Vietnamese NPLs: Towards A Secondary Debt Trading Regime?

The Vietnamese banking system has struggled to recover from the non-performing loan (NPL) hangover caused by high credit growth and loose lending practices in recent years. The first step in tackling NPLs was the formation of the Vietnam Asset Management Company (VAMC) in 2013 (as reported in 2013 in "Vietnam Launches Asset Management Company to Tackle Non-Performing Loans") and the subsequent strengthening of its capabilities (as reported in 2015 in "The New and Improved Vietnam Asset Management Company"). Whilst this framework provided a mechanism for Vietnamese credit institutions to sell their NPLs to VAMC in exchange for special bonds that matured in five years, thereby enabling the banks to provision for the NPLs over a five-year period, VAMC was merely a warehousing structure to house the NPLs before returning them to the bank's balance sheets. Though Moody's found that NPLs fell to 6.8% of total lending by the end of 2016, the improvements are partly driven