Sunday, 22 Sep 2019

Debt trading market needed for the write-off of legacy assets

Updated at Wednesday, 05 Dec 2018, 08:40
The Hanoitimes - The development of the debt trading market hasn’t so far met the real demand as the market’s legal regulations are not adequate and consistent.
Vietnam needs to establish an effective debt trading market to better lure the participation of private investors in the market, experts said.
Bad debts accounted for 6.67 percent of total outstanding loans by the end of June
Bad debts accounted for 6.67 percent of total outstanding loans by the end of June
Pham Tien Dat, deputy director of the Ministry of Finance’s Institute of Strategies and Policies, said that legal frameworks for the establishment of the debt trading market must be streamlined rapidly to help banks resolve non-performing loans (NPLs), which will contribute to stabilizing and strengthening the nation’s financial system.
The development of the debt trading market hasn’t so far met the real demand as the market’s legal regulations are not adequate and consistent, Dat said, explaining that the current policies on debt settlement mainly mention to the participation and support of the State, but not private sectors.
In addition, Dat said, the country’s debt buyers and sellers are restricted while goods in the market aren’t diversified.
Debt buyers in the country currently include State-owned Vietnam Debt and Assets Trading Company (DATC), State-owned Vietnam Assets Management Company (VAMC) and some 20 debts and asset management companies of credit institutions (AMCs). Meanwhile, debt sellers are only credit institutions and State-owned enterprises.
Goods traded in the debt market include only NPLs of credit institutions and SOEs. Meanwhile, debts of many other sectors and enterprises, such as of bankrupt companies could be traded in the market as well.
According to Dat, although Resolution No. 42/2017/QH14 on dealing with bad debts of credit institutions and Decree No. 69/2016/ ND-CP on debt trading conditions allowed private investors to take part in the debt trading, their participation in the market remains very limited due to a lack of professional brokers and asset valuation organizations, institutional investors, and private AMCs and enterprises.
Sharing the same view, Ha Huy Tuan, Vice Chairman of the National Financial Supervisory Committee also admitted that the settlement of bad debt still has bottlenecks as there hasn’t had an effective debt trading market to attract more participants.
Meanwhile, Nguyen Tien Dong, VAMC’s Chairman said that bad debt resolution is an urgent requirement to ensure a safe and sustainable development of the banking system. Statistics from the State Bank of Vietnam, NPLs, including those at VAMC and credit institutions, were at VND486 trillion (US$20.77 billion) by the end of June, accounting for 6.67 percent of total outstanding loans.
Incentive policies proposed
For the debt trading market to be buoyant, Dat proposed that it is necessary to formulate policies to encourage and attract private investors, which will help increase the competitiveness and improve business performance of debt trading companies.
At the same time, authorities should study to establish a debt trading platform to develop the secondary debt trading market, Dat said, adding that regulations on debt trading market should be also legalized to create more capital mobilization channels for the local market, which will help firms to reduce their dependence on bank loans.
According to Dung, the debt trading platform, which will introduce and provide the most trustworthy information about debts to investors, will help increase the transparency and publicity of the market.
The debt trading platform, which may be under the management of the Ministry of Finance, will be responsible for developing transaction infrastructure, setting standards for posting debt information, managing and developing intermediaries for market creation, and establishing regulations on supervising and protecting investors, Dung said.
In addition to diversifying goods in the debt trading market, Dung also suggested that there is a need of a system of rating agencies for creditors and independent asset valuation institutions, thereby helping the buyer and the seller to determine the market value of the debts.
Anh Hong
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