[NEWS] – Need to legislate on bad debt handling regulations

At the Seminar on Law on Credit Institutions (amended) organized by the Banking Association on March 8, banks all commented on issues related to regulations on handling bad debts and collateral.

Many problems with regulations on collateral, bad debt handling

The Law on Credit Institutions (Credit Institutions) plays a very important role in the operation of the system of credit institutions. The amendment of the Law on Credit Institutions in 2017 has added regulations on handling specially controlled credit institutions, and additional regulations to improve the governance capacity of credit institutions...

In addition to the achieved results, up to now, relevant Laws have been issued, amended, and supplemented and along with the development and drastic changes in technology, the Law on Credit Institutions has arisen a number of limitations regulations that need additional research, appropriate correction

Accordingly, the amendment with the principle of protecting the legitimate rights and interests of the secured party when dealing with collateral, the Law on lousy debt settlement should clearly stipulate bad debts, after deducting costs of preservation, seizure, and expenses of handling security assets, priority shall be given to payment of secured debt obligations to credit institutions before paying other obligations of the parties. security (including tax obligations, court fees, and other obligations that the securing party does not secure).

Regarding the proposal to handle collateral, Ms. Nguyen Thi Phuong - Director of BIDV’s Legal Department - recommends within 5 years (or a specific time that the State Bank considers appropriate) from the date of issue. Credit institutions receive real estate to replace customers’ debt repayment obligations, credit institutions must sell or transfer; or decide to make a business office, a working place, or a warehouse to directly serve the professional activities of the credit institution.

Difficult to handle real estate assets that are not legal enough

A representative of the Asset Management Company (VAMC) said that, when VAMC buys a debt from a credit institution whose collateral is a real estate project, however, when handling the collateral is a real estate project, It is not feasible for the project to fully satisfy the conditions for transfer as prescribed in the Law on Real Estate Business, the Law on Housing, the Law on Construction, the Law on Investment, the Law on Land.

The reason is that many debts are secured by real estate projects or assets formed in the future are real estate projects that have not been completed "corresponding technical infrastructure works according to the schedule stated in approved project” or the investor does not have a complete “land use right certificate for the whole or part of the transferred project”.

According to this person, in order for the credit institution or VAMC to have a legal basis to handle the secured assets, which are real estate projects, thereby contributing to enhancing the efficiency of bad debt handling, the regulation on real estate project conditions should be met. The transferred property must meet the following conditions.

In addition, credit institutions also proposed to supplement regulations assigning the Department of Natural Resources and Environment to guide the order and procedures for registration of the transfer of ownership and use rights to real estate when the credit institutions receive the property as real estate to replace the debt repayment obligation of the customer.

Source: Collector