STATE BANK OF VIETNAM MINISTRY OF EDUCATION & TRAINING BANKING ACADEMY *************** NGUYEN THI KIM QUYNH ENHANCING EFFICIENCY OF HANDLING OF NON-PERFORMING LOAN (NPL) OF THE ASSET MANAGEMENT COMPANY TO VIETNAM CREDIT INSTITUTIONS SUMMARY OF DOCTORAL THESIS IN ECONOMICS HANOI - 2020 RESEARCH WORKS ARE COMPLETED AT BANKING ACADEMY The dissertation is defended in front of the PhD Council at the grassroots doctoral thesis at 14:00 on June 1, 2020 at the Banking Academy HA NOI – 2020 INTRODUCTION The urgency of the topic VAMC was established with great attention and support from the State Bank, the Government and ministries, agencies but still faces many difficulties and obstacles such as mechanisms, policies and regulations; the law is not complete; operating capital is limited; Vietnam has not really formed a debt trading market; This is also the main reason making debts that VAMC collected(sao khoản nợ lại thu mua), although quite large, (con số xử lý) are still modest Stemming from the above reasons, the author chooses the topic ‘Enhance the efficiency of handling NPLs of the Asset Management Company to Vietnamese credit institutions" Research objectives of the thesis 2.1 General research objectives Assessing the effectiveness of VAMC's NPL resolution to Vietnamese credit institutions and proposing solutions to improve the efficiency of handling NPLs for VAMC 2.2 Specific research objectives - Firstly, Systematizing the theoretical issues of NPLs, NPLshandling of credit institutions and the effectiveness of NPL handling of Asset Management Company Clarifying the implication of NPL handling; factors affecting the efficiency of handling NPLs; - Secondly, Studying the experiences of other countries in dealing with NPLsthrough the Asset Management Company and drawing lessons for Vietnam; - Thirdly, Assessing the status of NPL handling of VAMC in the period of 2013-2019, building a model of factors affecting VAMC's NPL solutionresults - Fourthly, Proposing appropriate solutions for VAMC to improve the efficiency of handling NPLs 2.3 Research questions Firstly: What is the effective handling of NPLs of the Asset Management Company? What criteria to evaluate the effectiveness of of handling of NPLs of the Asset Management Company? What factors affect the effectiveness of handling of NPLs of the AssetManagement Company? Secondly: How is the actual situation of VAMC's NPL handling period 2013 - 2019? How is the impact of factors on the effectiveness of VAMC's NPL handling period 2013-2019? Thirdly: What is the solution to improve the efficiency of VAMC's NPL handling? In order to implement such solutions, what support does VAMC need from the concerned agencies? Research subject and scope 3.1 Research subjects The thesis studied the effectiveness of dealing with NPLs of the Asset Management Company with respect to Vietnamese credit institutions 3.2 Research scope - Regarding the content: The dissertation researches the effectiveness of dealing with bad debts of the Asset Management Company with respect to Vietnamese credit institutions - Research period: From 2013-2019 Research method The thesis uses a combination of qualitative research methods and quantitative methods New contributions of the thesis 5.1 Theoretical contributions Firstly, the thesis has systematized the basic issues of NPLs, the effectiveness of handling NPLs of the Asset Management Company Second, The thesis has studied the experience of handling NPLs through the Asset Management Companies of several countries in the World From there, draw valuable lessons for VAMC in dealing with NPLs Third, the thesis has built a quantitative research model with 10 factors affecting the effectiveness of VAMC's NPL handling The research results show the different influence level of factors on the effectiveness of VAMC's NPL handling that previous studies have not been verified 5.2 Practical contributions Firstly, the thesis has analyzed in detail the effectiveness of VAMC's NPL performance in the period of 2013-2019 Especially, by collecting information through survey questionnaires, the thesis has evaluated and analyzed the factors affecting VAMC's NPL performance Second, propose a number of solutions and recommendations to improve the effectiveness of VAMC's handling of NPLs The solutions and recommendations have somewhat followed the theoretical analysis and practical assessment of the effectiveness of VAMC's NPL handling The structure of the thesis In addition to the introduction, the list of references and appendices and layout of the thesis is divided into chapters, tables, figures and graphs as follows: Chapter 1: Overview of research on the topic Chapter 2: Basic theory of the effectiveness of the NPL Management Company Chapter 3: Actual situation of solving NPLs of VAMC Chapter 4: Solutions to improve the efficiency of handling NPLs for VAMC CHAPTER I OVERVIEW OF RESEARCH ON THE TOPIC 1.1 OVERVIEW OF FOREIGN RESEARCH WORKS 1.1.1 There is no single or optimal definition of NPL in previous studies 1.1.2 All studies have come to the unanimous consequence of the NPL 1.1.3 Many studies have pointed out the causes of NPLs arising from both the macro and the banks 1.1.4 Previous studies have shown that in order to deal with NPLs, it is necessary to apply a variety of debt handling measures 1.1.5 Establishing a Asset Management Company to handle debts is necessary, the effectiveness of debt management of the Asset Management Company depends on many factors 1.2 OVERVIEW OF DOMESTIC RESEARCH WORKS 1.2.1 The cause of arising NPLs comes from both objective and subjective reasons from the credit institution itself 1.2.2 Studies have pointed out the limitations of VAMC's NPL handling and proposed solutions to improve the effectiveness of VAMC's NPL handling 1.3 RESEARCH GAPS  About theoretical research Previous studies have provided a theoretical basis for the effectiveness of of VAMC's NPL handling, but has not been systematic and updated recently, especially in the period of 2013- 2019  About practical research Firstly, there is no scientific work to comprehensively study the NPLhandling activities of VAMC, especially in the period from 2013-2019 Secondly, from different research perspectives, the authors have previously analyzed a few factors affecting VAMC's performance without a comprehensive analysis and evaluation of influencing factors, the level of influence of Factors to the effectiveness of VAMC's handling of NPLs The author has presented comprehensively the factors affecting VAMC's bad debt handling activities, built a model to assess the impact of each factor, so that VAMC could have a base to build an evaluation model influence level of each factor, from which there are suitable solutions Thirdly, in order to offer a solution to improve the NPL handling efficiency of the Asset Management Company, it must have a comprehensive evaluation in a certain period.Some studies on VAMC are only conducted for a short period of time like a year or two whenVAMC is put into operation Therefore, previous studies have not had a comprehensive and specific view, so the proposed solutions may no longer be suitable for the current operation of VAMC CHAPTER 2: BASIC THEORY ABOUT THE EFFECTIVENESS OF HANDLING NPL OF THE COMPANYASSET MANAGEMENT 2.1 BASIC THEORY OF NPL 2.1.1 The concept of NPL According to the author, the bad debt must be approached and assessed at the repayment ability of the customer This means that a loan may be in due or overdue, if the lender (credit institution) assesses that the customer has signs of default or suspects repayment, it can be classified as NPL 2.1.2 The cause of NPL a) Objective reasons  From customers Losses in business activities of customers Customer ethics  From the environment Regulatory environment Some credit programs under the Government's design are not reasonable Natural environment such as natural disasters, floods, fires, crop failures, epidemics Economic environment b) Subjective causes Strategy and Risk appetile Credit policies and processes are weak, inconsistent and professional The organization of internal inspection and control was lax Staff quality is low Lack of supervision and risk management after lending 2.1.3.Indicators for measuring NPLs - Scale and structure of NPLs - NPL ratio = total NPLs / total outstanding debt - NPL ratio compared to equity = total NPL/ total equity - NPL ratioto the contingency reserve fund = total NPL / the loss fund balance -The ratio of non-performing loans to the total value of collaterals = total nonperforming loans / the total value of collaterals - NPL ratio = ratio of total debt and off-balance sheet commitments from group to group against total debt and off-balance sheet commitments from group to group + Moodys’: ≤ 2%; + FDIC: assess asset quality by levels with increasing risk level: level is the best asset level, the risk level is very low, not worrying while level reflects the worst asset level , have the highest risk to financial institutions (FDIC, 1997); + AIA CAMELS: ≤ 1% (AIA, 1996); + Viet Nam: ≤ 3% 2.2.THE EFFICIENCY OF MANAGEMENT COMPANY HANDLING BAD DEBT OF THE ASSET 2.2.1.Asset management company 2.2.1.1.Asset Management Company concept Asset Management Company, abbreviated to AMC, or Asset Management Company, is a type of debt management and asset exploitation company In each country, depending on economic conditions and development policies of each country, the debt management and asset exploitation company has its own names, characteristics, rights and obligations However, the debt management and asset exploitation company can be considered as a special-purpose institution with special responsibilities and power in performing the function of buying, selling and managing doubtful debts from the banking system and handle those debts optimally 2.2.1.2 Types of Property Management Company There are two types of Asset Management Companies: State Asset Management Company and Private Asset Management Company, namely: 2.2.1.3 Characteristics of the Asset Management Company Characteristics of the Asset Management representativeness, independence and effectiveness Companyexpressed through 2.2.1.4 Functions and duties of the Asset Management Company a) Purchase of bad debts: Buy debt at the book value of the debt; Buy debt at market value b) Tasks of handling bad debts after the purchase  Dealing with debts: Debt sale; Directly manage debts and restructure debts through converting debts into contributed capital; Authorize another bank or other organization to manage and handle the debt; Securitizing bad debt  About handling collateral of debt: Selling collateral; Invest, repair, upgrade and lease properties; Other duties such as consulting, brokerage for debt and asset trading; Financial investment, capital contribution, stock purchase; Guarantee for customers with bad debts to borrow money at banks; Joint venture, cooperation to manage and handle assets;auction of debt/asset of debt 2.2.2.Effectiveness of handling NPLs of the Asset Management Company 2.2.2.1.The concept of effectiveness of handling NPLs of the Asset Management Company Considering AMC's handling of bad debts, AMC's bad debt handling efficiency is the relationship between AMC's own debt settlement results and VAMC's expenses, and AMC's NPL handling efficiency is considered between the efficiency of AMC's NPL handling and the whole sector's NPL handling efficiency 2.2.2.2.The criteria for evaluating the effectiveness of handling NPLs of the Asset Management Company a) System of quantitative criteria Target 1: Ratio of AMC’s NPLs (original balance of balance sheet) purchased from credit institutions compared to total NPL balance of credit institutions Target 2: The ratio of NPLs handled by AMC to the total NPLs handled by credit institutions Target 3:AMC's NPL recovery rateto purchased NPLs Target 4: Proportion of outstanding loans, debt restructured customers / total NPLs in the balance sheet, purchased AMC customers of credit institutions Target 5: Proportion of outstanding loans recovered from collaterals /total recovered outstanding debts Target 6: The proportion of NPL handling methods to total handled NPLs Target 7: Capital turnover for debt settlement b) System of qualitative criteria The suitability and spread of AMC's NPL handling results Diversity and suitability of debt settlement methods Attractive level of parties involved in debt settlement (buyers, sellers, brokers, the support of the authorities 2.2.2.3.Factors affecting the efficiency of handling of NPLs of the Asset Management Company a) Group of subjective factors  First: Model and organizational structure of AMC  Second: Functions and duties of AMC  Third: Capital capacity of AMC  Fourth: Human resources of AMC  Fifth: Information technology system b) Objective factor group  First, the development of the NPL trading market  Second: The system of legal documents related to NPL handling  Third: Viewpoints, cooperation of debt selling credit institutions  Fourth: The support of the authorities  Fifth: The operation of debt trading companies 2.3 EXPERIENCE WITH DEBT HANDLING THROUGH AMC OF SOME COUNTRIES AND LESSONS FOR VIETNAM 2.3.1 Background of birth of AMCs 2.3.1.1 AMC Korea (KAMCO) was established in 1997, due to a reorganization from the Asset Management Company of the Korea Development Bank (KDB) 2.3.1.2 Four Chinese AMCs were established in 1999 amid rising NPLs due to a centrally planned economic mechanism 2.3.1.3 With the entry of Deposit Insurance, Japan established Debt Collection and Recovery Agency - RCC, Industrial Reconstruction Agency - IRCJ to handle 2.3.1.4 NPLs One of the three solutions to solving NPLs of Malaysia is to set up the national AMC - Danaharta 2.3.2 Ownership of AMCs 2.3.2.1 AMC Korea - KAMCO is a non-bank financial institution with state ownership of over 50% 2.3.2.2 Four Chinese AMCs are owned by four Chinese state-owned commercial banks 2.3.2.3 The Japanese AMCs are owned by Deposit Insurance 2.3.2.4 Danaharta - AMC Malaysia is wholly owned by the state 2.3.1 Legal system that operates AMC 2.3.3.1 The Malaysian Act 587 gives Danaharta a lot of power in dealing with NPLs 2.3.3.2 If the Malaysian Act 587 gives Danaharta the power to buy debt and manage 2.3.3.3 2.3.3.4 unprofitable companies, the Hamco Kamco act gives Kamco the powers of debt buying and debt settlement (securitization) debts and property seizures to handle debts ) To create a legal framework for the handling of NPLs Japan has amended a number of relevant laws China lacks a unified legal system for AMCs, with too many discrete legal instruments governing the activities of AMC 2.3.4 Effective handling of NPLs of AMCs 2.3.4.1 In general, Kamco was effective, the NPL dropped sharply to 2.3% in 2002 After years of losses, banks started making profits from 2001 and grew rapidly from 2002 and stable development so far 12 Table 3.3: Debt purchase results by special bonds 2013-2019 No Criteria Number of customers The amount of NPLs 2013 2014 2015 2016 2017 2018 2019 Accumulated to31/12/2019 933 5.254 8.836 832 414 500 162 16.931 1.511 8.597 14.310 1.240 562 761 381 27.363 Outstanding balance of balance sheet 35.563 89.941 107.644 42.183 32.601 30.917 20.544 359.393 30.926 75.812 99.143 40.035 31.839 29.812 19.846 327.413 (VND billion) Purchase price (billion dong) Source: Report of VAMC's activities for the years 2013-2019  Classification of debts bought by special bonds Table 3.4: Classification of NPLs which VAMC purchased with special bonds based on the type of Credit Institutions Unit: VND billion Joint stock commercial bank Financial company Total 10.82 20.044 30.926 Proportion 35,19% 64,81% 0% 100.% Purchase price 29,641 46.171 285 75.812 Proportion 39,10% 60,90% 0,38% 100% Purchase price 44.516 53.965 662 99.143 Proportion 44,90% 54,43% 0,67% 100% Purchase price 4.804 34.998 233 40.035 Proportion 12,00% 87,42% 0,58% 100% Purchase price 31.820 19 31.839 Proportion 99,94% 0% 0,06% 100% No Year Criteria SOCB 2013 Purchase price 2014 2015 2016 2017 13 2018 2019 Total Purchase price 13.426 16.260 126 29.812 Proportion 45,04% 54,54% 0,42% 100% Purchase price 19,833 13 19.846 Proportion 0% 99,93% 0,07% 100% Purchase price 135.089 191.271 1.338 327.413 Proportion 41,26% 58,42% 0,41% 100% Source: Author compiled from VAMC software Table 3.5: Classification of NPLs VAMC purchased by special bonds according to the Plan of the period 2013-2019 Unit: VND billion No Type Joint stock company Limited 2013 2014 2015 2016 2017 2018 2019 Total 10.409 34.610 47.009 12.834 18.432 24.941 17.046 165.281 13.725 29.084 33.817 14.172 5.669 1.862 841 99.170 Business households and individuals 4.749 9.200 13.098 12.255 7.650 2.507 409 49.868 Private enterprise 1.377 1.898 2.506 761 31 24 1.087 7.684 Government company 99 627 1.831 - - 315 180 3.052 459 102 56 - - - 623 108 291 825 12 51 162 283 1.732 company Foreign6 invested enterprises Other Total 30.926 75.812 99.143 40.035 31.839 29.812 19.846 327.413 Source: Author compiled from VAMC software 14 Table3.6: Classification NPLs that VAMC bought with special bonds based onindustry groups from 2013 to 2019 Unit: VND billion No Name of Industry 2013 2014 2015 2016 2017 2018 2019 Total Real estate business 8.602 11.878 20.151 9.073 4.857 2.385 974 57.92 Construction industry 4.104 8.945 8.497 5.088 15.631 4.863 2.679 49.807 Wholesale and retail industry; Repairing automobiles, motors, motorbikes and other motor vehicles 2.924 9.81 10.271 969 1.622 13 244 25.853 3.823 7.818 8.136 2.31 357 2.53 244 25.218 Processing industry Transportation and warehousing industry 956 3.745 6.29 1.699 876 37 365 13.968 Agriculture, forestry and fishery 1.067 3.186 3.457 2.83 457 57 1.705 12.759 Other services 6.73 20.93 33.022 13.774 6.456 88 487 81.487 Other 2.72 9.5 9.318 1.583 Total 4.291 19.839 13.149 60.4 30.926 75.812 99.142 40.034 31.839 29.812 19.846 327.411 Source: Author compiled from VAMC software c) Debt purchase results by market value Table 3.7: Debt purchase results by the 2013-2019 equity period 2013 2014 2015 2016 2017 2018 2019 Lũy kế Numbers of the debt - - - - 40 37 83 Number of customers / customer groupshang - - - - 14 16 36 - - - - 2.939 2.943 2.131 8.013 - - - - 3.141 2.819 2.247 8.207 Criteria Principal billion) balance(VND Purchase billion) price (VND Source: Report of VAMC's activities for the years 2013-2019 d) Debt handling results Table 3.8: VAMC's debt collection and settlement results for the period 2013-2019 15 Unit: VND billion Criteria 2013 2014 2015 2016 2017 2018 2019 Lũy kế Return value from NPLs which bought by special bonds 146 4.875 17.142 28.853 30.852 33.964 31.372 146.942 Return value from NPLs which bought based on market price 0 0 3.548 1.630 5.178 30.852 37.512 32.740 152.120 Total 146 4.875 17.142 28.853 Source: Report of VAMC’s activities for the year 2013-2019 Table3.9: VAMC debt collection and settlement results for each method Unit: VND billion TT 2013 2014 2015 2016 2017 2018 2019 Lũy kế 1.773 1.183 4.860 6.472 10.925 16.661 41.874 Purchased by special bonds 1.773 1.183 4.860 6.472 10.234 15.411 39.933 Purchased by market price 0 0 691 1.250 1.941 Sale of collaterals 490 4.180 6.356 4.865 5.200 6.468 27.559 Purchased by special bonds 490 4.180 6.356 4.865 2.392 6.284 24.567 Purchased by market price 0 0 2.808 184 2.992 Other methods 146 2.612 11.779 17.637 19.515 21.387 9.611 82.687 NPLs purchased by special bonds 146 2.612 11.779 17.637 19.515 21.332 9.521 82.442 NPLs purchased by market price 0 0 55 90 245 146 4.875 17.142 28.853 30.852 37.512 32.740 152.120 Criteria Debt sale Total Source: Author compiled from VAMC software 3.2.2.3Measure the effectiveness of VAMC's handling of bad debts a) Criteria 1: 16 Table 3.10: Ratio of NPLs purchased by VAMC (according to balance sheet principal) from credit institutions to total outstanding loans of credit institutions Unit: VND billion No Year NPLs VAMC bought according to principal 2013 2014 2015 2016 2017 2018 2019 35.563 89.941 107.644 42.183 35.316 33.860 22.675 116.490 214.920 131.820 150.120 144.590 158.875 157.289 30,53% 41,85% 81,66% 28,1% 22,39% 19,46% 13,06% balance of balance sheet Total number of NPLs of credit institutions Proportion Source: SBV Report and VAMC Report b) Criteria 2: Table: 3.11: Proportion of NPLs handled by selling debt to VAMC compared to total NPL handled by credit institutions Unit: VND billion No Year are 2013 2014 2015 2016 2017 2018 2019 NPLs handled through 35.563 89.941 107.644 42.183 35.316 33.860 22.675 selling debts to VAMC (VNDbillion) Total NPLs handled by commercial 87.977 143.550 186.894 118.493 115.541 163.141 159.733 banks (VND billion) 40,42% 62,65% 57,60% 35,60% 30,76% 20,76% 14,20% Proportion Source: SBV Report, VAMC Report c) Criteria 3: Table 3.12: NPL recovery ratio of VAMC compared to purchased NPLs 17 Unit: VND billion,% NPL purchased by special bonds Year Accumulated recovery amount NPL bought according to market value Accumulated Accumulated Accumulated Recovery Recovery purchase recovery purchase rate rate price amount price 2013 146 30.826 0,5% 2014 5.021 106.538 4,7% 2015 22.163 205.681 10,8% 2016 51.016 245.716 20,8% 2017 81.868 277.547 29,5% 3.141 0% 2018 115.570 307.359 37,6% 3.548 5.960 59,5% 2019 146.680 327.413 44,8% 5.178 8.207 63,1% Source: Report of VAMC's activities for the years 2013-2019 d) Criteria 4: Table 3.13: Percentage of outstanding loans, restructured customers / total NPLs in the balance sheet, purchased VAMC customers of commercial banks Unit: VND billion No Criteria Total principal balance of NPLs on the balance sheet which is restructured by VAMC Total principal balance of NPLs on the balance sheet NPLs restructuring ratio 2013 2014 2015 2016 2017 2018 2019 813 606 1.411 480 2.946,6 35.563 89.941 107.644 42.183 35.540 33.860 22.675 0% 0,9% 0,56% 3,34% 1,35% 0,02% 12,99% Source: Report ofVAMC’s activities for the year 2013-2019 e) Criteria 5: Table 3.14: Percentage of outstanding NPLs recovered from handling of collaterals on 18 total outstanding NPLs recovery Unit:VND billion No Criteria Returns handling collaterals 2013 2014 2015 2016 2017 2018 2019 from 490 4.180 6.356 4.865 5.200 16.661 Total returns 146 4.875 17.142 28.853 30.852 37.512 32.740 Proportion 0% 36,37% 6,90% 16,84% 20,98% 29,12% 19,76% Source: Report ofVAMC’s activities for the year 2013-2019 f) Target 6: Table 3.15: Proportion of debt settlement methods to total handled NPL Unit: VND billion No Implementation methods Selling assets fixed Selling debt Other measures Proportion of recovery by each method 2013 2014 2015 2016 2017 2018 2019 0% 10,05% 24,38% 22,03% 15,77% 13,86% 19,76% 0% 36,37% 6,90% 16,84% 20,98% 29,12% 50,89% 100% 53,58% 68,71% 61,13% 63,25% 57,01% 29,36% Source: Report of VAMC's activities for the years 2013-2019 g) Target 7: Table 3.16: VAMC's market capitalization cycle Unit: VND billion Result of debt purchase (VND billion) Circle of capital No Year VAMC capital (VND billion) 2013 500 0 2014 500 0 2015 500 0 2016 500 0 2017 2.000 3.141 1,57 2018 2.000 2.819 1,41 2019 5.000 2.247 1,12 Source: Authors' summary 3.2.3Analysis of factors affecting VAMC's NPL handling performance 19 3.2.3.1Building a research model a) Official scale b) Research models c) Develop research hypotheses 3.2.3.2Design scales, survey tables 3.2.3.3Assess the reliability of the scale by Cronbach's Alpha coefficient 3.2.3.4EFA discovery factor analysis a) EFA discovery factor analysis for the independent variable b) EFA analysis for the dependent variable Table 3.17: KMO test for dependent variables KMO and Bartlett’s Test KMO value (Kaiser-Meyer-Olkin of Sampling Adequacy) Bartlett’s statistical Approx, Chi-Square quantities (Bartlett’s Test Df of Sphericity) Sig, 0,705 5689.626 1035 000 (Source: SPSS 20.0 output) c) Rotation matrix of factors 4.2.3.5 Linear regression analysis Model running results: VAMC's NPL handling efficiency = 2,981+ 0,139 Functions and duties of VAMC + 0,136 VAMC's capital capacity + 0,156 VAMC's personnel + 0.222 VAMC's technology +(- 0.263 Development of debt trading market) 3.2.3.6 Analysis of quantitative research results 3.2.3 Assessing the effectiveness of VAMC's handling of NPLs in the period 2013-2019 3.2.3.1 Result Firstly, VAMC has shown its mission role in dealing with NPLs, VAMC has contributed to bringing NPLs of the whole CI system to below 3% Secondly, the handling of NPLs through VAMC is a tool to help the State Bank identify and transact NPLs Thirdly, the handling of NPLs through VAMC in the period of 2013-2019 is consistent with Vietnam's economic and political conditions, spreading the results of handling NPLs Fourthly, credit institutions have reduced financial pressure, have more capital to increase credit activities, and have more power to handle debts through selling debts to VAMC Fifthly, customers with NPLs have the opportunity to once again be reviewed by VAMC to review the business situation, reconsider in debt restructuring 20 3.2.3.2Limitations and causes a) Limitations Firstly, VAMC has not fully implemented 10 assigned tasks under the Government's direction in Decree No 53/2013 / ND-CP Secondly, VAMC's debt purchase value according to market value is low, not yet showing the leading role of debt trading market Thirdly, VAMC has not promoted its role in mobilizing other capital sources to carry out market debt purchase Fourthly, the results of VAMC's special debt collection by VAMC have not shown the efficiency of VAMC's debt resolution Fifth, VAMC has not shown the effectiveness in debt restructuring and supporting customers b) The causes of the limitations  Subjective reasons Firstly, VAMC staff is still lacking, not much experience in dealing with NPLs, especially in supporting corporate finance Secondly, the current organizational structure model of VAMC will no longer be suitable in the coming time when VAMC fully implements its duties according to Decree No 53/2013 / ND-CP and implements new operations Thirdly, the new Risk Management is initially implemented Fourthly, VAMC does not have an information system connecting with credit institutions to update information about NPLs and collaterals of NPLs for debt settlement Fifthly, the facilities have not met VAMC’s operational requirements  Objective reasons from mechanisms and policies related to debt handling Firstly, the legal corridor for trading and dealing with NPLs has been formed but scattered in many different regulations There is no specific law on dealing with NPLs, and there is no law on debt securitization Secondly, the regulations on seizureof collateral have actively supported the handling of NPLs of VAMC, but there are still problems when implementing Thirdly, the regulations restricting mortgage registration when receiving additional collaterals are land use right, not encouraging investors to buy VAMC's debt Fourthly, there has been no policy to attract foreign investors to participate in Vietnam's debt trading market Fifthly, the current law has no specific guidance on the valuation of NPLs, leading to inconsistent implementation and not ensuring transparency and objectivity 21 Sixthly, there is no legal regulation on the case of land use right registration, the ownership of land-attached assets applies to debt-buying individuals who are not debt purchase and sale organizations under Resolution No 42/2017 / QH14 Seventhly, debt trading is still limited in transaction models and modes Objective reasons from credit institutions, characteristics of debts and collateral of debts Firstly, NPLs have been generated for a long time and are difficult to recover Secondly, conflicts of interest in the process of buying, selling and handling NPLs between VAMC and credit institutions Thirdly, reporting and updating information were inaccurate, leading to problems in information processing and proposing debt settlement plans  Objective reasons from customers Firstly, VAMC is very difficult to implement debt restructuring activities because few customers meet the debt restructuring conditions as prescribed Second, customers not cooperate, oppose, delayin settling debt 22 CHAPTER 4: SOLUTION TO IMOROVE THE EFFICIENCY OF HANDLING NPLs FOR VAMC 4.1 ORIENTATIONS, THESIS AND OBJECTIVES TO IMPROVE THE EFFICIENCY OF HANDLING NPLs FOR VAMC 4.1.1.Orientations The guidelines and policies of the Party and the State, the regulations of the National Assembly, the Government, and the Prime Minister states clearly that the development orientation of VAMC needs to focus on improving the capacity of VAMC to buy and sell NPLsbased on the market price associated with handling of mortgaged assets, protecting the lawful and legitimate interests of creditors as well asallocating appropriate resources to quickly and completely handlingNPLs 4.1.2.Thesis Thesis 1: It is necessary to improve the institution and legal framework in dealing with NPLs to promote the role of VAMC as a tool of the Government and the State Bank in the process of handling NPLs Thesis 2: Strengthening VAMC's ability to handle bad debts in terms of capital, technology and human resources Thesis 3: Besides dealing with bad debts quickly, it is necessary to promote measures to support enterprises such as debt restructuring or financial support Thesis 4: Dealing with bad debts must ensure the openness, transparency, safety and development of the State's capital 4.1.3.1 Objectives Period 2020 - 2025 The total accumulated NPLs purchased until the end of 2020 will be at least VND 330,000 billion; By the end of 2020, completing basically the handling of NPLs purschased with special bonds (excluding NPLs purchased with special bonds by weak credit institutions, which may cause risks to the system).From 2021, VAMC will strengthen the handling of NPLs purchased according to market price, as well as continue to handle NPLs bought by special bonds and bad debts of weak credit institutions, which may cause risks to the system; Establishing and developing the NPLs trading market, where VAMC plays a central role of the market; Fully implement the operations of VAMC according to Decree 53/2013 / ND-CP 4.1.3.2 Objectives for the period 2026 - 2030 Expand activities such as Debt securitization, Provide debt collection services; Civil judgment execution and property handover orders; Promote financial investment activities, aiming to build VAMC into an institution with a financial intermediary role 23 4.2 Solutions to improve the efficiency of handling NPLs for VAMC 4.2.1.Solutions group about models, functions and tasks 4.2.1.1.Implement enough duties according to Decree No 53/2013 / ND-CP and add new tasks 4.2.1.2.Perfecting the model, organizational structure 4.2.2 Group of capital solutions 4.2.2.1 Increase financial resources for VAMC 4.2.2.2 Improve the efficiency of other capital mobilization 4.2.2.3 Effective management of VAMC's capital resources 4.2.3 Group of solutions on risk management capacity 4.2.3.1.Completing the system of processes, internal regulations on NPL trading and handling 4.2.3.2.Establish a risk early warning system 4.2.3.3.Control customers after buying debt 4.2.3 Group of human resource solutions 4.2.3.1 Improve recruitment mechanism and process 4.2.3.2 Train high-quality debt handling staff 4.2.3.3Have appropriate policies for employees 4.2.4.Technology solutions group 4.2.5.Group of other complementary solutions 4.2.5.1.Establishing the Club of NPL trading organizations to establish Association of NPL trading 4.2.5.2 Improve the capacity and role of intermediaries in the market 4.3 SUGGESTIONS AND RECOMMENDATIONS 4.3.1 Recommendations to the National Assembly 4.3.1.1 Develop a law to handle NPLs 4.3.1.2 Develop a Debt Securitization Law 4.3.2 Recommendations to the Government 4.3.2.1 Proposing the National Assembly to promulgate the Law on handling NPLs and the Law on securitization of debts 4.3.2.2 Modify functions and duties of VAMC in Decree No 53/2013 / ND-CP 4.3.2.3 Approving to increase charter capital for VAMC 4.3.3 Recommendations to the State Bank Firstly, Proposal to promulgate the Law on handling bad debts Secondly, submit to raise charter capital for VAMC Thirdly, submit to amend and supplement Decree No 53/2013 / ND-CP Fourthly, approve the VAMC Development Strategy for the period of 2019-2025 and orientations to 2030 24 Fifthly, approve the scope of activities and personnel for VAMC in accordance with the operational capacity of VAMC in each period Sixthly, direct the formulation and approval of the Scheme on establishment of NPL trading floor and AMC Club Seventhly, assume the prime responsibility and coordinate with the concerned ministries and branches in directing the handling of debts 4.3.4 Recommendations to Ministries 4.3.4.1 Recommendations to the Ministry of Finance 4.3.4.2 Proposals to the Ministry of Justice and the People's Court 4.3.4.3 Recommendations to the Ministry of Planning and Investment 4.3.4.4 Recommendations to the ministries, localities 25 CONCLUSION The thesis "Enhancing the efficiency of handling NPLs of the Asset Management Company to Vietnamese Credit Institutions" has achieved the following results: Firstly, the thesis has codified theoretical issues on NPLs, NPL handling, the NPL handling efficiency of the Asset Management Company; Secondly, the dissertation studies experiences of other countries on handling NPLsthrough AMC and draws lessons for Vietnam; Thirdly, the thesis assesses the actual situation of NPL handling of VAMC in the period of 2013-2019, building a model of factors affecting VAMC's NPL handling results; Fourthly, By identifying the results, limitations and causes of the limitations of VAMC, the project develops the orientations, views and goals of dealing with NPLsby 2025 and the orientation of 2030; propose a synchronous, feasible, scientific and practical solution to improve the efficiency of handling NPLs for VAMC LIST OF SCIENTIFIC RESEARCH WORKS Nguyen Manh Hung, Nguyen Thi Kim Quynh, Nguyen Manh Thao (2016), The results of interest rate reduction in Vietnam for the period 2007-2015 and recommendations, Banking Science & Training Journal No 171- August 2016 Nguyen Thi Kim Quynh (2016), Solution to buy and sell NPLs at market value of VAMC, Journal of Science & Training Bank No 171- August 2016 Nguyen Manh Hung, Nguyen Thi Kim Quynh and partners (2017), Completing the model and mechanism for handling NPLs of VAMC Company, Scientific research project at branch level, code: DTNH.025 / 16 Phan Huu Nghi, Nguyen Thi Kim Quynh (2019), Securitizing NPLs: International Experience and Lessons for Vietnam, National Workshop on the Fourth Industrial Revolution: Entrepreneurship and Business Development Vietnamese businesses ... turnover for debt settlement b) System of qualitative criteria The suitability and spread of AMC's NPL handling results Diversity and suitability of debt settlement methods Attractive level of... optimally 2.2.1.2 Types of Property Management Company There are two types of Asset Management Companies: State Asset Management Company and Private Asset Management Company, namely: 2.2.1.3 Characteristics... limited; Vietnam has not really formed a debt trading market; This is also the main reason making debts that VAMC collected(sao khoản nợ lại thu mua), although quite large, (con số xử lý) are still