IMPORTANT UPDATE FOR BUSINESSES: Banks Regain the Right to Seize Collateral Assets – What Should Enterprises Know About This Legal Shift?

Vinex Official
Jun 30, 2025
2 min read

On June 27, 2025, the National Assembly officially passed amendments to the Law on Credit Institutions (LCIs).

Among the key changes, the most significant and impactful is the reinstatement of the right to seize collateral assets — a legal mechanism that was proven effective during the implementation of Resolution 42 (2017–2023).

This legal tool allows banks to take possession of a borrower’s pledged property without requiring a court ruling, provided that the borrower breaches contractual obligations.And now, this right is making a comeback — with greater legal clarity, faster enforcement procedures, and much higher risks for businesses struggling with cash flow issues.

Banks Can Seize Collateral Assets Under the New Law – What Should Businesses Do to Mitigate the Risks? Source: Internet

What Is the Right to Seize Collateral Assets?

The right to seize collateral assets empowers banks and credit institutions to take possession of pledged or mortgaged property without court intervention, as long as certain conditions are met under the loan agreement.

During 2017–2023:

Banks could quickly repossess and liquidate assets
Debt recovery rates rose by 65%
A growing number of borrowers voluntarily repaid loans to avoid asset forfeiture

After Resolution 42 expired, this right ceased to apply. As a result:

Banks were forced to resolve disputes through courts
Debt collection became slower, more costly, and less effective

What Risks Do Businesses Face?

The return of the right to seize collateral assets marks a power shift in favor of financial institutions.

🔺 Businesses may now face:

Immediate seizure of assets — even without a court order
Potential loss of factories, land, equipment, or other critical assets due to minor contractual violations
Disruptions in operations, contracts, and overall credit standing

Especially in a real estate market that’s still recovering, businesses are at risk of falling into:→ Cash flow crises→ Bad debt classification→ Asset liquidation by banks

What Should Businesses Do to Stay Safe?

1. Re-examine all current loan agreements:

Are there clauses that allow banks to seize collateral?
Under what conditions does the clause activate?

2. Assess your financial position:

Are there any overdue payments?
Can your business meet debt obligations in the next 3–6 months?

3. Prepare a risk mitigation plan:

Renegotiate terms before it’s too late
Consider substituting or adjusting collateral if necessary
Engage legal counsel early — not after the crisis starts

Not Just a Tool for Banks

Although the right to seize collateral assets is designed to help banks deal with non-performing loans, it also brings intense pressure on borrowers.

This change can: