Does a Bank Have the Right to Seize Collateral Assets?
According to the 2025 Amendments to the Law on Credit Institutions (Vietnam)
This article analyzes the bank’s right to seize collateral assets under Article 198a of the Law on Credit Institutions as amended and supplemented in 2025, based on dispute resolution practice and from the perspective of protecting the lawful rights and interests of borrowers and collateral providers.
1. Is the bank’s right to seize collateral an automatic right?
The Law amending and supplementing a number of articles of the Law on Credit Institutions in 2025 (Law No. 96/2025/QH15) introduced Article 198a, which specifically regulates the right of credit institutions to seize collateral assets.
Based on the structure and content of Article 198a, it can be affirmed that the bank’s right to seize collateral is not an automatic right. Such right may only be exercised when all statutory conditions are fully satisfied and when the seizure is conducted in strict compliance with the procedures prescribed by law.
2. Conditions for a bank to lawfully seize collateral assets
Pursuant to Clause 2, Article 198a of the Law on Credit Institutions as amended in 2025, a credit institution is entitled to seize collateral assets securing a non-performing loan only when all of the following conditions are met:
- When a case of handling secured assets occurs in accordance with Article 299 of the Civil Code.
- The security agreement contains an agreement whereby the security provider consents to the secured party’s right to seize the collateral assets of the non-performing loan when a case of handling secured assets occurs in accordance with the law on security for performance of obligations.
- The security measure has taken effect with respect to third parties in accordance with the law on security for performance of obligations.
- The collateral assets are not assets under dispute in a case that has been accepted but not yet resolved or is being resolved by a competent court; are not subject to interim urgent measures applied by the court; are not subject to distraint or enforcement security measures in accordance with law; and do not fall under cases of suspension of handling in accordance with the law on bankruptcy.
- The collateral assets to be seized meet the conditions prescribed by the Government.
- The credit institution, foreign bank branch, or debt trading and handling organization has fulfilled the obligation to publicly disclose information in accordance with Clause 3 or Clause 4 of this Article.
Accordingly, the absence of any one of the above conditions deprives the credit institution of the legal basis to seize the collateral assets.
3. Procedures for public disclosure prior to seizure of collateral assets
3.1. Collateral assets being real estate
Clause 3, Article 198a provides:
“At least 15 days prior to the date of seizure of collateral assets being real estate, the credit institution, foreign bank branch, or debt trading and handling organization must carry out procedures for public disclosure of information on the time and place of seizure, the collateral assets to be seized, and the reasons for seizure.”
Public disclosure of information must be carried out in the following forms:
- Posting information on its website
- Sending written notices to the commune-level People’s Committee and the commune-level police authority where the collateral assets are located
- Posting public notices at the headquarters of the commune-level People’s Committee where the security provider’s address is registered under the security agreement, and at the headquarters of the commune-level People’s Committee where the collateral assets are located
- Notifying the security provider or the person holding the collateral assets (if any) in accordance with the notification method agreed upon in the security agreement.”
3.2. Collateral assets being movable property
Clause 4, Article 198a provides:
“Prior to the seizure of collateral assets being movable property, the credit institution, foreign bank branch, or debt trading and handling organization must carry out procedures for public disclosure of information on the collateral assets to be seized and the reasons for seizure.”
4. Role of local authorities in the seizure of collateral assets
Clause 5, Article 198a provides:
“The commune-level People’s Committee and the commune-level police authority at the place where the collateral assets are seized shall, within the scope of their functions, duties, and powers, ensure security, order, and social safety during the process of seizing collateral assets.”
In cases where the security provider does not cooperate or is absent as notified, a representative of the commune-level People’s Committee at the place of seizure shall participate as a witness and sign the minutes of seizure of the collateral assets.
This provision indicates that the involvement of local authorities does not create or replace the bank’s right to seize collateral, but solely serves to ensure order and safety during the execution process.
5. Legal limits on the seizure of collateral assets
Clause 6, Article 198a provides:
“In the course of seizing collateral assets, credit institutions, foreign bank branches, debt trading and handling organizations, and authorized entities seizing collateral assets in accordance with this Clause must not apply measures that violate prohibitions of law or are contrary to social ethics.”
Clause 7, Article 198a further provides:
“Credit institutions, foreign bank branches, and debt trading and handling organizations must develop and promulgate internal regulations on the procedures for seizing collateral assets, including regulations applicable to the authorization of seizure of collateral assets as prescribed in Clause 6 of this Article.”
6. Legal assessment
From the above provisions, it can be concluded that the 2025 amendments to the Law on Credit Institutions do not grant banks an absolute right to seize collateral assets.
The right of seizure is subject to strict statutory conditions, applicable objects, and mandatory procedures, and is placed within a legal control mechanism aimed at protecting the lawful rights and interests of borrowers and collateral providers.
7. Conclusion
A bank is entitled to seize collateral assets only when all conditions prescribed in Article 198a of the Law on Credit Institutions, as amended in 2025, are fully satisfied and when the seizure is conducted in strict compliance with statutory procedures.
Any seizure that fails to meet these conditions or violates procedural requirements may give rise to disputes and related legal liabilities.
See also: Trusted Lawyer in Vietnam | Nguyen Thanh Trung – Expert in Banking Credit Contract Disputes
Firm Information
HT Legal VN Law Firm is a professional law firm specializing in legal representation and protection of borrowers and collateral providers in banking and credit relationships, banking and credit disputes, security transactions, and civil enforcement proceedings.
With a team of lawyers who have directly handled numerous cases involving borrowers and collateral providers in credit relationships with banks, HT Legal VN focuses on protecting clients’ lawful rights and interests on the basis of strict compliance with law, proper procedures, and prudent legal strategies.
HT Legal VN pursues the professional philosophy: “Right Solutions – Effective Outcomes – Trustworthiness”, accompanying clients not only in dispute resolution but also in long-term legal risk prevention.
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