On May 16, 2024, the State Bank of Vietnam issued Circular 03/2024/TT-NHNN to amend and supplement certain provisions of Circular 19/2013/TT-NHNN, regulating the purchase, sale, and handling of bad debts by the Asset Management Company of Vietnam credit institutions.
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Specifically, according to Circular 03/2024/TT-NHNN, the regulations on the purchase, sale, and handling of bad debts by the Vietnam Asset Management Company of credit institutions have been amended as follows:
(1) The amendments regarding the purchase of bad debts are as follows:
Conditions for bad debts purchased by the Asset Management Company at market value are as follows:
a) The conditions specified for the scope of bad debts to be purchased; Bad debts with collateral; Bad debts and collateral must be legal and have valid and specific records and documents; Borrowers still exist; The book value of the principal outstanding balance of bad debts as prescribed in this Circular.
b) The Asset Management Company evaluates that there is a possibility of fully recovering the amount paid for the debt purchase.
c) The collateral of bad debts can be liquidated or the borrower has prospects for recovering the ability to repay the debt.
d) In case of converting bad debts purchased with special bonds into bad debts purchased at market value, the corresponding special bonds must meet the conditions of not being due for payment and not being blocked at the State Bank.
- According to the amended Circular, asset management companies can only purchase bad debts at market value after completing the following tasks:
+ Assessing that the bad debts meet the conditions specified in the law amended and supplemented by the new circular;
+ The asset management company must self-evaluate or hire an appraisal company to determine the value of the bad debts and their collateral;
Credit institutions and foreign bank branches must transfer all original documents and records related to the bad debts to the Asset Management Company. In case of converting bad debts purchased with special bonds into bad debts purchased at market value as prescribed in this Circular, the Asset Management Company must transfer all original documents and records related to the recovered debt amount, capital contribution, and equity at the borrower to Vietnamese credit institutions.
(2) The amendments regarding the sale and handling of bad debts are as follows:
- The Circular 03/2024/TT-NHNN supplements the value of bad debts that can be sold, specifically, bad debts can be sold to legal entities and individuals at a price that may be higher or lower than the principal outstanding balance of the bad debts.
- The Circular 03/2024/TT-NHNN supplements regulations on handling and selling collateral of bad debts as follows:
+ The asset management company sells the collateral of bad debts at a price that may be higher or lower than the principal outstanding balance of the bad debts.
Please note that: The purchase and sale of bad debts at market value must be made in written contracts in accordance with this Circular and other relevant regulations. In case of converting bad debts purchased with special bonds into bad debts purchased at market value as prescribed in Clause 3 of this Article, the special bond debt purchase contract terminates from the time the market value debt purchase contract takes effect. The Asset Management Company may agree with the credit institution or foreign bank branch to share the remaining value of the recovered amount from bad debts after deducting the purchase price and handling costs.
In summary, from July 1, 2024, the purchase, sale, and handling of bad debts by the Vietnam Asset Management Company of credit institutions must be carried out in accordance with the regulations of Circular 03/2024/TT-NHNN.
Circular 03/2024/TT-NHNN takes effect from July 1, 2024.
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