The National Assembly has just passed an important resolution specifically addressing non-performing loans (NPLs) held by credit institutions (NPL Resolution). The NPL Resolution takes effect for a period of five years from 15 August 2017. The NPL Resolution only applies to (1) NPLs arising before 15 August 2017 or (2) NPLs arising after 15 August 2017 from loans which have been extended before 15 August 2017. The NPL Resolution does not make clear whether a credit institution may acquire NPLs from other non-bank entities and use the powers under NPL Resolution to enforce such NPLs.
The NPL Resolutions provide some important measures to address NPLs as follows:
· A credit institution may sell an NPL at a market price which may be lower than the principal amount of the NPL. The NPL Resolution seems to suggest that secured assets of an NPL now can be sold at a price which is lower than the principal amount of the NPL. However, it seems illogical to compare the value of secured assets with the principal amount of the NPL.
· VAMC may purchase NPLs held by banks at a price determined by an independent valuer agreed between VAMC and the selling banks.
· A credit institution may directly seize the secured assets of an NPL which is in the possession of the borrower or a third party if the security agreement allows so. The foreclosure can be assisted by local authorities including police. The credit institution, however, must (1) make an advanced announcement of the foreclosure, (2) register the security interests relating to the secured assets in accordance with law, (3) ensure that there is no ongoing dispute relating to the secured assets before the foreclosure time. Before the NPL Resolution, a credit institution does not have rights at law to foreclose secured assets.
· The court will apply expedited procedures to hear cases relating to the obligation to hand-over secured assets or to the rights to enforce secured assets by credit institutions if (1) the contract is clear about the obligation, and (2) the security interest has been registered in accordance with law. Before the NPL Resolution, a dispute relating to enforcement of secured assets is not entitled to expedited hearing automatically under the Civil Procedures Code.
· A person acquiring an NPL which is secured by land use right or assets attached to land is entitled to continue to hold the security. This is to overcome the restriction under the Land Law 2013 that land use right or assets attached to land can only be mortgaged with credit institutions in Vietnam.
· After 15 August 2022, on-going transfers, foreclosure or court hearings at that time are allowed to be continued.