Conflicts of Rights and Interests in the Enforcement of Secured Assets by Banks in Vietnam

(Legal Framework Update 2026)

Category: In-depth Legal Analysis – Specialized Legal Services Practice Area: Banking & Finance Disputes, Secured Transactions Service Positioning: Lawyers Protecting Borrowers and Security Providers Author: HT Legal VN Law Firm – Ho Chi Minh City, Vietnam

1. Structural Imbalance in Credit Relationships

In credit relationships and secured transactions, the imbalance of legal position and practical capacity between banks and borrowers or security providers is an objective and structural reality of the financial market. This is not merely an issue arising from individual cases, but rather a systemic characteristic inherent in modern banking operations.

From both a legal and practical perspective:

• Banks design lending conditions, credit documentation, standard-form contracts and internal debt recovery procedures based on specialized banking regulations.
• Key contractual terms concerning interest rates, adjustment margins, penalty interest, security obligations and events of default are largely pre-drafted, leaving borrowers with minimal bargaining power.
• Banks possess sophisticated legal teams, risk management systems, extensive financial resources and comprehensive customer data, granting them a decisive advantage once disputes arise.

As disputes emerge, banks are typically the proactive party, able to initiate enforcement measures and legal proceedings, while borrowers and security providers often find themselves in a defensive position, facing financial pressure, accumulating interest and the imminent risk of losing secured assets.

2. Legal Basis for the Right to Enforce Secured Asset

The Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions 2025 (Law No. 96/2025/QH15), effective from 15 October 2025, introduced Article 198a, which for the first time provides a relatively comprehensive statutory framework governing the right of credit institutions to take possession of secured assets in Vietnam.

Pursuant to Article 198a of the Law on Credit Institutions (as amended in 2025), credit institutions are only entitled to take possession of secured assets if all statutory conditions are satisfied and the enforcement is conducted in strict compliance with prescribed procedures.

Under the structure and spirit of Article 198a, it is clear that:

A bank’s right to take possession of secured assets is not automatic or unconditional. Such right may only be exercised when all legal conditions are fully met and the enforcement strictly complies with statutory procedures.

3. Statutory Conditions for Enforcement

Pursuant to Clause 2, Article 198a of the Law on Credit Institutions as amended in 2025, a credit institution may only take possession of secured assets relating to a non-performing loan if all of the following conditions are met:

1. A circumstance giving rise to enforcement of secured assets has occurred in accordance with Article 299 of the Civil Code of Vietnam;
2. The security agreement expressly provides that the security provider consents to the secured party’s right to take possession of the secured assets upon enforcement;
3. The security interest has taken effect against third parties in accordance with applicable laws on secured transactions;
4. The secured assets are not subject to pending court disputes, interim injunctive measures, distraint or enforcement security measures, and are not subject to suspension under insolvency or bankruptcy proceedings;
5. The secured assets satisfy specific conditions for possession as stipulated by the Government;
6. The credit institution has duly fulfilled its statutory obligations on public disclosure of information prior to enforcement.

Failure to satisfy any single condition renders the enforcement legally invalid and exposes the bank to potential disputes and liabilities.

4. Disclosure Obligations and the Role of Local Authorities

Vietnamese law requires credit institutions to comply with specific disclosure obligations prior to taking possession of secured assets. These obligations serve as a procedural safeguard aimed at ensuring transparency and preventing arbitrary enforcement.

In practice, local People’s Committees and local police authorities may be present during enforcement primarily for the purpose of maintaining public order and safety. Their involvement does not confer enforcement authority upon banks, nor does it legitimize enforcement actions that fail to comply with statutory requirements.

Critical legal questions therefore arise:

• To what extent can local authorities verify the legality of enforcement documentation?
• Who bears responsibility if enforcement is carried out based on defective procedures or unlawful grounds?
• Where should the boundary be drawn between civil enforcement and administrative intervention?

5. Regulatory Gaps in Valuation and Disposal of Secured Assets

Key stages of enforcement—including asset valuation, appointment of valuation firms, selection of auctioneers and disposal of assets through auction or asset appropriation—are largely conducted by banks themselves under internal procedures.

The absence of an independent and robust supervision mechanism at these stages creates significant legal and practical risks:

• Potential undervaluation of secured assets;
• Loss of asset value to the detriment of borrowers and security providers;
• Disputes concerning the accountability of involved organizations and individuals in cases of misconduct or procedural violations.

These gaps highlight the need for careful judicial oversight and effective dispute resolution mechanisms, particularly where enforcement actions have immediate and irreversible consequences.

6. Social and Legal Implications

From a social perspective, enforcement actions involving the presence of authorities can exert substantial psychological pressure on borrowers and security providers. In many cases, individuals struggle to distinguish between lawful civil enforcement and acts resembling administrative or criminal measures.

This reality underscores the importance of:

• Transparency regarding the role and authority of each participating entity;
• Strict limitation of enforcement powers within the civil law framework;
• Prompt recourse to judicial resolution when serious disputes arise.

As a matter of principle, the enforcement of secured assets constitutes a form of civil self-protection, not an exercise of judicial or administrative power. Any conflict exceeding reasonable and lawful boundaries must ultimately be resolved by competent courts in accordance with the principle of equality before the law.

7. The Role of Lawyers in Balancing Rights and Interests

Based on extensive experience in handling banking and secured transaction disputes, HT Legal VN observes that early involvement of legal counsel enables borrowers and security providers to:

• Accurately understand their rights and obligations;
• Assess the legality of enforcement actions;
• Mitigate risks arising from procedural violations or information asymmetry.

HT Legal VN provides comprehensive legal support throughout the enforcement lifecycle, including:

• Reviewing credit and security documentation;
• Representing clients in negotiations with banks;
• Protecting clients’ interests during enforcement, litigation and judgment enforcement;
• Proposing legally sound solutions aimed at balancing interests, upholding the rule of law and minimizing social conflict.

Conclusion

Vietnamese law does not grant banks an absolute or unconditional right to take possession of secured assets. Enforcement is strictly conditional, procedurally regulated and subject to legal scrutiny.

Understanding these limitations is essential for all stakeholders. Proper legal advice and timely intervention remain critical in safeguarding lawful rights and ensuring that enforcement mechanisms operate within the boundaries of the rule of law.

Legal References

• Law No. 96/2025/QH15 amending and supplementing the Law on Credit Institutions of Vietnam (Article 198a)
• Civil Code of Vietnam 2015 (Article 299)

This article is for general legal reference purposes only and is based on current Vietnamese law and dispute resolution practice. The application of legal principles may vary depending on specific facts and circumstances.