A foreign investor interested in investing in non-performing loans (NPL) in Vietnam should at first know which type of NPL exists in Vietnam. Depending on the types of the existing lenders, NPLs can be classified into:
- NPLs held by onshore credit institutions (Bank NPL). A foreign entity may acquire and transfer Bank Loans in general. The legal framework for investing in Bank NPLs is most advanced. There are separate regulations of the State Bank of Vietnam (SBV) on transfer of bank loans and there has just been a special resolution of the National Assembly dealing with Bank NPLs incurred before 15 August 2017 (NPL Resolution). In theory, a Bank Loan transferred to a foreign entity could be considered as a foreign loan and be subject to foreign loan regulations. However, the SBV has indicated that a Bank NPL sold to a foreign entity is not regarded as a foreign loan;
- NPLs held by Vietnam Asset Management Company (VAMC NPLs). VAMC is a special purpose company set up by Vietnamese Government to deal with NPLs in Vietnamese banking system. There are special rules regarding how VAMC can purchase Bank Loans (which will then become VAMC NPLs) and sell VAMC NPLs. A foreign entity may acquire and transfer VAMC NPLs if the foreign entity is recognised as an “economic organisation, which is licensed to trade debts” and if there is approval by the SBV. VAMC NPLs are also covered by the recent NPL Resolution;
- NPLs held by offshore entities (Offshore NPL). If the Offshore NPLs have been registered with the SBV under foreign loan regulations, then the acquisition and transfer of the Offshore NPLs also need to be registered with the SBV; and
- NPLs held by other onshore non-bank entities. There is no special regulations on NPLs held by onshore non-bank entities. As such an investment in NPLs held by onshore non-bank entities will need to follow the general principles on transfer of rights and obligations under the Civil Code 2015.
This post is contributed in parts by Nguyen Hoang Duy, a VNLaw associate.