The key to reduce bad debts in Vietnam is to sell or otherwise deal with the assets that are mortgaged or pledged to secure unpaid debts more quickly and effectively. Otherwise, the Government can only either delay the situation (but only up to a point) or use its own depleted budget to remove bad debts from the banking system. Circular 16/2014 jointly issued by the State Bank, the Ministry of Justice and the Ministry of Natural Recourse and Environment in June 2014 should assist creditors including banks and the VAMC in enforcing the secured assets mortgaged or pledged to them. Circular 16/2014 contains specific and detailed procedures for the enforcement of certain types of mortgages or pledges.
One important point under Circular 16/2014 is that it provides for a process whereby the secured asset can be sold privately without going through a public auction. In particular, If the mortgage/pledge agreement allows the creditor to sell the secured assets through private sale but does not specify the valuation method, then the creditor and the securing party may
(1) mutually agree on the value of the secured assets;
(2) if (1) fails, the securing party may appoint a valuer to value the secured assets;
(3) if the securing party does not appoint a valuer then the creditor may do so;
(4) if the assets cannot be sold at the valuation determined by the valuer at (2) or (3), then the creditor may reduce the sale price within 15 days. The creditor may reduce the sale price three consecutive times (up to 10% each). The creditor may only reduce the sale price after 30 days for secured assets being real properties or 15 days for other assets from the last price reduction; and
(5) if the assets cannot be sold after three times of reducing price, the creditor may take over the secured assets in lieu of the secured obligations at the valuation being the latest sale price being proposed at (4).