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Decision No. 480/QD-TTg dated March 18
th
, 2013
of the Prime Minister approving the Accounting-
Audit Strategy until 2020 with a vision to 2030 and
the implementation of Resolution No. 35/NQ-CP
on May 5
th
, 2016 for corporate and business
support and development up to 2020, the plan
for IFRS in 2018-2020 will be only applied only
on selected units. In addition, when Basel IV is
quite popular in developed countries, Vietnam is
still trying to reach the need for Basel II in 2018.
Therefore, Vietnam has a long way to go, to set up
a safety environment for developing and applying
securitization.
Thirdly,
although some of the preconditions for
securitization process in Vietnam are available,
but these companies are not really the true SPV,
and its performance is still limited. In Vietnam,
these companies specialized in the debt trading
are DATC and VAMC, which securitized non
performing loans of enterprises and banks and
bring them to the debt trading market. However,
although there are many similarities, these models
are not true SPV, and in fact bothDATCandVAMC
do not do really effective, because: (i) Debt trading
market is underdeveloped, its products are not
diversified; (ii) The provisions of the law on the
use of security assets to recover outstanding debts
are still incompleted, thus limiting the progress
and effectiveness of handling non performing
loans for the banking sector; (iii) The size of DATC
and VAMC is still relatively small compared to the
outstanding non-performing loans and (iv) Selling
non-performing loans to foreign investors are
facing many difficulties. For example, under the
Land Law, the use of mortgage, the transferring
ownership, the changing purpose of using land...
for foreign investors is not completed. At the
same time, the collateral for real estate and assets
on land accounts for 72% of the total collateral
value of debts held by VAMC. Therefore, even
when the secularization of bad debt which
originated from the urgent needs of financial
market, is still facing many difficulties, then
the true process of secularization can not be
completed soon in the future.
Conclusions and recommendations
Therefore, under current circumstance, to
enhancing the ability to apply securitization for
financial market in Vietnam, it is necessary to
focuses on the following strategies:
Firstly,
legal system and the legal document
related to securitization have to be developed.
Securitization is often treated as a complex debt
instrument, so it should be strictly controlled
by the law. In particular, it is necessary to set
standards for securitization products (restrict
subprime debt securities) and strictly manage
rating companies and other securitization audit
units. In addition, securitization can only be
treated as good financial instrument when the
legal system (especially those about property, the
formation and enforcement of security property
rights, contractual provisions and bankruptcy
mechanism) is developed and when the court’s
decision is consistent and reliable by the legal
system. In addition, it is necessary to set out a
roadmap for SPV’s establishment, in which SPV’s
establishment owned by the State should be
considered. Besides, regulations on disclosure of
information, regulations on issuance of securities
business practice certificates, tax regulations...
have to be constructed to make sure a relatively
adequate legal corridor to help securities bad
debt performing better. As such, VAMC will play
the role of originator and hired by SPV to do
almost all of SPV’s tasks in securitization. After
purchasing bad debts from credit institutions,
VAMC will have to classify debts, assess asset
quality, form debt portfolio, and then securitized
bad debts on the stock market. VAMC will also
be more favorable when approaching securities
securitization in real estate sector because more
than 67% of Non-performing loans now are in real
estate industry. After classifying debt, assessing
asset quality, and securing bad debt, VAMC or a
third-party should continue to rank credit rating
for these collateralized loans.
Securitization can only be treated as
good financial instrument when the legal
system (especially those about property,
the formation and enforcement of security
property rights, contractual provisions and
bankruptcy mechanism) is developed and
when the court’s decision is consistent and
reliable by the legal system.
