Vietnamese NPLs: new right to seize secured assets is major improvement

Author: Karry Lai | Published: 4 Apr 2018

Resolution no. 42 could be a lasting solution to tackling Vietnam’s bad debts even if it was introduced on a pilot basis. Some of its provisions, most notably a new right to seize secured assets, could well provide a solution to the country’s growing non-performing loan (NPL) problem.

The new rule was issued in August 2017 with the intention to create a better legal framework to address credit institutions’ NPLs, and, from there, to enhance their funding. Plans to privatise state-owned enterprises, which have historically been a key source of bad debt, have been in the pipeline for many years but have so far not materialised. 

Vietnam’s total public debt has gone from 35% of the GDP in 2011 to 62.4% of GDP in 2016. NPLs stood at 9.5% at the end of 2017, far greater than in China, another jurisdiction which has been battling similar issues...