What is asset management company? Principle of operation of the Asset Management Company in Vietnam

What is asset management company? Principle of operation of the Asset Management Company in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is asset management company?

According to Clause 2, Article 3 of Decree 53/2013/ND-CP,  asset management company is a specialized enterprise and is organized in the form of a one-member limited liability company whereby the State owns 100% of charter capital and subject to the State management, inspection and monitoring conducted by the State Ban

2. Principle of operation of the Asset Management Company in Vietnam

Aaccording to Article 5 of Decree 53/2013/ND-CP, the Asset Management Company shall operate in the following principles:

- Covering expenditures with revenues and not for profit

- Being public and transparent in the activities of purchase and handling of bad debts.

- Limiting risks and expenses in handling of bad debts.

3. Management and operation of Asset Management Company in Vietnam

Management and operation of Asset Management Company according to Article 11 of Decree 53/2013/ND-CP is as follows:

- The member Board includes no more than 07 members.

- The Supervisory Board includes no more than 03 members.

- The Asset Management Company has a General Director and a Deputy General Director.

- Powers, duties and responsibilities of the member Board, Supervisory Board, members of the member Board, members of the Supervisory Board, General Director of the Asset Management Company shall comply with the provisions of law and the charter of the Asset Management Company.

- The State Bank shall appoint and dismiss the Chairman and the members of the member Board, the Head and members of the Supervisory Board, General Director and Deputy General Director of Asset Management Company.

- The legal representative of the Asset Management Company is not necessarily the auctioneer in accordance with the law on asset auction.

4. Asset Management Company’s purchase of bad debts in Vietnam

Regulations on asset Management Company’s purchase of bad debts according to Article 14 of Decree 53/2013/ND-CP (amended in Decree 18/2016/ND-CP) are as follows:

- Asset Management Company shall buy bad debts from credit institutions according to the book value of the outstanding debt minus the unused provisions for such bad debts.

- The Vietnam Asset Management Company shall purchase a non-performing loan from a credit institution at the market value on the basis of agreement and revaluation of such loan.

A credit institution may gradually amortize in its operating expenses the difference between the book value and the traded value of the loan purchased at market value and the value of the risk provision deducted for such loan on the following principles:

+ The credit institution is suffering loss or will suffer loss if such difference is wholly amortized at a time;

+ The amortization shall be made over 5 (five) years at most, counting from the time of sale of the loan. The amount to be amortized annually must not be lower than the revenue-expenditure difference (exclusive of the amortized amount).

- The credit institutions that sell debts shall provide Asset Management Company with the information and documents about the outstanding principal and the interest that have not been paid by their loan customers.

- When buying bad debts at market prices, Asset Management Company shall reassess their value based on the ability to recoup investment and collateral for such bad debts; MAC may hire an advisory organization to valuate bad debts and collateral where necessary.

- When a credit institution having 3% bad debt ratio of 3% or higher, or a bad debt ratio determined by the State bank does not sell bad debts to Asset Management Company, the State bank shall consider taking the following measures:

+ Carry out an inspection or request the credit institution to hire an independent audit company or valuation company to reassess the quality and value of its assets, equity capital, and charter capital; the cost of audit and valuation is paid by the credit institution;

+ Bases on the result of inspection, independent audit or valuation, the credit institution shall sell bad debts to MAC to ensure a safe bad debt ratio, make provisions, and comply with the adequacy ratios as prescribed by the State bank; restructure itself according to a plan approved by the State bank.

- The sale of bad debts shall be contracted and the credit institution that sells its debts must send written notifications to its loan customers, debt payers, and guarantors within 10 working days for them to know and fulfill their obligations to Asset Management Company.

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