Mr. Nguyen Quoc Hung, Chairman of the Vietnam Asset Management Company, spoke with VET about its performance in the first nine months and its plan for 2016.
■ This year the VAMC targets buying a total of VND80 trillion ($3.56 billion) in bad debts from financial institutions and regaining about VND10 trillion ($446.2 million). Have results to date this year been in line with the targets?
As at September 30 VAMC was exceeding its plans for buying bad debts. In the first nine months it bought VND91 trillion ($4.06 billion) worth of bad debts from financial institutions at a price of VND82 trillion ($3.65 billion). It has proposed to the State Bank of Vietnam (SBV) that it receive an additional VND20 trillion ($892.4 million) to buy more bad debts and issuing special bonds before the end of the year. This year the VAMC will therefore buy bad debts by issuing special bonds totaling VND100 trillion ($4.46 billion).
The VAMC has been proactive in handling bad debts under existing regulations, which resulted in it collecting VND9.8 trillion ($437.27 million). Collections will therefore be higher than the VND10 trillion ($446.20 million) targeted at the beginning of the year.
■ What is the total of the bad debts bought and handled since the VAMC came into being?
The VAMC has bought VND224 trillion ($9.99 billion) in principal, of which VND218 trillion ($9.72 billion) had no provisions set, with VND190 trillion ($8.47 billion) in special bonds issued. The company has collected VND14.82 trillion ($661.26 million) since 2013, or 7 per cent.
The VAMC has adjusted interest rates on 28 debts of nine borrowers with a total principal of VND367 billion ($16.37 million), removed or reduced interest rates or fees for 17 borrowers, totaling VND66 billion ($2.94 million), and rearranged the loan terms for eleven borrowers with a total principal of VND446 billion ($19.9 million). It has also worked with financial institutions to continue the credit provision of VND950 billion ($42.38 million) to two customers to finish two projects. Disbursement in the two projects is VND425 billion ($18.96 million) to date.
■ In order to lower the bad debt ratio to less than 3 per cent, the SBV requires commercial banks sell bad debts that they can’t handle themselves to the VAMC before September 30. Did VAMC buy all of the debts commercial banks should have sold?
The VAMC has proposed a plan to issue additional bonds to achieve the target of buying all debts from commercial banks that they intend to sell this year. After working with financial institutions we decided to increase the amount of bad debt purchases by issuing special bond valued at VND20 trillion ($892.4 million).
■ How has VAMC achieved its targets?
There are many reasons.
Firstly, the economy is in good shape. Secondly, real estate has greater liquidity with more successful transaction being made. The price of real estate is rising, encouraging many enterprises sell real estate to pay off their debts. Collateral in the form of real estate is also now easier to handle.
Thirdly, there is strong cooperation between the VAMC and the Ministry of Justice, making legal judgments more enforceable.
■ What are VAMC’s plans for 2016?
In our plan we have indicated that from 2016 the VAMC must be able to “stand on its own two feet” without assistance from the SBV, because the bad debt ratios of each financial institution have been cut to 3 per cent and they are no longer required to sell their debts to the VAMC.
The relationship between the VAMC and financial institutions is equal, so after focusing on buying bad debts by special bonds VAMC has set a priority of handling bad debts (selling the debt or the collateral) and buying debt under market prices with new bad debts and reducing the amount of bad debts bought by special bonds.
VAMC will also participate in investing capital, swapping debt to equity to reorganize enterprises that have a chance to recover. We will also continue to rearrange debts, provide guarantees for customers to borrow from financial institutions, and investing in assets, mostly buildings, and leasing them for profit. Additionally, if the financial capacity of a company is sufficiently strong, VAMC will buy shares from financial institutions and help in the reorganization process.