INITIATION OF RESOLUTION NO. 42/2017/QH14 OF THE NATIONAL ASSEMBLY ON PILOT SETTLEMENT OF BAD DEBTS OF CREDIT INSTITUTIONS

At the 3th session, the 14^th National Assembly has passed Resolution No. 42/2017/QH14 on pilot settlement of bad debts of credit institutions (hereinafter referred to as Resolution), which stipulates certain settlement of bad debts and treatment of collateral tied to bad debts so as to solve issues and difficulties in applicable law in connection with settlement of bad debts and collateral of credit institutions, branches of foreign banks (hereinafter referred to as credit institutions), and create a synchronized, effective, and feasible mechanism to quickly settle the bad debts and enable credit institutions to promote their role as a leading capital channel, meeting the capital demand for business of the economy.

In order to promptly and effectively initiate Resolution No. 42/2017/QH14, the Prime Minister requests Ministers, Heads of ministerial-level agencies, Heads of Governmental agencies, Presidents of People's Councils, Presidents of People’s Committees of provinces and central-affiliated cities (provinces) shall direct and perform the following tasks:

Initiate regulation of this Resolution in a timely and effective manner so as to quickly settle bad debts and collateral within scope of regulation of this Resolution, and direct initiation of preventative measures and minimize bad debt incurred and improve credit quality of credit institutions; promote the role of Vietnam Asset Management Company (VAMC) in settlement of bad debts; strive to bring the bad debt ratio in the credit system of the credit institutions system and NPLs sold to VAMC and NPLs to the credit rating agencies to under 3% (excluding bad debts of Weak commercial banks are approved by the government as their own option); strive to bring the non-performing loan ratio of the credit institutions system, bad debts sold to VAMC and bad debts which have been classified to under 3% (excluding bad debts of poor commercial banks which will have their bad debts settled according to discrete plans approved by the Government).

1. Necessary preparations for initiation

a) Propagation:

- State Bank of Vietnam shall heighten awareness of credit institutions and VAMC of contents of the Resolution.

- Ministries, ministerial-level agencies, People’s Committees of provinces shall heighten awareness of agencies, units, officials, public employees in charge of settlement of bad debts and collateral of credit institutions, VAMC of contents of the Resolution.

- The Ministry of Information and Communications shall raise public awareness of this Resolution.

The propagation of Resolution must be completed before August 15, 2017.

b) Formulate and complete guiding documents of Resolution:

- The Ministry of Natural Resources and Environment shall take charge and cooperate with relevant agencies in providing guidelines for register mortgage of land use right, property on land as prescribed in this Resolution.

- State Bank of Vietnam shall take charge and cooperate with relevant agencies in providing guidelines for bad debt purchase by VAMC as prescribed in this Resolution.

Guiding documents of Resolution must be promulgated before August 15, 2017.

c) Necessary preparations for implementation:

- The Ministry of Justice shall direct enforcement authorities to comply with regulations on civil judgment enforcement relating to bad debts of credit institutions, VAMC as prescribed in this Resolution; direct and enforce legally effective judgments in conjunction with credit and banking promptly and legally.

- The Ministry of Finance shall direct tax authorities to heighten awareness of and provide guidelines for tax policies as prescribed in this Resolution.

- The Ministry of Public Security shall direct police authorities to keep social security and order every time a credit institution or VAMC exercises the right to seizure of collateral as prescribed in this Resolution.

- The Ministry of Natural Resources and Environment shall direct competent registry to conduct procedures for assignment of  right to ownership or use of collateral to buyer, assignee as prescribed in this Resolution.

- Local governments shall direct and cooperate with relevant bodies in implementing this Resolution in administrative divisions; and particularly assist credit institutions and VAMC every time they exercise the right to seizure of collateral as prescribed in this Resolution.

Ministries, ministerial-level agencies, People’s Committees of provinces shall issue documents on guidelines for the above-mentioned contents under scope of the whole field, sector and administrative division before August 15, 2017.

d) Settlement of bad debts in respect of state budget:

- The Ministry of Planning and Investment shall take charge and cooperate with relevant agencies in formulating a plan for capital allocation to pay outstanding capital construction debts in respect of bad debts payable by central government budget and bad debts of the lending program as appointed by the Government.

- Local governments shall make plans for allocation of sources of funds to pay outstanding capital construction debt relating to bad debts payable by local government budget.

2. Inspection and supervision

a) State Bank of Vietnam shall inspect and supervise credit institutions’ and VAMC's implementation of this Resolution;

b) Ministries, relevant agencies shall supervise and inspect their affiliates' performance of tasks assigned in Clause 1 Part II of this Directive.

3. Improvement of legal system

a) State Bank of Vietnam shall cooperate with the Ministry of Justice and relevant ministries in reviewing and reporting the Government improvement of legal system in terms of settlement of bad debts, collateral in consideration of practical application of this Resolution before August 15, 2021;

b) State Bank of Vietnam shall improve legal framework in terms of administration of credit institutions, particularly risk management; study and propose amendments to legislative documents in terms of credit grant of credit institutions to restrict bad debts; and enhance capacity of inspection and supervision of the system of Bank Supervision and Inspection Agency;

c) The Ministry of Justice shall improve and request the Government to promulgate decree(s) on secured transactions.

4. Implementation

a) Ministers, Heads of ministerial-level agencies, Heads of Governmental agencies, Presidents of People's Councils, Presidents of People’s Committees of provinces shall implement this Resolution, their guiding documents and perform tasks assigned in this Directive. Annual report on implementation of the Resolution must be sent to the State Bank of Vietnam before September 15 in order for the State bank sends a consolidated report to the Government;

b) State Bank of Vietnam shall take charge and cooperate with relevant Ministries and agencies in send an annual report on settlement of bad debts and a consolidated report on implementation of Resolution to the Government, the Government shall then submit the former report to National Assembly (before October 1) and the latter report to the National Assembly (before December 31, 2021), and concurrently send them to relevant ministries for cooperation.

State Bank of Vietnam shall oversee, expedite, and inspect the implementation of the Resolution, any difficulties arising shall be reported to the Prime Minister for consideration./.