20170622_BSC_Sector Insight_Addressing NPLs Resolution_ICB8355

Effect Evaluation
The National Assembly approved the resolution on addressing non-performing loans (NPLs) on June 21st, 2017 (86% approval). This is one of the most important document which will have a great positive impact on the whole economy.

The scale of bad debt and the progress of NPLs processing
• Large NPLs (including on balance sheet loans, non-processing loans sold to VAMC and latent debt) reached nearly VND600 trillion is equivalent to 10.08% of total outstanding loans and 13.3% of Vietnam's GDP at the end of 2016.
• New NPLs arises 1.3% to 1.5% on average annually, Governor of the Bank stated.

Processing bad debts takes too long. The whole systems processed about VND122 trillion bad debt on average for 4 years.

Highlights of the Addressing NPLs resolution:
• In effect as of August 15th, 2017 and valid for 5 years, is the highest legislation in dealing with bad debts and collateral.
•  Not using the state budget to process bad debt
• Creating a mechanism for banks to deal with NPLs.
• Dealing with bad debts of all credit institution, regardless they are bad debts of weak CIs or not, dealing with bad debts arises from loans incurred before August 15th, 2017.

Important adjustments in Amendment and Supplement of the Legislation of Credit Institutions resolution:
• More clarification on the identification, authorities and mechanism of dealing with weak CIs.
• Mechanism of responsibilities and privilege of designate credit, supporting CIs; Liabilities exemption for individuals participate in handling weak CIs.