Vietnam’s first debt trading platform is scheduled to become operational on October 15, according to Nguyen Trong Du, deputy chief inspector of the Banking Inspection and Supervision Agency under the State Bank of Vietnam.
|The government's debt management arm VAMC would be the operator of Vietnam's first debt trading platform. Source: VAMC|
Du noted the platform, operated by the central bank-run Vietnam Asset Management Company (VAMC), would provide consultation and brokerage services in trading debts of individuals and associations, and serve as an intermediary in arranging such transactions among different parties.
The Government's debt management arm said its intention behind the setup of a debt exchange is to provide a new, effective, and professional service in resolving bad debts, in turn promoting the development of the debt market with the agency playing a key role in facilitating debt trading activities.
Once operational, the debt trading platform is expected to attract the attention of credit institutions and investors being organizations, individuals using its services.
The move is seen as welcoming news for the Vietnamese banking sector in efforts to resolve bad debts, which is lacking a debt market and qualified investors.
As Vietnam’s debt market is still in its early development stage, not to mention the lack of a legal framework to oversee debt trading activities, VAMC’s Director-General Doan Van Thang called for the Government's agencies to speed up the process of drafting legal instruments and framework for debt trading, including the securitization of bad debts.
Economist Le Xuan Nghia told The Hanoi Times that there has been a growing number of foreign investors expressing interest in purchasing bad debts at banks, especially those related to real estate projects.
“The lack of a legal framework, however, is preventing buyers from pushing for purchasing bad debts,” Nghia said.
The availability of a debt exchange would make it easier for investors to access official and credible information on certain debts, which no doubt would promote transactions of bad debts in Vietnam, he added.
“This is especially important for banks as they are facing a growing number of bad debts from businesses struggling with the Covid-19 impacts,” he added.
On this issue, Economist Can Van Luc said debt trading in Vietnam is mainly carried out via contracts, while in other countries, debts are converted into marketable security that is securitized by original debts.
“A trading platform would open more possibilities in resolving bad debts,” he added.
Since 2018 to date, VAMC has successfully auctioned debts and guaranteed assets worth nearly VND3 trillion (US$130 million), while the introduction of Resolution No.42 in August 2017, providing special pilot treatment of bad debts at credit institutions, was key in resolving nearly VND350 trillion (US$15.17 billion) worth of bad debts as of April 30, or 66% of the total.
The Covid-19 pandemic, however, has significantly impacted VAMC’s capabilities in recouping debts. This year, the VAMC and credit institutions resolved over VND46 trillion (US$2 billion) of bad debts and recouped over VND14 trillion (US$607 million) of debts from guaranteed bonds.