The central bank-run Vietnam Asset Management Company (VAMC), the Government’s debt management arm, said it is planning to launch the debt trading platform, the first of its kind in Vietnam, in the early third quarter.

Customers at a BIDV branch in Hanoi. Photo: Quoc Viet

The move came after the State Bank of Vietnam (SBV) approved the establishment of VAMC’s debt exchange in April.

According to the VAMC, the debt exchange would provide consultation and brokerage services in trading debts of individuals and associations, at the same time serving as an intermediary in arranging such transactions between different parties.

The VAMC said the ultimate goal would be to provide a new 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.

Given Vietnam’s debt market 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 instrument and framework for debt trading, including the securitization of bad debts.

“Debt trading in Vietnam is mainly carried out via contracts, while in other countries, they have converted debts into a marketable security that is securitized by original debts,” he said.

Sharing Thang’s view, economist Can Van Luc said a debt trading platform is what Vietnam is still missing, especially bad debt securitization.

“This leads to the lack of qualified investors and liquidity for debts, in turn limiting possibilities to resolve debts,” Luc 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.