Resolution No. 42/2017/QH14 on piloting the handling of bad debts of credit institutions

RESOLUTION

On piloting the handling of non-performing loans of credit institutions

OF THE NATIONAL ASSEMBLY

On the basis of the Constitution of the Socialist Republic of Vietnam;

Pursuant to the Law on the Organization of the National Assembly No. 57/2014/QH13;

Based on the Law on Legislative Regulatory Acts No. 80/2015/QH13;

RESOLUTION:

Article 1. Scope of Regulation

This Resolution stipulates the pilot implementation of certain policies regarding the handling of non-performing loans and the disposal of collateral for such loans of credit institutions, foreign bank branches, and organizations wholly owned by the State with 100% capital contribution established by the Government to handle non-performing loans of credit institutions; the rights and obligations of agencies, organizations, and individuals related to the handling of non-performing loans and the disposal of collateral for such loans of credit institutions, foreign bank branches, and organizations wholly owned by the State with 100% capital contribution established by the Government to handle non-performing loans of credit institutions.

Article 2. Applicability

1. Credit institutions and foreign bank branches.

2. Organizations wholly owned by the State with 100% capital contribution established by the Government to handle non-performing loans of credit institutions (hereinafter referred to as organizations buying and disposing of non-performing loans).

3. Relevant agencies, organizations, and individuals.

Article 3. Principles for Handling Non-Performing Loans

1. Ensuring transparency, protecting the legitimate rights and interests of credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans, and relevant agencies, organizations, and individuals.

2. Being consistent with market mechanisms on the principle of prudence, ensuring the benefits of depositors and maintaining stability and security of the system.

3. Not using state budget funds to handle non-performing loans.

4. Agencies, organizations, and individuals who violate the law causing non-performing loans and during the process of handling non-performing loans shall bear responsibility according to the provisions of the law.

Article 4. Non-Performing Loans

1. Non-performing loans as defined in this Resolution include:

a) Debts formed and identified as non-performing before August 15, 2017;

b) Debts formed before August 15, 2017 and identified as non-performing during the period when this Resolution takes effect.

The identification of debts as non-performing is based on the Appendix attached to this Resolution. In necessary cases, the Standing Committee of the National Assembly will consider and amend the Appendix upon the proposal of the Government and report to the National Assembly at the nearest session.

2. Credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans have the responsibility to confirm in writing that a debt is a non-performing loan when requested by competent state agencies during the process of handling non-performing loans and collateral for such loans as prescribed in this Resolution.

Article 5. Sale of Non-Performing Loans and Collateral

Credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans sell non-performing loans and collateral for such loans publicly and transparently in accordance with the law; the selling price should be consistent with market prices and may be higher or lower than the original principal amount of the debt.

Article 6. Purchase and Sale of Non-Performing Loans by Organizations Buying and Disposing of Non-Performing Loans

1. Organizations buying and disposing of non-performing loans can purchase non-performing debts recorded both within and outside the balance sheet of credit institutions, except joint venture credit institutions and wholly foreign-owned credit institutions, and convert non-performing debts purchased through special bonds into market-priced non-performing debts according to the guidance of the State Bank of Vietnam.

2. Organizations buying and disposing of non-performing loans can sell non-performing debts to legal entities and individuals, including businesses without the function of purchasing and selling debts.

3. Organizations buying and disposing of non-performing loans can agree with credit institutions specified in Clause 1 of this Article to purchase non-performing debts at a price equal to the valuation value of independent valuers; handle, sell, recover debts according to the law and distribute the remaining value of the recovered amount from the non-performing debt after deducting the purchase price and handling costs.

Organizations buying and disposing of non-performing loans must agree with credit institutions to select independent valuers.

Article 7. Right to Seize Secured Assets

1. The guarantor and the holder of secured assets for non-performing debts shall have the obligation to hand over the secured assets along with all relevant legal documents and files to credit institutions, foreign bank branches, organizations buying and handling non-performing debts for disposal according to the agreement in the guarantee contract or other documents (hereinafter referred to as the guarantee contract) and the provisions of the law on secured transactions.

In case the guarantor and the holder of secured assets fail to hand over the secured assets to credit institutions, foreign bank branches, organizations buying and handling non-performing debts for disposal, such credit institutions, foreign bank branches, and organizations buying and handling non-performing debts shall be entitled to seize the secured assets in accordance with the provisions of this Article.

2. Credit institutions, foreign bank branches, and organizations buying and handling non-performing debts shall have the right to seize the secured assets of non-performing debts of the guarantor and the holder of secured assets of non-performing debts when meeting the following conditions:

a) When the event occurs to handle the collateral as prescribed in Article 299 of the Civil Code;

b) The guarantee contract contains an agreement that the guarantor consents to the credit institution or foreign bank branch having the right to seize the secured assets of non-performing debts when the secured asset is processed according to the law;

c) The secured transaction or security measure has been registered in accordance with the law;

d) The secured asset is not a disputed asset in a lawsuit that has been accepted but not yet resolved or is being resolved at the competent court; it is not currently subject to urgent temporary measures by the court; it is not currently seized or subject to enforcement security measures under the law;

đ) Credit institutions, foreign bank branches, and organizations buying and handling non-performing debts have fulfilled the obligation to publicly disclose information as stipulated in Clause 3 or Clause 4 of this Article.

3. At least fifteen days before the date of seizing the secured immovable property, credit institutions, foreign bank branches, and organizations buying and handling non-performing debts shall publicize information about the time, location, and reason for seizing the secured assets in accordance with the following provisions:

a) Posting information on their own electronic information website;

b) Sending a notification letter to the People's Committee of the commune and the police agency where the secured asset is located;

c) Affixing the notification letter at the office of the People's Committee of the commune where the guarantor registered the address according to the guarantee contract and the office of the People's Committee of the commune where the collateral is located;

d) Notifying the guarantor in writing through registered mail to the guarantor's address as stated in the guarantee contract or delivering directly to the guarantor.

4. Credit institutions, foreign bank branches, and organizations buying and handling non-performing debts shall publicize information about the process of seizing movable secured assets in accordance with the following provisions:

a) Posting the information on their website and notifying the People's Committee of the commune where the guarantor has registered the address according to the guarantee contract before seizing the secured assets;

b) Notifying the guarantor in writing prior to exercising the right to seize the secured assets by sending registered mail to the guarantor's address as stated in the guarantee contract or delivering directly to the guarantor.

5. Local authorities at all levels and police agencies where the secured assets are seized shall ensure public security and social order within the scope of their functions, tasks, and powers upon request from credit institutions, foreign bank branches, and organizations buying and handling non-performing debts. In cases where the guarantor does not cooperate or is absent as notified by credit institutions, foreign bank branches, and organizations buying and handling non-performing debts, representatives of the People's Committee of the commune where the secured assets are seized shall witness and sign the seizure record.

6. Credit institutions may only delegate the right to seize secured assets to asset management companies under such credit institutions; organizations buying and handling non-performing debts may only delegate the right to seize secured assets to credit institutions selling debts, asset management companies under such credit institutions selling debts.

Credit institutions, foreign bank branches, organizations buying and handling non-performing debts, and organizations delegated to seize secured assets shall not apply prohibited measures under the law during the process of seizing secured assets.

7. The Ministry of Public Security shall direct public security agencies at all levels to perform the task of maintaining public security and order when credit institutions, foreign bank branches, and organizations buying and handling non-performing debts exercise the right to seize secured assets of non-performing debts as prescribed in this Resolution.

Article 8. Application of Simplified Procedures in Dispute Resolution Related to Secured Assets at Courts

1. Courts shall apply simplified procedures to resolve disputes regarding the obligation to deliver secured assets or disputes regarding the right to dispose of secured assets for non-performing loans of credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans, provided that all of the following conditions are met:

a) The guarantee contract contains an agreement whereby the guarantor has the obligation to deliver the secured asset of the non-performing loan to the creditor or credit institution, foreign bank branch, organization buying and disposing of non-performing loans has the right to dispose of the secured asset;

b) The guarantee transaction or security measure has been registered in accordance with the provisions of the law;

c) There are no parties residing abroad, disputed assets located abroad, except in cases where parties residing abroad and parties residing in Vietnam have agreed to request the court to resolve the dispute through simplified procedures or the parties can provide evidence of lawful ownership of the asset and have reached a consensus on the disposal of the asset.

2. The resolution of disputes stipulated in Clause 1 of this Article shall be carried out according to the simplified procedure prescribed in the Civil Procedure Code.

3. The Supreme People's Court shall guide the implementation of the provisions of this Article.

Article 9. Purchase and Sale of Non-Performing Loans with Secured Assets Being Land Use Rights, Real Estate Attached to Land, or Future Real Estate Attached to Land

1. The buyer of a loan originated from a non-performing loan of a credit institution, foreign bank branch, where the secured asset of the loan is land use rights, real estate attached to land, or future real estate attached to land shall have the right to take over the mortgage, register the mortgage of land use rights, real estate attached to land, or future real estate attached to land as the secured asset of the purchased loan.

2. The buyer of a loan originated from a non-performing loan of a credit institution, foreign bank branch, where the secured asset of the loan is land use rights, real estate attached to land, or future real estate attached to land shall inherit the rights and obligations of the mortgagee.

3. Organizations buying and disposing of non-performing loans shall register the mortgage when receiving additional secured assets being land use rights, real estate attached to land, or future real estate attached to land of the purchased loan.

4. The Minister of Natural Resources and Environment shall prescribe the registration of mortgages of land use rights, real estate attached to land, or future real estate attached to land; registration of changes to the Certificate of Land Use Right, Ownership Certificate of House and Other Real Estate Attached to Land as the secured asset of the loan originated from a non-performing loan of a credit institution, foreign bank branch.

Article 10. Disposal of Secured Assets Being Real Estate Projects

1. Credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans may transfer the secured asset of a non-performing loan being a real estate project provided that all of the following conditions are met:

a) The project has been approved by competent state authorities in accordance with the law;

b) There is a decision on land allocation or lease issued by competent state authorities;

c) The project does not have any disputes over land use rights that have been accepted but not yet resolved or are currently being resolved by the competent court; it is not currently subject to attachment for enforcement of judgments or administrative decisions of competent state authorities;

d) There is no decision on project recovery or land recovery issued by competent state authorities.

2. The transferee of the project must meet the conditions prescribed by the law on real estate business; inherit the rights and obligations of the project developer and proceed with the necessary procedures to continue implementing the project in accordance with the law on investment and construction law.

Article 11. Seizure of collateral assets of the party subject to enforcement

Collateral assets securing non-performing debts of the party subject to enforcement that guarantee the obligation to repay at credit institutions, foreign bank branches, organizations buying and disposing of bad debts shall not be seized to fulfill other obligations as prescribed in Article 90 of the Civil Enforcement Law, except in cases of enforcing judgments and decisions on maintenance payments, compensation for damage to life and health, and where there is written consent from credit institutions, foreign bank branches, organizations buying and disposing of bad debts.

Article 12. Priority order of payment when disposing of collateral assets

The amount received from disposing of collateral assets securing non-performing debts, after deducting preservation costs, seizure costs, and disposal costs, shall be prioritized for payment towards the secured debt obligation to credit institutions, foreign bank branches, organizations buying and disposing of bad debts before fulfilling tax obligations and other unsecured obligations of the guarantor. In cases where a single asset is used to secure multiple obligations, the priority order of payment among parties receiving guarantees shall be carried out according to the provisions of the law.

Article 13. Sale of non-performing debts with collateral assets under seizure

Credit institutions have the right to sell non-performing debts with collateral assets under seizure to organizations buying and disposing of bad debts, enterprises with functions to buy and sell debts. Credit institutions are responsible for providing full and truthful information about the seizure status of collateral assets before implementing the sale of non-performing debts; the buyer shall independently assess the risks associated with purchasing this debt. The sale of collateral assets under seizure shall be carried out in accordance with the provisions of the law.

Article 14. Return of collateral assets as evidence in criminal cases

After completing the procedures for determining evidence and finding that it does not affect the handling of the case and enforcement, the investigative agency has the responsibility to return the evidence in criminal cases, which are collateral assets securing non-performing debts, upon the request of the guarantor organization being credit institutions, foreign bank branches, organizations buying and disposing of bad debts.

Article 15. Transfer of collateral assets

1. The competent authority registering ownership and use rights of property has the responsibility to implement the procedures for transferring ownership and use rights of property to the buyer, the transferee of collateral assets securing non-performing debts of credit institutions, foreign bank branches.

2. The payment of taxes by the guarantor, the transferee related to the transfer of collateral assets shall be carried out in accordance with the provisions of the tax law. The guarantor, the transferee shall not undertake the tax and fee obligations of the guarantor from the proceeds of the transfer of collateral assets when performing registration procedures for changing ownership and use rights of collateral assets.

Article 16. Allocation of anticipated interest, difference when selling non-performing debts of credit institutions, organizations buying and disposing of bad debts

1. Credit institutions are allocated the recorded anticipated interest of non-performing debts of credit institutions not yet withdrawn according to regulations, the difference between the book value of the debt being accounted for in the balance sheet and the selling price of the non-performing debt and the specific provision amount already established for this debt into annual business results according to the following principles:

a) The minimum annual allocation level is the income and expenditure difference from the annual business results of the credit institution;

b) The maximum period for allocating anticipated interest is 10 years, except in the case provided for in Clause 2 of this Article; the maximum period for allocating the difference between the book value of the debt being accounted for in the balance sheet and the selling price of the non-performing debt and the specific provision amount already established for this debt is 05 years.

2. For anticipated interest of non-performing debts sold to organizations buying and disposing of bad debts not yet withdrawn according to regulations, the time limit for allocating anticipated interest shall not exceed the remaining term of special bonds of the organization buying and disposing of bad debts.

3. Credit institutions may only allocate anticipated interest according to the provisions of Clause 1 and Clause 2 of this Article for anticipated interest recorded up to December 31, 2016.

4. Organizations buying and disposing of bad debts are allocated the difference between the book value of the debt being accounted for in the balance sheet and the market purchase price of the non-performing debt and the specific provision amount already established for this debt into annual business results with a minimum allocation level being the income and expenditure difference.

Article 17. Application of Law

1. The handling of non-performing loans and the disposal of collateral for non-performing loans of credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans shall be carried out in accordance with the provisions of this Resolution. In cases where this Resolution does not provide for such matters, the current laws shall apply.

2. Where there are different provisions between this Resolution and other laws on the same issue regarding the handling of non-performing loans and the disposal of collateral for non-performing loans of credit institutions, foreign bank branches, and organizations buying and disposing of non-performing loans, the provisions of this Resolution shall apply.

3. Policy banks may apply the provisions of this Resolution to handle non-performing loans and dispose of collateral for non-performing loans of policy banks.

Article 18. Transitional Provisions

The transitional measures after this Resolution ceases to be effective shall be implemented as follows:

1. Agreements between organizations buying and disposing of non-performing loans and credit institutions as stipulated in Clause 3, Article 6 of this Resolution that have become effective during the period when this Resolution is in effect shall continue to be implemented until the completion of the agreement;

2. Credit institutions, foreign bank branches, organizations buying and disposing of non-performing loans may continue to exercise their right to seize collateral according to the provisions of Article 7 of this Resolution if they have publicly disclosed information in accordance with Clause 3 or Clause 4 of Article 7 of this Resolution during the period when this Resolution is in effect;

3. Courts shall continue to apply the expedited procedures as provided for in Article 8 of this Resolution for cases that have been accepted for trial during the period when this Resolution is in effect.

Article 19. Implementation Provisions

1. This Resolution takes effect from August 15, 2017 and shall be implemented within a period of five years from the date it becomes effective.

2. The National Assembly, the Standing Committee of the National Assembly, the National Ethnic Council, the Committees of the National Assembly, the Delegations of the National Assembly, and National Assembly deputies shall supervise the implementation of this Resolution.

3. The Government shall be responsible for organizing the implementation of this Resolution, reporting annually to the National Assembly on the results of handling non-performing loans, and presenting a summary report on the implementation of this Resolution at the first session of the National Assembly in 2022, and proposing improvements to the legal system concerning the handling of non-performing loans and collateral.

4. The Supreme People's Court and the Supreme People's Procuracy shall be responsible for organizing the implementation of this Resolution. The Supreme People's Court shall be responsible for guiding the uniform application of laws concerning the resolution of disputes related to the handling of non-performing loans and collateral for non-performing loans as prescribed in this Resolution.

5. The State Bank of Vietnam shall be responsible for directing, supervising, inspecting, and auditing the implementation of this Resolution by credit institutions, foreign bank branches, and organizations buying and disposing of non-performing loans; implementing measures to limit non-performing loans.

6. Local authorities at all levels shall be responsible for directing and coordinating with relevant agencies and organizations in organizing the implementation of this Resolution at the local level; formulating plans to allocate funds to settle overdue construction debts related to non-performing loans under the responsibility of the local budget.

This Resolution was adopted by the National Assembly of the Socialist Republic of Vietnam, the 14th term, third session, on June 21, 2017.