On May 27th, at the seminar “Addressing Non-Performing Loans: What’s the Harmonious Solution?”, experts discussed and analyzed existing bottlenecks and proposed practical solutions to tackle Vietnam’s non-performing loans.
As the Vietnamese economy strives for recovery and growth, the real estate market, a crucial driver of development, faces unprecedented challenges. These challenges encompass not only inherent legal and planning issues but also the intricate problem of managing the massive portfolio of collateral assets stuck within the banking system. This burden significantly weighs down both the credit system and businesses themselves.
Real estate credit debt has surpassed VND 1,560 trillion, a 20% increase compared to the end of 2024. Behind this number lie stalled projects, exhausted enterprises, and anxious citizens concerned about their assets and future. This paints a complex picture of latent risks, capital flow bottlenecks, and difficulties faced by credit institutions, project developers, and homebuyers alike.
Consequently, addressing non-performing loans in the real estate sector is no longer merely a technical issue confined to the banking industry. It has become a multifaceted problem that necessitates legal interventions and close collaboration between the state, businesses, and citizens.
Striking a Balance between Repossession Rights and Borrower Protection
 Mr. Do Thien Anh Tuan – Fulbright School of Public Policy and Management
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Mr. Do Thien Anh Tuan from the Fulbright School of Public Policy and Management shared that collateral assets provide banks with the confidence to extend credit while managing risks. An effective asset disposal mechanism not only safeguards credit institutions from non-performing loans but also promotes credit expansion and strengthens trust in the financial system. However, the true value of collateral is realized when it can be swiftly, transparently, and legally repossessed and disposed of if the borrower defaults.
In the Common Law system, contractual agreement freedom is emphasized. If the mortgage contract clearly stipulates the “right to sell the asset,” banks can repossess and sell the asset without court intervention. This approach shortens debt resolution time, reduces legal costs, and enhances debt recovery efficiency, becoming a model for credit risk management.
In contrast, Civil Law countries like Vietnam typically require the disposal of secured assets to go through courts or enforcement agencies, even when the contract includes explicit provisions regarding disposal rights. This approach aims to protect the legitimate interests of borrowers and third parties, ensuring fairness and transparency throughout the process. However, the complex judicial process prolongs the disposal time.
This portion of non-performing loans, often referred to as a “blood clot,” drags on from month to month, causing losses for banks and mortgagors. The sequestered, sealed, and immobilized assets are unproductive and lead to waste.
Between 2017 and 2023, Resolution 42/2017/QH14 introduced a special mechanism that enabled credit institutions to dispose of assets more swiftly and effectively. However, when the resolution expired in late 2023, the legal system immediately lacked an efficient disposal mechanism. Thus, there is a need to refine the legal framework in the post-Resolution 42 era.
Proposing a Mechanism to Ensure Transparency, Fairness, and Dispute Limitation
Mr. Tuan further suggested that a prerequisite is to have a clear agreement in the mortgage contract regarding the right to dispose of the asset without court intervention—a mechanism known as “power of sale.” This agreement cannot be vague or merely formal; it must specify the notification procedure, valuation method, waiting period for disposal, and the remaining rights of the borrower after the asset is sold.
Throughout the disposal process, transparent notification to the borrower is essential, preferably in writing and with reasonable notice. This not only ensures the borrower’s right to know and prepare but also enables them to proactively repay the debt, find a buyer to negotiate a better price, or renegotiate with the lender.
Another critical aspect is accurately valuing the asset to reflect its market value and prevent credit institutions from selling it at a low price, causing losses to the borrower. To ensure objectivity, supervision by a third party or an independent valuation mechanism should be implemented throughout this process.
Additionally, the asset disposal procedure should be designed to be transparent, easily monitored, and verifiable. In cases where public auctions are not conducted, asset transfers should occur through exchanges or other transparent channels. Simultaneously, information such as the asking price, buyer’s dossier, and transaction records should be publicly disclosed to prevent conflicts of interest.
An important principle to consider is guaranteeing the borrower’s right to receive any surplus after the asset is sold, minus the principal, interest, and reasonable expenses. This legitimate property right must be communicated clearly by the credit institution in all cases—even when there is no surplus value—to avoid potential complaints.
Lastly, the legal framework should also consider the rights of third parties with interests, such as co-owners, lawful tenants, or guarantors. These entities should be notified and allowed to exercise their rights and obligations before the asset is disposed of, ensuring a more comprehensive, transparent, and humane process.
There is a need to codify the successful aspects of Resolution 42 to protect the legitimate repossession rights of banks and safeguard the property rights of borrowers. Ultimately, a balance must be struck between the repossession rights of banks and the property rights of borrowers. This balance should be based on principles that increase risk coverage for banks, reduce capital costs for borrowers, and improve access to credit for the economy.
– 11:04 27/05/2025
Unleashing the Power of Capital: Unveiling the Enormous ‘Dormant Capital’
The magnitude of non-performing loans in the economy has surpassed a staggering threshold of 1 million billion Vietnamese dong. This colossal amount of “dead capital” is a festering wound, draining resources in a capital-starved economy and perpetuating the plight of elevated interest rates on loans.
Unleashing the Power of Capital: Unveiling the Enormous ‘Dormant Capital’
The magnitude of non-performing loans in the economy has surpassed a staggering threshold of 1 million billion Vietnamese dong. This colossal amount of “dead capital” is a wasteful burden on the economy, especially in a context of capital scarcity, and it contributes to keeping borrowing rates high.
“Revolutionary Proposal: Exploring a Special Lending Authority with a 0% Interest Rate”
The government proposes to shift the authority to decide on special lending at a 0% interest rate and without collateral from the Prime Minister to the State Bank.
“The Appointment of Mr. Nguyen Thanh Nhung as Acting CEO of Sacombank”
The Board of Directors of Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) has announced a transition in its leadership. With immediate effect, Ms. Nguyen Duc Thach Diem has stepped down from her role as Chief Executive Officer. The Board has appointed Mr. Nguyen Thanh Nhung as the new Acting CEO. Ms. Diem will continue to serve as the Vice-Chairwoman of the Board of Directors, a position she currently holds.
The Evolution of China’s Banking Strategy and Lessons for Vietnam
The Chinese banking system has undergone a strategic transformation over the past decade. Moving away from a model reliant on large-scale credit growth, fueled by real estate lending and state-owned enterprise loans, the industry has embraced a new paradigm. This paradigm shift involves a comprehensive approach to finance, diversifying revenue streams, and embracing digital transformation. This evolution reflects a conscious effort to adapt to the demands of risk management, improved operational efficiency, and sustained growth.
