A proposed regulation on collateral seizure could have major implications for Vietnam’s credit market. Defining “only” The first draft of a Government decree on “conditions for seizing collateral tied to bad debts” states that lenders can seize collateral only if it is not the borrower’s sole home and not their main or only tool for earning a living. The State Bank of Vietnam (SBV), which drafted the proposal, said the intent is to protect borrowers, ensuring they maintain basic living conditions. “Seizing collateral could worsen the borrower’s financial hardship, making it tough for them to support themselves or their families. Likewise, taking their only home could also leave them without a place to live,” the SBV noted. One sticking point is how to define “only” and who confirms it. Under the draft, borrowers must declare and prove that the asset in question is their only home or primary working tool. This requirement could lead to extra costs and paperwork, especially if third-party verification is needed during loan approval or collateral seizure. The SBV also acknowledged risks for lenders. “Imposing limitations on the seizure of a sole residential property used as collateral could also create risks for lenders. A borrower or […]
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