Vietnam has two debt trading companies already – the Debt and Asset Trading Corporation (DATC), a legal entity under the Ministry of Finance (MOF), and the Vietnam Asset Management Company (VAMC), belonging to the State Bank of Vietnam. However, the debt trading in Vietnam remains at a standstill.
There are many markets, but markets lack capital Nguyen Tri Hieu, a renowned banking expert, commented that DATC serves as the ‘bag to hold debts’ for MOF. DATC’s main function is keeping the debts of state-owned enterprises (SOEs) so that enterprises can escape from debts and go equitized. In fact, DATC wants to expand its operation and trade the debts of non-SOEs as well. However, it cannot do this because of limited capital and too many existing problems in the operation mechanism set by the State.
Meanwhile, VAMC also acts as a coffer for commercial banks to put debts into. VAMC was established as a financial institution that helps banks clear their bad debts out of their balance sheets and undergo restructuring.
However, as forecast, VAMC still cannot do many things since its establishment. The debts VAMC have dealt with are just ‘a drop of water in the sea’.
Some banking experts pointed out that with modest chartered capital, VAMC won’t have power large enough to help banks settle debts.
There is no debt trading market in Vietnam which is professional and large enough for businesses to trade debts.Commercial banks also have asset management companies (AMC) which are in charge of collecting debts for the holding banks.AMCs wants to cooperate to trade debts, but they cannot because of the problems in operation policy. As a result, many AMCs no longer operate, and only their names exist. Debt trading floor needed
Nguyen Van Hung, finance director of AASC, a finance service & auditing firm, said businesses agree that it is necessary to set up a debt trading market for businesses.
“This will be a large market,” he said. “In developed markets, the debts will be securitized like a type of bond and put into transactions on the stock market.”
The State Bank of Vietnam is compiling a draft decree on debt trading, stipulating the conditions businesses must have to be eligible for providing services.
The businesses which want to trade debts must have legal capital of VND100 billion at minimum, while the businesses which run trading floors must have VND1 trillion at least.
The required minimum legal capital for businesses providing other services is VND10 billion.
Source: The Business Times