In May 2013, the Vietnam Asset Management Company ("VAMC") was launched following Decree No. 53/2013/ND-CP in order to tackle non-performing loans ("NPLs") - a burden on Vietnamese commercial banks and other credit institutions ("Vietnamese Credit Institutions"). It is a 100 percent state-owned one-member limited liability company established by the State Bank of Vietnam ("SBV") with the business purpose of purchasing NPLs from the Vietnamese Credit Institutions.
VAMC is given broad authority to deal with the NPLs in a number of aspects, such as the ability to restructure NPLs, the right to enforce security, and the power to sell the collateral through an auction. It is a mandatory requirement that the Vietnamese Credit Institutions with NPL ratios of 3 percent or more are required to sell them to VAMC in exchange for special bonds. Failure to do so will result in a reassessment of that Vietnamese Credit Institution, which may then result in an order for sale of the NPLs, or a restructuring plan approved by the SBV. Holders of special bonds may use them as collateral for re-financing from the SBV.
Although the establishment of VAMC is seen as a positive change in the banking sector, foreign-invested credit institutions (established and operating in Vietnam) fall outside the scope of this Decree. According to some estimates, the ratio of NPLs is so high that VAMC may not have sufficient funds to purchase all NPLs. This could require further government reforms which permit VAMC to partner with foreign investors as a funding source. Consequently, this might enable foreigners to purchase real property assets in Vietnam by way of participating in the security enforcement (together with VAMC).