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Legalization of Resolution 42: Impacts and Opportunities for the Banking Sector

• The three core provisions of Resolution 42 include: (1) the right to seize collateral, (2) the attachment of assets used as collateral for non-performing loans (NPLs) by parties subject to enforcement, and (3) the return of collateral used as evidence in criminal cases. These provisions were approved by the National Assembly during its 9th Session of the 15th Tenure on June 27, 2025, and will take effect from October 15, 2025.
• We believe the most significant impact of legalization of Resolution 42 lies in the provision granting the right to seize collateral, which enhances borrowers’ awareness of debt repayment obligations, particularly for NPLs, due to the legal pressure to surrender collateral. Once a loan is classified as non-performing and the borrower is unable to repay, the borrower is required to voluntarily surrender the collateral to the bank for processing (in compliance with legal conditions for seizure) or to dispose of the collateral to settle the debt. This enables banks to avoid initiating lawsuits in cases where the securing party does not cooperate, thereby expediting the collateral recovery process.
• The provision on asset attachment for collateral related to enforcement ensures alignment between the rights of secured creditors, such as credit institutions, and the execution of judgments or decisions by competent authorities. It prevents civil enforcement agencies from attaching pledged or mortgaged assets when the debtor has no other collateral available or when available collateral is insufficient, thereby safeguarding the interests of creditors.
• Regarding the provision on the return of collateral used as evidence in criminal cases, once the evidence verification process is completed and deemed not to affect the case, the competent procedural authority is responsible for returning the collateral to the secured party upon request. This protects the rights of credit institutions to process collateral and accelerates the recovery and resolution of NPLs.
• The codification of Resolution 42 is expected to deliver broad benefits to the banking sector in addressing NPLs. Furthermore, we anticipate that banks with a high retail lending portfolio may benefit more significantly from the seizure and processing of collateral, provided the collateral has clear and complete legal documentation, free from disputes or legal restrictions. Retail loan collateral is typically less complex and easier to process, significantly reducing the costs associated with NPL resolution. This eliminates the need for extensive resource allocation across multiple locations for legal proceedings to seize collateral, as was required after Resolution 42 expired.