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
- 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
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.,