The Vietnam Asset Management Company has begun to issue a new class of bond against bad debts it buys from credit institutions, one that can be traded between the central bank and lenders as well as among the latter.

Earlier the VAMC was issuing special bonds that could not be traded and could only be used as collateral to secure funding from the central bank.

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Another benefit for credit institutions from the new bonds is that they carry a risk ratio of zero percent when calculating their capital adequacy ratio.

Like the old bonds, they too carry a zero interest rate.

Their maturity date will be negotiated between the VAMC and the lenders, but will have a minimum tenor of one year.

The bonds have been created through the State Bank of Vietnam's Circular 14/2015/TT-NHNN, which took effect as of October 15.

The circular states that the VAMC would have to sell the bad debts through an auction or offer the consumers, who are the prospective buyer of the debt, the most competitive prices.

The VAMC could grant authority to credit institutions to sell the bad debt.

Source: VNA