VNBA drafts Handbook on the out-of-court debt restructuring

The meeting was held in accordance with Resolution No. 181/NQ-HDHH dated April 16, 2025 of the VNBA Council, which agreed on the policy of developing and issuing the Handbook on Out-of-Court Walkout (OCW) (or . At the same time, the contents related to the process of developing and issuing the Handbook on Out-of-Court Debt Restructuring - an important document in supporting the handling of bad debts and restructuring of enterprises in a non-litigation direction. This is an important step towards unifying the mechanism for handling bad debts and potentially risky debts between credit institutions (CIs) and enterprises.

Dr. Nguyen Quoc Hung, Vice Chairman cum General Secretary of VNBA, chaired the meeting. The Handbook is one of two important documents developed by VNBA with technical support from the International Finance Corporation (IFC), along with a set of documents on debt collection culture. Both contents have been reviewed and agreed upon by the Standing Committee of the Banking Association Council.

In his speech directing the meeting, Dr. Nguyen Quoc Hung - Vice Chairman and General Secretary of VNBA emphasized: the development of this Handbook is a step to institutionalize the policy of debt settlement under the conciliation and non-litigation mechanism, contributing to improving the efficiency of bad debt settlement in the credit institution system, while approaching international practices and the trend of perfecting the legal framework in Vietnam.

According to Dr. Nguyen Quoc Hung, the framework of the Handbook has been built with advice from the International Finance Corporation (IFC), the current key work is to review, edit and perfect the structure, content and form. The draft will be widely consulted with agencies such as the State Bank of Vietnam, the Supreme People's Court, the Supreme People's Procuracy, ministries, branches... before being officially issued.

In the context of many enterprises borrowing capital from many credit institutions with different conditions, the lack of coordination in debt settlement can lead to the suspension of all debt repayment obligations, including secured loans. The development of the Out-of-Court Walkout Handbook will help form a coordination mechanism between creditors, similar to the Paris Club's "Creditors' Committee" model. This approach will create conditions for enterprises with the potential to recover to restructure proactively and effectively, while preserving credit resources and limiting losses for the entire system.

Out-of-court debt restructuring with many creditors, before the debt repayment deadline, is understood as a friendly negotiation process between enterprises and credit institutions, aiming to readjust loans and operating structures, helping enterprises overcome difficulties and prevent the risk of bankruptcy.

The goal of this process is: Increase debt recovery rates for credit institutions, reduce bad debts; Avoid unnecessary bankruptcy for resilient businesses; Protect stakeholders (employees, suppliers, customers, etc.); Reduce the burden on the judicial system; Contribute to financial stability, maintain economic growth, and reduce unemployment.

Dr. Nguyen Quoc Hung emphasized: “This Handbook is not a legal document, but a guideline based on model principles, with recommendations. However, it can create a practical basis for banks and businesses to act in a unified manner, support effective debt handling and protect common interests.” Dr. Nguyen Quoc Hung requested the Drafting Team to work seriously, review all legal regulations, inherit practical experience, and at the same time build a feasible and easy-to-apply process. Issues such as determining the conditions for application, the lead organization, new lending criteria, the role of “seed capital”, processing time, the level of consensus between the parties, etc. all need to be carefully considered and consensus obtained.

At the meeting, representing the Handbook Drafting Team, Lawyer Nguyen Hung Quang, Director, CEDR Mediator of the International Finance Corporation (IFC) presented the main contents of the Draft Handbook, including: Applicable conditions; Debt restructuring process (the name will be adjusted to suit the nature of “out-of-court restructuring”); Processing procedures; Time and coordination mechanism; Implementation mechanism; Supporting appendices.

Participating in comments to complete the Handbook, representatives of member banks affirmed that the Handbook is a very necessary document, contributing to creating a unified reference framework when handling common debts. In fact, many credit institutions have implemented separate debt handling procedures, leading to a lack of synchronization when participating in financing a business.

Some opinions said that the phenomenon of disagreement in behavior between credit institutions is not uncommon, especially when the credit granting rate is different. This makes the negotiation and restructuring process prolonged, even to the point of failure. There are cases where businesses attempt to restructure but only receive support from a few organizations, while other units “sit still”.

An issue of concern to many delegates is determining the time when a loan is “no longer able to repay” according to current regulations. Accordingly, only short-term loans with a remaining term of less than 4 months are eligible for restructuring, while revolving loans usually have terms of 6 to 9 months. Many opinions suggest that there should be a more flexible and practical view.

According to international experience, there should be an independent intermediary such as a law firm to coordinate the lenders. In Vietnam, this role can be initially assumed by the Vietnam Banking Association: receiving documents, inviting meetings, connecting credit institutions and supporting the establishment of creditor groups. However, to operate effectively, it is necessary to clearly identify the “leader” - the organization that plays the main coordinating role in the group of creditors, which can be the unit with the largest outstanding debt, holding collateral or having prestige in the system.

Legally, there are opinions that it is necessary to distinguish between debt restructuring according to Circular 39/2016/TT-NHNN of the State Bank and debt restructuring in a broader sense. If this is determined to be a comprehensive restructuring activity, it is necessary to propose a separate mechanism to ensure that it does not violate current regulations.

In addition, the regulations on interest exemption and reduction, currently regulated internally by each bank, also need to be reviewed and guided in a unified manner to improve the ability to coordinate and support businesses effectively.

Accordingly, representatives of credit institutions agreed that: in order for the debt restructuring mechanism to be implemented substantially, it is necessary to identify the right subjects, and at the same time have a clear and appropriate legal basis. The Handbook, once issued on schedule and built on the basis of close coordination between relevant parties, will be an important tool to contribute to improving the efficiency of debt settlement, business recovery and protecting the safety of the credit system.

During the process of developing the Handbook on debt restructuring outside of court, members of the Editorial Board focused on discussing many core issues, to ensure that this document is not only consistent with international practices but also closely related to legal and professional practices in Vietnam.

One of the contents of interest is the new lending mechanism for restructured loans. Delegates suggested clarifying the criteria for capital allocation: equally divided among banks or based on the current outstanding debt ratio of each credit institution. This is an important issue, affecting fairness and substantive cooperation between lenders in the debt restructuring process.

The issue of responsibility for managing loans after restructuring was also clarified. When agreeing to grant new credit, it is necessary to specifically identify the focal management organization, the person in charge (leader), and the coordination mechanism between banks in monitoring, supervising and supporting businesses. Some organizations such as the Military Bank (MB) have successfully implemented this model, thanks to clear assignment of roles and drastic actions. However, with large, multi-bank loans, the processing process will be more complicated and require synchronous and transparent coordination.

If the Handbook recommends using “seed capital” to support business recovery, it is also necessary to clearly identify the responsibilities of the parties for this capital. The lack of a specific assignment of responsibilities can make the guidance a formality, difficult to implement in practice.

The meeting agreed to assign Mr. Nguyen Thanh Son, Director of the Training Center, VNBA as the Team Leader, and discussed effective working methods to complete the draft Handbook as soon as possible.

The principle throughout is: The Handbook must be consistent with international practices but not contrary to Vietnamese law. Some terms such as "debt restructuring" or "debt restructuring" need to be used carefully, avoiding duplication or conflict with current legal documents such as the Bankruptcy Law, Circular 39/2016/TT-NHNN, Circular 03/2023/TT-NHNN, etc.

Finally, the members emphasized that this Handbook is not a mandatory legal document, but a guiding, consensual and voluntary document. However, once signed, the parties need to have a cooperative and goodwill attitude, avoiding disputes or lawsuits, which could affect the trust and effectiveness of debt settlement of the entire system.

Concluding the meeting, Dr. Nguyen Quoc Hung - Vice Chairman and General Secretary of the Vietnam Banking Association highly appreciated the serious working spirit and enthusiastic contributions from the members of the Drafting Team. He emphasized that the development of the Handbook on Out-of-Court Debt Restructuring has practical significance in supporting credit institutions in handling bad debts and potentially risky debts, especially in the context of the legal corridor on bankruptcy being completed.

Dr. Nguyen Quoc Hung asked the members to continue to promote a sense of responsibility, proactively study documents in depth and actively participate in the process of completing the document. "This is an essential task to improve risk management capacity and ensure the safety of the financial - banking system", he emphasized.

According to the plan, after completing the initial draft based on the synthesis of opinions from the members of the Editorial Board, the document will be widely sent to credit institutions for comments within 5 days. On that basis, the Working Group will continue to coordinate with relevant agencies to review, unify and complete the content.

During the completion process, the Working Group plans to closely coordinate with the Legal Department of the State Bank and representatives of the Vietnam Asset Management Company (VAMC) to ensure the legality and enforceability of the document.

Dr. Nguyen Quoc Hung hopes that the Handbook will become a useful reference tool, contributing to promoting transparency, consensus and efficiency in the process of negotiating, handling debt and restructuring enterprises. He affirmed that this document does not aim to prescribe specific legal responsibilities, but aims to establish model principles so that credit institutions and businesses can share approaches and work towards solutions that benefit the entire system.

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