| Project Detail |
Improving insolvency resolution addresses the acute problem of non-performing loans in the banking sector and reduces the losses of creditors and frees assets for productive purposes. Effective and efficient insolvency and debtor-creditor regimes play a vital role in fostering investor confidence, job preservation and protection of employees. Background The level of non-performing loans within the banking sector in Vietnam is worrisome. The government has committed to improve the regulatory framework to allow for effective debt resolution. However, systemic challenges, i.e. related to the lack of transparency and ownership structure of the banking system, render reform efforts very complex. Reasons for the ineffective insolvency and bankruptcy mechanism are: cumbersome & prolonged procedures, weak capacity of the courts & weak enforcement of court judgements, poor awarness of the advantages of using insovency procedures, an incomplete legal framework for alternative dispute resolution etc. Objectives The project addresses the banking crisis by supporting the clean-up of non-performing loans (NPL) in the system with the goal to mitigate the negative impacts on the countrys economic crisis. By improving the capacity of banks in NPL management, the project will enable them to resolve the current NPLs more effectively and to better recover debts. By strengthening their capacity in risk management, the project will help improve banks asset quality and prevent future NPLs. NPLs that banks cannot revolve themselves can be resolved via either courts or Alternative Dispute Resolution (ADR). Therefore, the project aims to strengthen the bankruptcy legal framework, increase the use of ADR in debt resolution and strengthen the capacity of the financial sector around risk management and debt resolution. By increasing transparency and predictability for investors, the project will enhance investor confidence, which has positive effects on the economy. Medium-term outcomes The revised bankruptcy law and its guiding documents are enacted. The revised insolvency freamework are increasingly utilized. The provisions for fast-track insolvency procedures are adopted. The legal framework for ADR is improved. ADR resolution is increasingly utilized. Good practice in portfolio monitoring and NPL management are adopted. Commercial banks portfolios are improved. Financing to SMEs is increased. Results Expected results: Court resolution on arbitration and decree on commercial mediation are drafted. Relevant stakeholders (judges, arbitrators, mediators) are trained and arbitration center tools are disseminated. Roundtables, media events and other activities promoting ADR are carried out. Information and knowledge on NPL and portfolio management, distressed assets resolution and risk management and SME banking are disseminated. Activities promoting commercial banks understanding and use of different tools and mechanisms for insolvency are carried out. Guidance, manuals and/or tools for banks on portfolio monitoring and NPL management are developed and market participant training is provided. New products and services for lead banks in SME banking are developed. |
