Proposals to curb large bad debts include restricting outbound travel and pursuing criminal charges for non-cooperation in collateral asset handling

At a roundtable on bad debt resolution in the new context on 15 April, bank representatives said they are facing difficulties in handling delinquent loans. While some borrowers cooperate and hand over collateral, a sizable share are reportedly finding ways to prolong debt collection.

Cause: weak sanctions and deliberate delays

Mr. Tran Trung Dung, Chairman of the Board of Directors of VAMC, said the current bottleneck is the lack of sufficiently strong sanctions to reinforce credit discipline in the market. He said bad debts are forming from two parallel sources: objective factors such as a difficult economy and market downturns that reduce borrowers’ repayment ability; and a second group driven by insufficient transparency and weak market discipline.

For the second group, delinquency and procrastination have become increasingly common, including cases where borrowers reportedly form groups to launder debt, cross-lend, and shuffle debts in more complex ways.

“There are people who live in luxury, drive luxury cars, travel abroad but do not repay debts,” Tran Trung Dung said.

Development: fake disputes and extended litigation

Nguyen Quoc Hung, Deputy Chairman and General Secretary of the Vietnam Banks Association (VNBA), said that in practice there have been cases where debtors intentionally create fake disputes to delay transferring assets and collateral for bad debt resolution.

Hung noted that when such situations occur, streamlined procedures are almost impossible to apply, and cases must proceed through ordinary litigation, moving through multiple levels of court decisions. He said this significantly lengthens the asset-handling process, reduces debt recovery effectiveness, and directly affects banks’ ability to rotate capital.

Data and policy proposals: stronger sanctions and clearer accountability

Hung proposed that state agencies consider stronger sanctions for those who incur large bad debts, especially debts sold to VAMC. He suggested restricting outbound travel for people with large bad debts, arguing that it is unacceptable for them to go abroad to hide while leaving banks without resources to locate and recover the debt.

VNBA also raised that bad debts sold to VAMC are no longer purely civil relationships between banks and borrowers. They are part of national financial resources. Based on that view, authorities should study stronger sanctions, possibly including criminal liability where there are signs of violations, to restore discipline and provide a solid basis for debt markets to operate.

Legal and operational focus: monetizing assets to restart credit

Nguyen Thi Phuong, Director of the Legal Department at BIDV, supported the emphasis on sanctions and said banks may use debt-resolution measures such as selling to VAMC, DATC, or entrusting units. However, she said the end goal remains to liquidate collateral and monetize assets to restart the credit cycle.

“Assets should be transferred to new owners with the capacity to exploit them and generate cash flow to finance the economy,” Phuong emphasized.

Impact: investor participation depends on recoverability

Bank representatives said that if bottlenecks in asset handling are not resolved soon, the debt market will not develop because no investor—domestic or international—will participate if they do not see recoverability of assets.

They said the core of debt buying is inheriting the full rights and obligations of the debt, with the key being the right to handle the collateral. To attract foreign investors into Vietnam’s debt market, they said the prerequisite is a transparent and clean legal environment and protection of asset rights after debt purchase.

If a market has many debts but collateral cannot be liquidated, representatives said it will be difficult to persuade any investor to participate.