From July 1, 2024, bad debts allowed to be traded and the plan to buy and sell bad debts at market prices will be changed according to Circular 03/2024/TT-NHNN

On May 16, 2024, the Governor of the State Bank of Vietnam issued Circular 03/2024/TT-NHNN amending Circular 19/2013/TT-NHNN regulating the purchase, sale and settlement of bad debts of Vietnam Asset Management Company (“VAMC”). Accordingly, some changes to pay attention to are as follows:

First, change the definition of “bad debt”. Accordingly, bad debts as of July 1, 2024 are 1) Bad debts of credit institutions and foreign bank branches, including bad debts that are being accounted for in the balance sheet in accordance with the regulations of the Governor of the State Bank on classification of assets, bad debts that have used risk provisions for handling but have not yet recovered debts and are monitoring outside the balance sheet and 2) Bad debts that VAMC has purchased from credit institutions and foreign bank branches but have not yet recovered.”

Secondly, the purchase of bad debts by VAMC from joint-venture credit institutions, credit institutions with 100% foreign capital, and foreign bank branches is only carried out according to market value.

Third, expand the ability to continue to extend credit to borrowers with bad debts. Accordingly, borrowers who have bad debts sold to VAMC and have effective production, business and investment projects will continue to be considered and granted credit by credit institutions and foreign bank branches according to agreements and provisions of law.

Fourth, VAMC will publicly post information on bad debts on the website for convenient transactions. Accordingly, VAMC will be obliged to post and post information on bad debts and collateral of the purchased bad debts on the Debt Exchange and the website of VAMC. The posting and posting of information must be in accordance with the provisions of the law on personal data protection.

Fifthly, supplementing the conditions of bad debts that VAMC is able to buy at market prices. Accordingly, in addition to the previous conditions, VAMC must also: 1) Determine the market value of the bad debt, including the collateral of that bad debt; 2) Assessment of economic efficiency, risks and ability to recover capital to purchase bad debts; 3) Analyze and assess the current situation and prospects of bad debts, borrowers, guarantors, debt repayment obligors and conditions for debt purchase agreements with credit institutions and foreign bank branches selling debts and 4) Anticipate feasible measures to handle debts, collateral of bad debts.

Sixth, for the collateral of the bad debt, the asset management company sells the collateral of the bad debt at a selling price that may be higher or lower than the principal balance of the bad debt.

This newsletter is only for the purpose of information about newly issued legal regulations, not used as advice or application to specific cases.

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