Unresolved bad debt remains at high level

Although the results of bad debt settlement, according to Resolution No.42/2017/QH14 dated June 21, 2017, of the National Assembly on piloting bad debt settlement of credit institutions for nearly five years are at a high level of VND380.2 trillion (US$16.44 billion), unresolved bad debt by December 31, 2021, remains high at VND412.67 trillion.

It is the information stated in the Government's report No.174/BC-CP sent to the NA to prepare for the third session.

According to the report, in case Resolution No.42 cannot continue to be implemented, the volume of bad debts determined under Resolution No.42 that has not been resolved, including newly arisen bad debts, is expected to reach VND430 trillion ($18.6 billion) at the end of 2022 and VND443 trillion at the end of 2023.

After handling a large number of bad debts in 2018 and 2019, the bad debt settlement speed in 2020 and 2021 tended to slow down due to the impact of the Covid-19 pandemic on the financial situation.

Therefore, to continue to achieve the goal of handling and controlling the bad debt ratio of the system of credit institutions in the coming time is a big challenge for the banking industry, requiring the participation of the political system, the close coordination of ministries, agencies, and localities in implementing solutions on handling bad debts, improving credit quality of credit institutions.

According to the Government, when the enforcement expires (until August 15, 2022), the entire mechanism on bad debt handling under Resolution No.42 will not be applied. The bad debt handling of credit institutions will comply with relevant laws. The lack of incentive mechanisms and policies will prolong the bad debt settlement process, affecting the restructuring of the system of credit institutions, especially weak credit institutions.

For the bad debt handling to be implemented effectively, removing difficulties in handling bad debts in general and handling bad debts following Resolution No.42 in particular, the Government said, in the upcoming time, it would continue to direct the State Bank of Vietnam to coordinate with ministries, agencies, and the People's Committees of provinces and cities to strengthen coordination in solving difficulties and problems in the implementation and guidance of Resolution No.42.

Specifically, it is to perfect the mechanism to access information on the status of collateral assets; apply simplified procedures in settling disputes related to the obligation to hand over collateral or the right to handle collateral at court; implement the order of priority for payment of tax obligations for the sum of money collected from the disposal of collateral assets of bad debts after deducting costs of preservation, seizure, and collateral disposal. In addition, it is necessary to develop standards for debt valuation and guide the return of collateral of bad debts as evidence in criminal cases at the request of the secured party, which is the credit institution.