VAMC builds strategy for debt trading

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VAMC is planning to develop a new strategy for buying and selling bad debts in Vietnam this year.

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 2020-2021, 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 339 trillion VND (14.55 billion USD) at book value from credit institutions through the issuance of special bonds.

In 2018 alone, the figure reached almost 31 trillion VND. The company also recouped 34 trillion VND worth of bad debts last year, lifting the total value recovered during 2013-2018 to 115.6 trillion VND, it reported.

For debt purchases at market prices, the value was more modest at 2.8 trillion VND last year and nearly 6 trillion VND 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 percent.

It expects to buy 50 trillion VND worth of bad debts and another 4.5 trillion VND of NPLs according to market prices in 2019.

In the five-year plan, the company expects to buy bad debts worth at least 330 trillion VND (14.2 billion USD) by 2020. The figure of bad debts purchased at market prices will reach at least 20 trillion VND.

The company will also focus on buying bad debts at the market price mechanism during the 2021-2023 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.

The 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, the VAMC is asking for the Government to pump more money to raise charter capital from the current 2 trillion VND to 5 trillion VND in 2019 and 10 trillion VND in 2020-2021.

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

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