Will the pilot of bad debt settlement of credit institutions be extended according to the latest Resolution of the Prime Minister of Vietnam?
- What activities may arise bad debt?
- What are the regulations on the rules for settlement of bad debts?
- What are the regulations on allocation of estimated profits or difference upon sale of bad debts of credit institutions or bad debt purchaser/manager?
- Will it be proposed to prolong the pilot of bad debt settlement of credit institutions?
What activities may arise bad debt?
According to Article 2 of the Appendix on identification of bad debts enclosed with Resolution 42/2017/QH14 of Vietnam, the following activities may arise bad debts, specifically:
“Article 2. Activities from which bad debts probably arise
1. Lending.
2. Finance lease.
3. Discounts, rediscounts of negotiable instruments and other valuable papers.
4. Factoring.
5. Credit grant in the form of credit card issuance.
6. Repayment according to commitment off-balance sheet.
7. Delegation of credit grant.
8. Debt purchase.
9. Purchase and entrust of purchase of unlisted corporate bonds on securities market or unregistered corporate bonds on market of unlisted public companies.”
What are the regulations on the rules for settlement of bad debts?
The implementation of bad debt settlement must be based on the rules specified in Article 3 of Resolution 42/2017/QH14 of Vietnam as follows:
“Article 3. Rules for settlement of bad debts
1. Bad debts are settled publicly and transparently and legitimate rights and interests of credit institutions, bad debt purchaser/manager and relevant entities are protected.
2. Bad debt are settled in conformity with market mechanism in consideration of conservatism principle, respect of depositors’ rights and maintenance of stable and safe system.
3. State budget is not used for settlement of bad debts.
4. Any entity has violated law resulting in bad debts or during the process of settlement of bad debts must take liability as per the law.”
What are the regulations on allocation of estimated profits or difference upon sale of bad debts of credit institutions or bad debt purchaser/manager?
Pursuant to Article 16 of Resolution 42/2017/QH14 of Vietnam, allocation of estimated profits or difference upon sale of bad debts of credit institutions or bad debt purchaser/manager is implemented as follows:
“Article 16. Allocation of estimated profits or difference upon sale of bad debts of credit institutions or bad debt purchaser/manager
1. The credit institution is entitled to allocate estimated profits that have been recorded of bad debts that have not been divested of as prescribed, difference between book value of the debt included in the balance sheet and selling price of the bad debt and amount of reserve for such debt to annual financial performance according to the following principles:
a) Minimum annual allocation is the difference of revenues and expenditures from annual financial performance of the credit institution;
b) Time limit for allocation of estimated profits may not exceed 10 years, except for the case prescribed in Clause 2 of this Article; time limit for allocation of difference between book value of the debt included in the balance sheet and selling price of the bad debt and amount of reserve for such debt may not exceed 5 years.
2. With regard to estimated profits of bad debts which have been sold to bad debt purchaser/manager but have not been divested of as prescribed, the time limit for allocation of estimated profits may not exceed the remaining period of the special bonds of bad debt purchaser/manager.
3. The credit institution is only entitled to allocate estimated profits obtained until December 31, 2016 as prescribed Clause 1 and Clause 2 of this Article
4. The bad debt purchaser/manager is entitled to allocate difference between the book value of the debt included in the balance sheet with the selling price of bad debt purchased by market price and the amount of reserve for such debt to the annual financial performance, but not greater than the difference between revenues and expenditures.”
Will the pilot of bad debt settlement of credit institutions be extended according to the latest Resolution of the Prime Minister of Vietnam?
Will it be proposed to prolong the pilot of bad debt settlement of credit institutions?
Resolution 47/NQ-CP in 2022 approved the Project Resolution on extending the application deadline of Resolution 42/2017/QH14 on piloting bad debt settlement of credit institutions (effective from 29 March 2022), whereby, the Prime Minister assigned the State Bank of Vietnam to carefully review the contents and submit the documents to the National Assembly in accordance with regulations, ensuring to fully absorb and explain the opinions of the Members. Government, strict, quality, effective, timely, in accordance with the order, procedures and legal regulations; responsible for the content of the report.
In addition, the Minister of Justice, authorized by the Prime Minister, signed a report on behalf of the Government to report to the National Assembly Standing Committee for permission to add the Resolution project to the Law and Ordinance formulation program in 2022, submit it to the National Assembly Standing Committee according to the one-session process, and draft it according to abbreviated order and procedures.
And finally, assign the Governor of the State Bank of Vietnam, under the authorization of the Prime Minister, on behalf of the Government to sign the Report to the National Assembly and the National Assembly Standing Committee in accordance with the provisions of the above Resolution project to give opinions and approve according to the process of a meeting, draft according to the order and shortened procedures as prescribed.
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