completed.

This Resolution will eventually create a broader scope to dispose of bad debts and also give potential investors more opportunities to approach real estate projects in Vietnam. Further guiding regulations need to be promulgated to realise the ambitious goals of the Resolution. Therefore only time will tell how effective the specific procedures will be and overall how feasible it will be to put the Regulation into effect.

Nguyen Thi Thanh Huong   Nguyen Hoang Tuan

Nishimura & Asahi
Suite 607, 63 Ly Thai To Building,
63 Ly Thai To Street, Hoan Kiem Dist.,
Hanoi, Vietnam
T: +84-24-3946-0870
E: info_hanoi@jurists.jp
info_hcmc@jurists.jp
W: www.jurists.co.jp

 


 

 

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