VietNamNet Bridge - A number of valuable properties such as real estate projects, machinery and equipment worth up to trillions of dong have been distrained and brought to auction by commercial banks. Debtors are also selling their assets to pay debts.

The National Assembly’s Resolution 42 has given unprecedented power to commercial banks. They have the right to distrain debtors’ mortgaged assets and sell the assets to collect debts.

A report found that by December 31, 2016, the bad debt ratio had accounted for 5.81 percent of total outstanding loans. 

Meanwhile, the ratio is predicted to increase in the time to come as a result of the credit loosening policy, which led to a 21 percent credit growth rate this year.

The National Assembly’s Resolution 42 has given unprecedented power to commercial banks. They have the right to distrain debtors’ mortgaged assets and sell the assets to collect debts.

Commercial banks, which are under pressure of bad debt, have to take drastic measures to collect debts. 

VAMC (Vietnam Asset Management Company) plans to auction Hoan Cau Group’s land plots valued at VND2.4 trillion. In Long An province, the $2 billion Happy Land developed by Khang Thong Group has also been distrained.

Techcombank said it has seized assets which are collateral for loans from 11 clients who cannot pay debts. 

Meanwhile, Agribank has offered to sell V-Ikon office building on Dien Bien Phu street and has seized the assets of Vinalines Dong Do in Hai Phong City.

Businesses also want to sell their assets to get money for debt payments. A state-owned enterprise in Hanoi is looking for partners to transfer a land plot covering an area of thousands of square meters in district 7, HCMC. Hung Vuong Seafood has decided to sell some land plots in HCMC.

According to Rong Viet, the total value of the assets mortgaged for bad debts had reached VND434 trillion by the end of the first quarter. At least 62 percent of the assets are real estate and 15 percent are assets on land and rights related to real estate.

However, in many cases, the sales are not going smoothly. The problem lies in the overvaluation of assets. Debtors, when mortgaging the assets for loans, exaggerated the assets’ value so as to be able to borrow more money.

Marc Djandji from Rong Viet Securities said the overvaluation makes it difficult for investors to determine the purchase price to offer.

To get rid of bad debts quickly, banks will have to sell assets at prices lower than the book value. Resolution 42 allows commercial banks to allocate losses within five years, thus easing the pressure of maintaining CAR (capital adequacy ratio) at over 8 percent.

The demand for houses, land and industrial zones will be increasing, and assets will easily find buyers if the valuations are accurate. 

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