Nâng cao hiệu quả xử lý nợ xấu của công ty quản lý tài sản đối với các tổ chức tín dụng việt nam tt tien anh

STATE BANK OF VIETNAM MINISTRY OF EDUCATION & TRAINING
BANKING ACADEMY
***************

NGUYEN THI KIM QUYNH

ENHANCING EFFICIENCY OF HANDLING OF NON-PERFORMING LOAN
(NPL) OF THE ASSET MANAGEMENT COMPANY TO VIETNAM CREDIT
INSTITUTIONS

SUMMARY OF DOCTORAL THESIS IN ECONOMICS

HANOI - 2020


RESEARCH WORKS ARE COMPLETED AT
BANKING ACADEMY

The dissertation is defended in front of the PhD Council at the grassroots doctoral
thesis at 14:00 on June 1, 2020 at the Banking Academy.

HA NOI – 2020


1
INTRODUCTION
1. The urgency of the topic
VAMC was established with great attention and support from the State Bank, the
Government and ministries, agencies but still faces many difficulties and obstacles such as
mechanisms, policies and regulations; the law is not complete; operating capital is limited;
Vietnam has not really formed a debt trading market; ... This is also the main reason making

debts that VAMC collected(sao khoản nợ lại thu mua), although quite large, (con số xử lý)
are still modest.
Stemming from the above reasons, the author chooses the topic ‘Enhance the
efficiency of handling NPLs of the Asset Management Company to Vietnamese credit
institutions".
2. Research objectives of the thesis
2.1 General research objectives
Assessing the effectiveness of VAMC's NPL resolution to Vietnamese credit institutions
and proposing solutions to improve the efficiency of handling NPLs for VAMC.
2.2 Specific research objectives
- Firstly, Systematizing the theoretical issues of NPLs, NPLshandling of credit
institutions and the effectiveness of NPL handling of Asset Management Company.
Clarifying the implication of NPL handling; factors affecting the efficiency of handling
NPLs;
- Secondly, Studying the experiences of other countries in dealing with NPLsthrough
the Asset Management Company and drawing lessons for Vietnam;
- Thirdly, Assessing the status of NPL handling of VAMC in the period of 2013-2019,
building a model of factors affecting VAMC's NPL solutionresults.
- Fourthly, Proposing appropriate solutions for VAMC to improve the efficiency of
handling NPLs.
2.3 Research questions
Firstly: What is the effective handling of NPLs of the Asset Management Company?
What criteria to evaluate the effectiveness of of handling of NPLs of the Asset Management
Company? What factors affect the effectiveness of handling of NPLs of the
AssetManagement Company?
Secondly: How is the actual situation of VAMC's NPL handling period 2013 - 2019? How
is the impact of factors on the effectiveness of VAMC's NPL handling period 2013-2019?
Thirdly: What is the solution to improve the efficiency of VAMC's NPL handling? In
order to implement such solutions, what support does VAMC need from the concerned
agencies?

2
3. Research subject and scope
3.1 Research subjects
The thesis studied the effectiveness of dealing with NPLs of the Asset Management
Company with respect to Vietnamese credit institutions.
3.2 Research scope
- Regarding the content: The dissertation researches the effectiveness of dealing with
bad debts of the Asset Management Company with respect to Vietnamese credit institutions.
- Research period: From 2013-2019.
4. Research method
The thesis uses a combination of qualitative research methods and quantitative methods
5. New contributions of the thesis
5.1 Theoretical contributions
Firstly, the thesis has systematized the basic issues of NPLs, the effectiveness of
handling NPLs of the Asset Management Company.
Second, The thesis has studied the experience of handling NPLs through the Asset
Management Companies of several countries in the World. From there, draw valuable
lessons for VAMC in dealing with NPLs.
Third, the thesis has built a quantitative research model with 10 factors affecting the
effectiveness of VAMC's NPL handling. The research results show the different influence
level of factors on the effectiveness of VAMC's NPL handling that previous studies have
not been verified.
5.2 Practical contributions
Firstly, the thesis has analyzed in detail the effectiveness of VAMC's NPL
performance in the period of 2013-2019. Especially, by collecting information through
survey questionnaires, the thesis has evaluated and analyzed the factors affecting
VAMC's NPL performance.
Second, propose a number of solutions and recommendations to improve the

effectiveness of VAMC's handling of NPLs. The solutions and recommendations have
somewhat followed the theoretical analysis and practical assessment of the effectiveness
of VAMC's NPL handling.
6. The structure of the thesis
In addition to the introduction, the list of references and appendices and layout of the
thesis is divided into 5 chapters, tables, figures and graphs as follows:
Chapter 1: Overview of research on the topic
Chapter 2: Basic theory of the effectiveness of the NPL Management Company.
Chapter 3: Actual situation of solving NPLs of VAMC.
Chapter 4: Solutions to improve the efficiency of handling NPLs for VAMC.


3

CHAPTER I
OVERVIEW OF RESEARCH ON THE TOPIC
1.1. OVERVIEW OF FOREIGN RESEARCH WORKS
1.1.1. There is no single or optimal definition of NPL in previous studies.
1.1.2. All studies have come to the unanimous consequence of the NPL.
1.1.3 Many studies have pointed out the causes of NPLs arising from both the macro and the
banks.
1.1.4 Previous studies have shown that in order to deal with NPLs, it is necessary to apply a
variety of debt handling measures.
1.1.5 Establishing a Asset Management Company to handle debts is necessary, the effectiveness
of debt management of the Asset Management Company depends on many factors.
1.2. OVERVIEW OF DOMESTIC RESEARCH WORKS
1.2.1. The cause of arising NPLs comes from both objective and subjective reasons from the
credit institution itself
1.2.2. Studies have pointed out the limitations of VAMC's NPL handling and proposed
solutions to improve the effectiveness of VAMC's NPL handling.

1.3. RESEARCH GAPS
 About theoretical research.
Previous studies have provided a theoretical basis for the effectiveness of of VAMC's
NPL handling, but has not been systematic and updated recently, especially in the period of
2013- 2019.
 About practical research
Firstly, there is no scientific work to comprehensively study the NPLhandling
activities of VAMC, especially in the period from 2013-2019.
Secondly, from different research perspectives, the authors have previously analyzed
a few factors affecting VAMC's performance without a comprehensive analysis and
evaluation of influencing factors, the level of influence of Factors to the effectiveness of
VAMC's handling of NPLs. The author has presented comprehensively the factors affecting
VAMC's bad debt handling activities, built a model to assess the impact of each factor, so
that VAMC could have a base to build an evaluation model influence level of each factor,
from which there are suitable solutions.
Thirdly, in order to offer a solution to improve the NPL handling efficiency of the Asset
Management Company, it must have a comprehensive evaluation in a certain period.Some
studies on VAMC are only conducted for a short period of time like a year or two whenVAMC is
put into operation. Therefore, previous studies have not had a comprehensive and specific view,


4
so the proposed solutions may no longer be suitable for the current operation of VAMC.


5
CHAPTER 2:
BASIC THEORY ABOUT THE EFFECTIVENESS OF HANDLING NPL OF THE
COMPANYASSET MANAGEMENT
2.1. BASIC THEORY OF NPL

2.1.1. The concept of NPL
According to the author, the bad debt must be approached and assessed at the repayment
ability of the customer. This means that a loan may be in due or overdue, if the lender
(credit institution) assesses that the customer has signs of default or suspects repayment, it
can be classified as NPL.
2.1.2. The cause of NPL
a) Objective reasons
 From customers
Losses in business activities of customers.
Customer ethics.
 From the environment
Regulatory environment.
Some credit programs under the Government's design are not reasonable.
Natural environment such as natural disasters, floods, fires, crop failures, epidemics.
Economic environment
b) Subjective causes
Strategy and Risk appetile
Credit policies and processes are weak, inconsistent and professional. The organization
of internal inspection and control was lax.
Staff quality is low.
Lack of supervision and risk management after lending
2.1.3.Indicators for measuring NPLs
- Scale and structure of NPLs.
- NPL ratio = total NPLs / total outstanding debt.
- NPL ratio compared to equity = total NPL/ total equity.
- NPL ratioto the contingency reserve fund = total NPL / the loss fund balance
-The ratio of non-performing loans to the total value of collaterals = total nonperforming loans / the total value of collaterals.
- NPL ratio = ratio of total debt and off-balance sheet commitments from group 3 to
group 5 against total debt and off-balance sheet commitments from group 1 to group 5.
+ Moodys’: ≤ 2%;

6
+ FDIC: assess asset quality by 5 levels with increasing risk level: level 1 is the best asset
level, the risk level is very low, not worrying while level 5 reflects the worst asset level , have the
highest risk to financial institutions (FDIC, 1997);
+ AIA CAMELS: ≤ 1% (AIA, 1996);
+ Viet Nam: ≤ 3%.
2.2.THE EFFICIENCY OF
MANAGEMENT COMPANY

HANDLING

BAD

DEBT

OF

THE

ASSET

2.2.1.Asset management company
2.2.1.1.Asset Management Company concept
Asset Management Company, abbreviated to AMC, or Asset Management Company, is
a type of debt management and asset exploitation company. In each country, depending on
economic conditions and development policies of each country, the debt management and
asset exploitation company has its own names, characteristics, rights and obligations.
However, the debt management and asset exploitation company can be considered as a

special-purpose institution with special responsibilities and power in performing the function
of buying, selling and managing doubtful debts from the banking system and handle those
debts optimally.
2.2.1.2. Types of Property Management Company
There are two types of Asset Management Companies: State Asset Management
Company and Private Asset Management Company, namely:
2.2.1.3 Characteristics of the Asset Management Company
Characteristics of the Asset Management
representativeness, independence and effectiveness.

Companyexpressed

through

2.2.1.4 Functions and duties of the Asset Management Company
a) Purchase of bad debts: Buy debt at the book value of the debt; Buy debt at market
value
b) Tasks of handling bad debts after the purchase
 Dealing with debts: Debt sale; Directly manage debts and restructure debts through
converting debts into contributed capital; Authorize another bank or other organization to
manage and handle the debt; Securitizing bad debt
 About handling collateral of debt: Selling collateral; Invest, repair, upgrade and lease
properties; Other duties such as consulting, brokerage for debt and asset trading; Financial
investment, capital contribution, stock purchase; Guarantee for customers with bad debts to
borrow money at banks; Joint venture, cooperation to manage and handle assets;auction of
debt/asset of debt.


7
2.2.2.Effectiveness of handling NPLs of the Asset Management Company

2.2.2.1.The concept of effectiveness of handling NPLs of the Asset Management
Company
Considering AMC's handling of bad debts, AMC's bad debt handling efficiency is the
relationship between AMC's own debt settlement results and VAMC's expenses, and AMC's
NPL handling efficiency is considered between the efficiency of AMC's NPL handling and
the whole sector's NPL handling efficiency.
2.2.2.2.The criteria for evaluating the effectiveness of handling NPLs of the Asset
Management Company
a) System of quantitative criteria
Target 1: Ratio of AMC’s NPLs (original balance of balance sheet) purchased from
credit institutions compared to total NPL balance of credit institutions.
Target 2: The ratio of NPLs handled by AMC to the total NPLs handled by credit
institutions.
Target 3:AMC's NPL recovery rateto purchased NPLs.
Target 4: Proportion of outstanding loans, debt restructured customers / total NPLs
in the balance sheet, purchased AMC customers of credit institutions.
Target 5: Proportion of outstanding loans recovered from collaterals /total
recovered outstanding debts.
Target 6: The proportion of NPL handling methods to total handled NPLs
Target 7: Capital turnover for debt settlement
b) System of qualitative criteria
The suitability and spread of AMC's NPL handling results
Diversity and suitability of debt settlement methods
Attractive level of parties involved in debt settlement (buyers, sellers, brokers, the
support of the authorities
2.2.2.3.Factors affecting the efficiency of handling of NPLs of the Asset Management
Company
a) Group of subjective factors
 First: Model and organizational structure of AMC.
 Second: Functions and duties of AMC.

 Third: Capital capacity of AMC.
 Fourth: Human resources of AMC
 Fifth: Information technology system.
b) Objective factor group
 First, the development of the NPL trading market.


8
 Second: The system of legal documents related to NPL handling.
 Third: Viewpoints, cooperation of debt selling credit institutions.
 Fourth: The support of the authorities.
 Fifth: The operation of debt trading companies.
2.3 EXPERIENCE WITH DEBT HANDLING THROUGH AMC OF SOME
COUNTRIES AND LESSONS FOR VIETNAM
2.3.1 Background of birth of AMCs
2.3.1.1 AMC Korea (KAMCO) was established in 1997, due to a reorganization from the
Asset Management Company of the Korea Development Bank (KDB).
2.3.1.2

Four Chinese AMCs were established in 1999 amid rising NPLs due to a centrally
planned economic mechanism.

2.3.1.3

With the entry of Deposit Insurance, Japan established Debt Collection and
Recovery Agency - RCC, Industrial Reconstruction Agency - IRCJ to handle

2.3.1.4

NPLs.

One of the three solutions to solving NPLs of Malaysia is to set up the national
AMC - Danaharta

2.3.2 Ownership of AMCs
2.3.2.1 AMC Korea - KAMCO is a non-bank financial institution with state ownership of
over 50%
2.3.2.2 Four Chinese AMCs are owned by four Chinese state-owned commercial banks
2.3.2.3 The Japanese AMCs are owned by Deposit Insurance
2.3.2.4

Danaharta - AMC Malaysia is wholly owned by the state

2.3.1 Legal system that operates AMC
2.3.3.1 The Malaysian Act 587 gives Danaharta a lot of power in dealing with NPLs
2.3.3.2 If the Malaysian Act 587 gives Danaharta the power to buy debt and manage

2.3.3.3
2.3.3.4

unprofitable companies, the Hamco Kamco act gives Kamco the powers of debt
buying and debt settlement (securitization) debts and property seizures to handle
debts ...)
To create a legal framework for the handling of NPLs Japan has amended a
number of relevant laws
China lacks a unified legal system for AMCs, with too many discrete legal
instruments governing the activities of AMC

2.3.4 Effective handling of NPLs of AMCs
2.3.4.1
In general, Kamco was effective, the NPL dropped sharply to 2.3% in 2002. After

5 years of losses, banks started making profits from 2001 and grew rapidly from
2002 and stable development so far.


9
2.3.4.2

With the discrete legal system, the Chinese AMC did not reach the goal as

2.3.4.3

expected, only dealing with the cash recovery rate of 21%.
AMC of Japan has successfully dealt with NPLs, especially in business

2.3.4.4
3.2.

reconstruction
With the recovery rate of over 58%, the efficiency of dealing with NPLs of
Danaharta - Malaysia is worth other countries.

LESSONS

ON

IMPROVINGEFFICIENCY

OFVIETNAMAMC’S

NPL

HANDLING
3.2.1.The complete legal system is the basis for hastening and effectively handling AMC's
NPLs
3.2.2.The AMCs must be empowered strong enough
3.2.3.If want to handle quickly and effectively, priority must be given to dealing with real
money
3.2.4.Not only handling NPLs quickly, but also AMCs need to improve their role in
business reconstruction activities
3.2.5.Securing debt is also a good solution to improve NPL handling for AMC
3.2.6.In addition to conventional debt handling, the handling of assets / liabilities in batches
will reduce costs and time, contributing to improving the efficiency of handling bad debts.


10
CHAPTER 3:
CURRENT SITUATION OF THE EFFECTIVENESS OF VAMC’s NPL
HANGDLING
3.1. CURRENT SITUATION OF NPL AND HANDLING OF NPL OF VIETNAM
CREDIT INSTITUTIONS
3.1.1.Actual situation of NPLs of credit institutions
Table 3.1: Non-performing loans of credit institutions in the period 2013-2019
Unit: VND billion, %
No Criteria
1

NPL

2

Loan
balance

3

NPL ratio
(%)

2013

2014

2015

2016

2017

2018

2019

116.490

214.920

131.820

150.120

144.590

158.875

157.289

3.226.870 6.612.923 5.169.412 6.102.439 7.265.829 8.318.088 9.546.673
3,61

3,25

2,55

2,46

1,99

1,91

1,65

Source: State bank summary report
3.1.2. Handling NPLs of credit institutions
Table 3.2: NPLs and results of dealing with NPLs of credit institutions (2013-2019)
Unit: VND billion
No

Criteria

2013

2014

2015

2016

2017

2018

2019

1

NPL

116.490 214.920 131.820 150.120 144.590 158.875 157.289

2

NPL
handling

87.977

143.550 186.894 118.493 115.541 163.141 159.733
Source: State Bank Annual Report 2013-2019

3.2. CURRENT SITUATION OF THE EFFECTIVENESS OF VAMC'S NPL

HANDLING
3.2.1.Overview of VAMC
3.2.1.1Background of VAMC’s establishment
In the context of the global economic downturn period 2008 - 2012, along with the
internal weakness accumulated over many years, Vietnam's economy began to decline,
macroeconomic appeared many uncertain factors. , high inflation rate, economic growth rate
fell to a low level. The State Bank has formulated and submitted to the Politburo and the
Government for approval and approved by the Prime Minister the Project "Dealing with


11
NPLs of the system of credit institutions" and the Project "Establishing the Management
Company". management of Vietnamese credit institutions ”in Decision No. 843 / QD-TTg
May 31, 2013.
3.2.1.2VAMC development history
As of December 31, 2019, VAMC has been in operation for more than 6 years.
3.2.1.3Organize the structure, principles and operational areas of VAMC
a) Organizational structure
VAMC is 174 people, including 09 managerial officers, 31 senior management
officers and the Director / Deputy Director of the Branch and 134 officials and employees.
Currently, VAMC is headquartered in Hanoi and has one branch in Ho Chi Minh.
b) Principles and areas of operation of VAMC
 Operating principles
Get revenue to cover expenses for non-profit purposes; Publicity and transparency in
activities of purchasing and handling NPLs; Limiting risks and costs in dealing with NPLs.
 Areas of operation
Buying bad debts of credit institutions; Debt recovery, debt collection and handling,
debt selling, collaterals; Debt restructuring, adjustment of debt repayment conditions,
conversion of debts into contributed capital and equity of borrowers; Investing, repairing,
upgrading, exploiting, using and leasing collaterals which have been collected by VAMC;

Managing bad debts bought, inspected and supervised collaterals related to bad debts,
including documents and records related to bad debts and loan security; Counseling,
brokerage for buying and selling debts and assets; Financial investment, capital
contribution, stock purchase; Organizing property auctions; Guarantee to organizations,
businesses and individuals borrowing capital from credit institutions; Other activities in
accordance with the functions and duties of VAMC after being permitted by the Governor
of the State Bank.
3.2.2.Realsituation of the effectiveness of VAMC's NPL handling
3.2.2.1 .Real Situation of the legal framework to operate VAMC activities
a) General legal framework for VAMC activities
b) Legal framework for VAMC's handling of NPLs
3.2.2.2 .Actual situation of the effecitiveness of VAMC’s NPL handling
a) Overview of VAMC's tasks
VAMC has just implemented 6/10 tasks assigned in Decree No. 53/2013 / ND-CP.
b) Debt purchase results by special bond


12
Table 3.3: Debt purchase results by special bonds 2013-2019

No

Criteria

1

Number of
customers

2

The amount of
NPLs

2013

2014

2015

2016

2017

2018

2019 Accumulated
to31/12/2019

933

5.254

8.836

832

414

500

162

16.931

1.511

8.597

14.310

1.240

562

761

381

27.363

Outstanding
4

balance of
balance sheet

35.563 89.941 107.644 42.183 32.601 30.917 20.544

359.393

30.926 75.812 99.143 40.035 31.839 29.812 19.846

327.413

(VND billion)
5

Purchase price
(billion dong)

Source: Report of VAMC's activities for the years 2013-2019
 Classification of debts bought by special bonds
Table 3.4: Classification of NPLs which VAMC purchased with special bonds based on
the type of Credit Institutions
Unit: VND billion
Joint stock
commercial
bank

Financial
company

Total

10.82

20.044

0

30.926

Proportion

35,19%

64,81%

0%

100.%

Purchase price

29,641

46.171

285

75.812

Proportion

39,10%

60,90%

0,38%

100%

Purchase price

44.516

53.965

662

99.143

Proportion

44,90%

54,43%

0,67%

100%

Purchase price

4.804

34.998

233

40.035

Proportion

12,00%

87,42%

0,58%

100%

Purchase price

31.820

0

19

31.839

Proportion

99,94%

0%

0,06%

100%

No

Year

Criteria

SOCB

1

2013

Purchase price

2
3
4
5

2014
2015
2016
2017


13
6

7

2018
2019

Total

Purchase price

13.426

16.260

126

29.812

Proportion

45,04%

54,54%

0,42%

100%

Purchase price

0

19,833

13

19.846

Proportion

0%

99,93%

0,07%

100%

Purchase price

135.089

191.271

1.338

327.413

Proportion

41,26%

58,42%

0,41%

100%

Source: Author compiled from VAMC software
Table 3.5: Classification of NPLs VAMC purchased by special bonds according to the
Plan of the period 2013-2019
Unit: VND billion
No
1
2

Type
Joint stock
company
Limited

2013

2014

2015

2016

2017

2018

2019

Total

10.409 34.610 47.009 12.834 18.432 24.941 17.046 165.281
13.725 29.084 33.817 14.172

5.669

1.862

841

99.170

3

Business
households and
individuals

4.749

9.200

13.098 12.255

7.650

2.507

409

49.868

4

Private
enterprise

1.377

1.898

2.506

761

31

24

1.087

7.684

5

Government
company

99

627

1.831

-

-

315

180

3.052

459

102

56

-

6

-

-

623

108

291

825

12

51

162

283

1.732

company

Foreign6

7

invested
enterprises
Other

Total

30.926 75.812 99.143 40.035 31.839 29.812 19.846 327.413

Source: Author compiled from VAMC software


14
Table3.6: Classification NPLs that VAMC bought with special bonds based onindustry
groups from 2013 to 2019
Unit: VND billion
No

Name of Industry

2013

2014

2015

2016

2017

2018

2019

Total

1

Real estate business

8.602

11.878 20.151

9.073

4.857

2.385

974

57.92

2

Construction industry

4.104

8.945

8.497

5.088

15.631

4.863

2.679

49.807

3

Wholesale and retail
industry; Repairing
automobiles, motors,
motorbikes and other
motor vehicles

2.924

9.81

10.271

969

1.622

13

244

25.853

3.823

7.818

8.136

2.31

357

2.53

244

25.218

4

Processing industry

5

Transportation and
warehousing industry

956

3.745

6.29

1.699

876

37

365

13.968

6

Agriculture, forestry
and fishery

1.067

3.186

3.457

2.83

457

57

1.705

12.759

7

Other services

6.73

20.93

33.022 13.774

6.456

88

487

81.487

8

Other

2.72

9.5

9.318

1.583

Total

4.291

19.839 13.149

60.4

30.926 75.812 99.142 40.034 31.839 29.812 19.846 327.411

Source: Author compiled from VAMC software
c) Debt purchase results by market value
Table 3.7: Debt purchase results by the 2013-2019 equity period
2013

2014

2015

2016

2017

2018

2019

Lũy kế

Numbers of the debt

-

-

-

-

6

40

37

83

Number of customers /
customer groupshang

-

-

-

-

6

14

16

36

-

-

-

-

2.939

2.943

2.131

8.013

-

-

-

-

3.141

2.819

2.247

8.207

Criteria

Principal
billion)

balance(VND

Purchase
billion)

price

(VND

Source: Report of VAMC's activities for the years 2013-2019
d) Debt handling results
Table 3.8: VAMC's debt collection and settlement results for the period 2013-2019

15
Unit: VND billion
Criteria

2013

2014

2015

2016

2017

2018

2019

Lũy kế

Return value from
NPLs which bought
by special bonds

146

4.875

17.142

28.853

30.852

33.964

31.372

146.942

Return value from
NPLs which bought
based on market
price

0

0

0

0

0

3.548

1.630

5.178

30.852

37.512

32.740

152.120

Total

146

4.875

17.142

28.853

Source: Report of VAMC’s activities for the year 2013-2019
Table3.9: VAMC debt collection and settlement results for each method
Unit: VND billion
TT
1

2

3

2013

2014

2015

2016

2017

2018

2019

Lũy kế

0

1.773

1.183

4.860

6.472

10.925

16.661

41.874

Purchased by
special bonds

0

1.773

1.183

4.860

6.472

10.234

15.411

39.933

Purchased by
market price

0

0

0

0

0

691

1.250

1.941

Sale of collaterals

0

490

4.180

6.356

4.865

5.200

6.468

27.559

Purchased by

special bonds

0

490

4.180

6.356

4.865

2.392

6.284

24.567

Purchased by
market price

0

0

0

0

0

2.808

184

2.992

Other methods

146

2.612

11.779

17.637

19.515

21.387

9.611

82.687

NPLs purchased
by special bonds

146

2.612

11.779

17.637

19.515

21.332

9.521

82.442

NPLs purchased
by market price

0

0

0

0

0

55

90

245

146

4.875

17.142

28.853

30.852

37.512

32.740

152.120

Criteria
Debt sale

Total

Source: Author compiled from VAMC software
3.2.2.3Measure the effectiveness of VAMC's handling of bad debts
a) Criteria 1:


16

Table 3.10: Ratio of NPLs purchased by VAMC (according to balance sheet
principal) from credit institutions to total outstanding loans of credit institutions
Unit: VND billion
No

Year
NPLs VAMC
bought
according to
principal

1

2013

2014

2015

2016

2017

2018

2019

35.563

89.941

107.644

42.183

35.316

33.860

22.675

116.490

214.920

131.820

150.120

144.590

158.875

157.289

30,53%

41,85%

81,66%

28,1%

22,39%

19,46%

13,06%

balance
of
balance sheet

2

Total number
of NPLs of
credit
institutions

3

Proportion

Source: SBV Report and VAMC Report
b) Criteria 2:
Table: 3.11: Proportion of NPLs handled by selling debt to VAMC compared to total
NPL handled by credit institutions
Unit: VND billion
No

1

2

3

Year
are

2013

2014

2015

2016

2017

2018

2019

NPLs
handled
through
35.563 89.941 107.644 42.183 35.316 33.860 22.675
selling debts
to

VAMC
(VNDbillion).
Total
NPLs
handled
by
commercial
87.977 143.550 186.894 118.493 115.541 163.141 159.733
banks (VND
billion)
40,42% 62,65% 57,60% 35,60% 30,76% 20,76% 14,20%
Proportion
Source: SBV Report, VAMC Report
c) Criteria 3:
Table 3.12: NPL recovery ratio of VAMC compared to purchased NPLs.


17

Unit: VND billion,%
NPL purchased by special bonds
Year

Accumulated
recovery
amount

NPL bought according to market value

Accumulated

Accumulated Accumulated
Recovery
Recovery
purchase
recovery
purchase
rate
rate
price
amount
price

2013

146

30.826

0,5%

2014

5.021

106.538

4,7%

2015

22.163

205.681

10,8%

2016

51.016

245.716

20,8%

2017

81.868

277.547

29,5%

0

3.141

0%

2018

115.570

307.359

37,6%

3.548

5.960

59,5%

2019

146.680

327.413

44,8%

5.178

8.207

63,1%

Source: Report of VAMC's activities for the years 2013-2019
d) Criteria 4:
Table 3.13: Percentage of outstanding loans, restructured customers / total NPLs in
the balance sheet, purchased VAMC customers of commercial banks.

Unit: VND billion
No

1

2

3

Criteria
Total principal
balance
of
NPLs on the
balance sheet
which
is
restructured by
VAMC
Total principal
balance
of
NPLs on the
balance sheet
NPLs
restructuring
ratio

2013

2014

2015

2016

2017

2018

2019

0

813

606

1.411

480

6

2.946,6

35.563

89.941

107.644

42.183

35.540

33.860

22.675

0%

0,9%

0,56%

3,34%

1,35%

0,02%

12,99%

Source: Report ofVAMC’s activities for the year 2013-2019
e) Criteria 5:
Table 3.14: Percentage of outstanding NPLs recovered from handling of collaterals on


18

total outstanding NPLs recovery
Unit:VND billion
No
1

Criteria
Returns
handling
collaterals

2013

2014

2015

2016

2017

2018

2019

from
0

490

4.180

6.356

4.865

5.200

16.661

2

Total returns

146

4.875

17.142

28.853

30.852

37.512

32.740

3

Proportion

0%

36,37%

6,90%

16,84%

20,98%

29,12%

19,76%

Source: Report ofVAMC’s activities for the year 2013-2019
f) Target 6:
Table 3.15: Proportion of debt settlement methods to total handled NPL
Unit: VND billion
No

Implementation
methods

1

Selling
assets

fixed

2

Selling debt

3

Other measures

Proportion of recovery by each method
2013

2014

2015

2016

2017

2018

2019

0%

10,05%

24,38%

22,03%

15,77%

13,86%

19,76%

0%

36,37%

6,90%

16,84%

20,98%

29,12%

50,89%

100%

53,58%

68,71%

61,13%

63,25%

57,01%

29,36%

Source: Report of VAMC's activities for the years 2013-2019
g) Target 7:
Table 3.16: VAMC's market capitalization cycle
Unit: VND billion
Result of debt
purchase (VND
billion)

Circle of capital

No

Year

VAMC capital
(VND billion)

1

2013

500

0

0

2

2014

500

0

0

3

2015

500

0

0

4

2016

500

0

0

5

2017

2.000

3.141

1,57

6

2018

2.000

2.819

1,41

7

2019

5.000

2.247

1,12

Source: Authors' summary
3.2.3Analysis of factors affecting VAMC's NPL handling performance


19
3.2.3.1Building a research model
a) Official scale
b) Research models
c) Develop research hypotheses
3.2.3.2Design scales, survey tables
3.2.3.3Assess the reliability of the scale by Cronbach's Alpha coefficient
3.2.3.4EFA discovery factor analysis
a) EFA discovery factor analysis for the independent variable
b) EFA analysis for the dependent variable
Table 3.17: KMO test for dependent variables
KMO and Bartlett’s Test
KMO value (Kaiser-Meyer-Olkin of Sampling Adequacy)
Bartlett’s
statistical Approx, Chi-Square
quantities (Bartlett’s Test Df
of Sphericity)
Sig,

0,705
5689.626
1035
.000

(Source: SPSS 20.0 output)
c) Rotation matrix of factors
4.2.3.5 Linear regression analysis
Model running results: VAMC's NPL handling efficiency = 2,981+ 0,139 Functions and
duties of VAMC + 0,136 VAMC's capital capacity + 0,156 VAMC's personnel + 0.222 VAMC's
technology +(- 0.263 Development of debt trading market)
3.2.3.6 Analysis of quantitative research results
3.2.3. Assessing the effectiveness of VAMC's handling of NPLs in the period 2013-2019
3.2.3.1. Result
Firstly, VAMC has shown its mission role in dealing with NPLs, VAMC has
contributed to bringing NPLs of the whole CI system to below 3%
Secondly, the handling of NPLs through VAMC is a tool to help the State Bank
identify and transact NPLs
Thirdly, the handling of NPLs through VAMC in the period of 2013-2019 is consistent
with Vietnam's economic and political conditions, spreading the results of handling NPLs.
Fourthly, credit institutions have reduced financial pressure, have more capital to
increase credit activities, and have more power to handle debts through selling debts to
VAMC.
Fifthly, customers with NPLs have the opportunity to once again be reviewed by
VAMC to review the business situation, reconsider in debt restructuring.


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3.2.3.2Limitations and causes
a) Limitations
Firstly, VAMC has not fully implemented 10 assigned tasks under the Government's
direction in Decree No. 53/2013 / ND-CP.
Secondly, VAMC's debt purchase value according to market value is low, not yet
showing the leading role of debt trading market.

Thirdly, VAMC has not promoted its role in mobilizing other capital sources to carry
out market debt purchase
Fourthly, the results of VAMC's special debt collection by VAMC have not shown the
efficiency of VAMC's debt resolution.
Fifth, VAMC has not shown the effectiveness in debt restructuring and supporting
customers
b) The causes of the limitations
 Subjective reasons
Firstly, VAMC staff is still lacking, not much experience in dealing with NPLs,
especially in supporting corporate finance.
Secondly, the current organizational structure model of VAMC will no longer be suitable in
the coming time when VAMC fully implements its duties according to Decree No. 53/2013
/ ND-CP and implements new operations.
Thirdly, the new Risk Management is initially implemented
Fourthly, VAMC does not have an information system connecting with credit
institutions to update information about NPLs and collaterals of NPLs for debt settlement.
Fifthly, the facilities have not met VAMC’s operational requirements
 Objective reasons from mechanisms and policies related to debt handling
Firstly, the legal corridor for trading and dealing with NPLs has been formed but
scattered in many different regulations. There is no specific law on dealing with NPLs, and
there is no law on debt securitization
Secondly, the regulations on seizureof collateral have actively supported the handling
of NPLs of VAMC, but there are still problems when implementing.
Thirdly, the regulations restricting mortgage registration when receiving additional
collaterals are land use right, not encouraging investors to buy VAMC's debt.
Fourthly, there has been no policy to attract foreign investors to participate in
Vietnam's debt trading market
Fifthly, the current law has no specific guidance on the valuation of NPLs, leading to
inconsistent implementation and not ensuring transparency and objectivity.

21
Sixthly, there is no legal regulation on the case of land use right registration, the
ownership of land-attached assets applies to debt-buying individuals who are not debt
purchase and sale organizations under Resolution No. 42/2017 / QH14.
Seventhly, debt trading is still limited in transaction models and modes
Objective reasons from credit institutions, characteristics of debts and collateral
of debts
Firstly, NPLs have been generated for a long time and are difficult to recover
Secondly, conflicts of interest in the process of buying, selling and handling NPLs
between VAMC and credit institutions
Thirdly, reporting and updating information were inaccurate, leading to problems in
information processing and proposing debt settlement plans
 Objective reasons from customers
Firstly, VAMC is very difficult to implement debt restructuring activities because
few customers meet the debt restructuring conditions as prescribed
Second, customers do not cooperate, oppose, delayin settling debt


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CHAPTER 4:
SOLUTION TO IMOROVE THE EFFICIENCY OF HANDLING NPLs FOR VAMC
4.1.

ORIENTATIONS,

THESIS

AND

OBJECTIVES

TO

IMPROVE

THE

EFFICIENCY OF HANDLING NPLs FOR VAMC
4.1.1.Orientations
The guidelines and policies of the Party and the State, the regulations of the National
Assembly, the Government, and the Prime Minister states clearly that the development
orientation of VAMC needs to focus on improving the capacity of VAMC to buy and sell
NPLsbased on the market price associated with handling of mortgaged assets, protecting the
lawful and legitimate interests of creditors as well asallocating appropriate resources to
quickly and completely handlingNPLs.
4.1.2.Thesis
Thesis 1: It is necessary to improve the institution and legal framework in dealing with
NPLs to promote the role of VAMC as a tool of the Government and the State Bank in the
process of handling NPLs.
Thesis 2: Strengthening VAMC's ability to handle bad debts in terms of capital,
technology and human resources.
Thesis 3: Besides dealing with bad debts quickly, it is necessary to promote measures
to support enterprises such as debt restructuring or financial support.
Thesis 4: Dealing with bad debts must ensure the openness, transparency, safety and
development of the State's capital.
4.1.3.1 Objectives Period 2020 - 2025
The total accumulated NPLs purchased until the end of 2020 will be at least VND
330,000 billion; By the end of 2020, completing basically the handling of NPLs purschased
with special bonds (excluding NPLs purchased with special bonds by weak credit

institutions, which may cause risks to the system).From 2021, VAMC will strengthen the
handling of NPLs purchased according to market price, as well as continue to handle NPLs
bought by special bonds and bad debts of weak credit institutions, which may cause risks to
the system; Establishing and developing the NPLs trading market, where VAMC plays a
central role of the market; Fully implement the operations of VAMC according to Decree
53/2013 / ND-CP.
4.1.3.2. Objectives for the period 2026 - 2030
Expand activities such as Debt securitization, Provide debt collection services; Civil
judgment execution and property handover orders; Promote financial investment activities,
aiming to build VAMC into an institution with a financial intermediary role.


23
4.2. Solutions to improve the efficiency of handling NPLs for VAMC
4.2.1.Solutions group about models, functions and tasks
4.2.1.1.Implement enough duties according to Decree No. 53/2013 / ND-CP and add new tasks
4.2.1.2.Perfecting the model, organizational structure
4.2.2. Group of capital solutions
4.2.2.1 .Increase financial resources for VAMC
4.2.2.2 .Improve the efficiency of other capital mobilization
4.2.2.3 .Effective management of VAMC's capital resources
4.2.3. Group of solutions on risk management capacity
4.2.3.1.Completing the system of processes, internal regulations on NPL trading and handling
4.2.3.2.Establish a risk early warning system
4.2.3.3.Control customers after buying debt
4.2.3. Group of human resource solutions
4.2.3.1 Improve recruitment mechanism and process
4.2.3.2 Train high-quality debt handling staff
4.2.3.3Have appropriate policies for employees
4.2.4.Technology solutions group

4.2.5.Group of other complementary solutions
4.2.5.1.Establishing the Club of NPL trading organizations to establish Association of NPL
trading
4.2.5.2. Improve the capacity and role of intermediaries in the market
4.3. SUGGESTIONS AND RECOMMENDATIONS
4.3.1. Recommendations to the National Assembly
4.3.1.1. Develop a law to handle NPLs
4.3.1.2 Develop a Debt Securitization Law
4.3.2 Recommendations to the Government
4.3.2.1 Proposing the National Assembly to promulgate the Law on handling NPLs and the
Law on securitization of debts
4.3.2.2 Modify functions and duties of VAMC in Decree No. 53/2013 / ND-CP
4.3.2.3 Approving to increase charter capital for VAMC
4.3.3 Recommendations to the State Bank
Firstly, Proposal to promulgate the Law on handling bad debts
Secondly, submit to raise charter capital for VAMC
Thirdly, submit to amend and supplement Decree No. 53/2013 / ND-CP
Fourthly, approve the VAMC Development Strategy for the period of 2019-2025 and
orientations to 2030