Conditions for seizure of collateral under the Amended Law on Credit Institutions 2025

The Law amending and supplementing several articles of the Law on Credit Institutions No. 96/2025/QH15 passed by the National Assembly on June 27, 2025 and officially effective from October 15, 2025 (“the Amended Law on Credit Institutions 2025”) was issued with the objective of enhancing the safety of the financial system, establishing a clear and transparent legal framework to promote efficient non-performing loan resolution.

One of the most notable contents in the Amended Law on Credit Institutions 2025 is the first-time legalization of the right to seize collateral by credit institutions, branches of foreign banks and debt trading and resolution organizations. This provision addresses a legal gap that has existed for many years and provides a strong legal basis for credit institutions, branches of foreign banks and debt trading and resolution organizations to accelerate the process of resolving non-performing loans, minimize capital stagnation and create conditions for the debt trading market to develop. In this article, TNTP will share with our readers the conditions for seizing collateral under the provisions of the Amended Law on Credit Institutions 2025.

1.Authorized parties eligible to seize collateral

According to the provisions of Clause 1, Article 198a of the Amended Law on Credit Institutions 2025, entities with the right to seize collateral include: credit institutions, branches of foreign banks and debt trading and resolution organizations, hereinafter collectively referred to as the “Debt Settlement Party” or entities legally authorized by the Debt Settlement Party. In which, debt trading and resolution organizations are defined as organizations in which the State owns 100% of the charter capital with the function of buying, selling and resolving debts as stipulated in Clause 4, Article 2 of the Law on Credit Institutions 2024.

Clause 6 of Article 198a of the Amended Law on Credit Institutions 2025 also specifically regulates entities permitted to be authorized to seize collateral as follows:

(i) Credit institutions may only authorize their asset management and exploitation companies to seize collateral;

(ii) Debt trading and settlement organizations may only authorize the selling credit institutions or the asset management and exploitation companies of such selling credit institutions to seize collateral;

(iii) Compulsorily transferred credit institutions may authorize the credit institutions receiving compulsory transfer or the asset management and exploitation company of the credit institutions receiving compulsory transfer to seize collateral.

2.Right to seize collateral of a non-performing loan

According to Clause 1, Article 198a of the Amended Law on Credit Institutions 2025, in cases where the securing party or the person holding the collateral of a non-performing loan does not hand over the collateral and related legal documents to the Debt Settlement Party for handling according to the agreement in the security contract or in another document (“security contract”) and provisions of the law on securing the performance of obligations, the Debt Settlement Party has the right to seize the collateral in accordance with Article 198a.

The Law on Credit Institutions does not provide a definition of non-performing loan; however, according to Clause 5, Article 3 of Circular 31/2024/TT-NHNN, “non-performing loan” (“NPL”) refers to debts in groups 3, 4 and 5 as stipulated in points c, d and e of Clause 1, Article 10 of Circular 31/2024/TT-NHNN and still being recorded in the balance sheet of the Debt Settlement Party .

According to Clause 1, Article 198a of the Amended Law on Credit Institutions 2025, the right to seize collateral only arises for the NPL. This means that if a debt has not been classified as a NPL according to Circular 31/2024/TT-NHNN, the Debt Settlement Party does not have the right to seize collateral under Article 198a. The handling of collateral in this case must follow conventional methods such as: handling according to agreement, filing a lawsuit in court or executing a judgment if there is a legally effective judgment/decision. In other words, Article 198a does not apply to regular debts, but only applies in the special context of NPL resolution as a special mechanism to help Debt Settlement Parties quickly and definitively resolve difficult-to-collect debts to protect the financial system.

In summary, the right to seize collateral of NPLs only arises when the Debt Settlement Party has grounds to determine that the securing party’s debt is a NPL and the Debt Settlement Party has requested the securing party to hand over the collateral for handling but the obligor fails to cooperate.

3.Conditions for exercising the right to seize collateral of NPLs

Based on Clause 2, Article 198a of the Amended Law on Credit Institutions 2025, the Debt Settlement Party has the right to seize collateral of NPLs when simultaneously meeting the following conditions:

(i) There are grounds for handling collateral according to Article 299 of the Civil Code 2015.

(ii) The security contract contains an agreement that the securing party consents to the secured party having the right to seize collateral of NPLs when circumstances arise for handling collateral according to the law on securing the performance of obligations.

According to current regulations, the Debt Settlement Party only has the right to seize collateral if there is a written agreement with the securing party regarding the right of seizure. This means that even if the collateral of a NPL meets all conditions for handling according to the agreement or law, it cannot be seized if there is no prior agreement on asset seizure.

(iii) The security measure has taken effect against third parties according to the law on securing the performance of obligations.

Based on the provisions of Article 297 of the Civil Code 2015 and Article 23 of Decree 21/2021/ND-CP, a security measure takes effect against third parties from the time of registration of the security measure or when the secured party holds or possesses the collateral.

(iv) The collateral is not a disputed asset in a case that has been accepted but not yet resolved or is being resolved by a competent court; is not subject to temporary emergency measures applied by the court; is not being distrained or subject to enforcement security measures according to law; does not fall under cases of temporary suspension of handling under bankruptcy law.

If the collateral falls under one of the above cases, legal priority belongs to the court or enforcement agency. These regulations serve to protect legal order and ensure fairness among various entities with interests related to the same asset. Allowing the Debt Settlement Party to seize collateral in these cases could cause conflicts of interest with other parties having legitimate disputes, obstruct judicial proceedings and enforcement activities of state agencies and affect the rights of other creditors, especially in bankruptcy cases.

(v) The collateral to be seized must meet the conditions stipulated by the Government

(vi) The Debt Settlement Party has fulfilled the obligation of information disclosure as stipulated in Clauses 3 and 4 of Article 198a of the Amended Law on Credit Institutions 2025.

In this article, TNTP has summarized the general contents related to the right to seize collateral. TNTP will continue to share detailed guidance on the procedures for seizing collateral as regulated under the Amended Law on Credit Institutions 2025 in the next article. We hope these updates will assist individuals, businesses and relevant organizations in timely understanding and adapting to the upcoming legal changes.

Sincerely,