On the afternoon of January 15th, during discussions on the draft Law on Credit Institutions (amended), many opinions focused on the issue of the State Bank of Vietnam considering and intervening early when foreign banking institutions operate at risk with customers.
The draft Law on Credit Institutions adds a provision requiring the State Bank of Vietnam to issue a written decision to terminate early intervention in credit institutions and branches of foreign banks. According to Representative La Thanh Tan ( Hai Phong ), this provision has changed the nature of early intervention.
According to the delegates, this change has shifted early intervention from a remote, early intervention mechanism by the regulatory authority to a specific handling phase. With the early intervention mechanism, when a credit institution is found to be in a situation requiring early intervention, the State Bank of Vietnam sends a document to the credit institution outlining requirements and restrictions to address operational issues and allow it to return to normal operations. This is not a document deciding to place the credit institution under early intervention. The State Bank's document clearly states the requirements and restrictions, along with the deadlines for their implementation. The requirements and restrictions from the State Bank of Vietnam cease when the implementation period ends, once the credit institution has rectified its problems; therefore, a document deciding to terminate early intervention is not necessary.
The delegate argued that the regulations as drafted in the bill could negatively impact the market, creating a risk of mass withdrawals, and therefore this regulation needs careful consideration.
Regarding the State Bank's decision to intervene early, and whether or not a document was issued, Deputy Pham Duc An ( Hanoi ) agreed with Deputy La Thanh Tan that the issue of making and withdrawing that decision should not be raised.
Representative Ha Sy Dong ( Quang Tri ) expressed concern about regulations for handling weak credit institutions. He argued that panic or "fleeing" from banks, and the threat of contagion risks that jeopardize the system's safety, frequently occur in commercial banks. When such incidents occur, good international practices, as well as Vietnam's costly lessons learned, indicate that the State Bank of Vietnam, as the central bank, should be given more and stronger authority to respond quickly and effectively to banking incidents, minimizing losses and preventing systemic safety risks.
Representative Doan Thi Le An (Cao Bang) argued that controlling the shareholding ratio could affect banks. Specifically, according to the revised draft law, the shareholding ratio for individual shareholders is proposed to remain at the current level, which is 5%. The limit for institutional shareholders (including shares indirectly owned by those shareholders) is reduced from 15% to 10%; and for shareholders and related parties, it is reduced from 20% to 15%. The purpose of reducing this shareholding ratio is to eliminate cross-ownership and the use of shareholding ratios to manipulate and control the operations of credit institutions by a few large shareholders or groups of shareholders.
However, the delegate argued that adjusting this ownership ratio is not very meaningful in limiting cross-ownership because it only controls the process on paper. Controlling the ratio is less important than monitoring the implementation of the regulation, not to mention the potential for creating barriers to foreign capital inflow into the banking system, as bank owners holding 15%-20% of the bank's capital cannot manipulate the lending activities of their own institution.
Representative Doan Thi Le An analyzed that, in reality, the recent cases of violations show that the actual ownership percentage of these entities is much higher than stipulated through subsidiaries, affiliated companies, or individuals whose names are listed.
“Revising the law to suit practical realities is essential. However, controlling ownership ratios in banks is not enough to prevent similar cases like SCB from recurring because cross-ownership or bank manipulation is inherently complex. On paper, many shareholders own less than the permitted percentage but still hold controlling power. Therefore, in addition to tightening ownership ratios, the effectiveness of which is still quite vague, it is necessary to consider stricter regulations on the conditions and procedures for granting credit to related customers. Shareholders must have a cross-monitoring system, and a specific legal framework in the financial sector needs to be established to clarify ownership structure, true owners, accountability, and to strictly punish cases of intentional wrongdoing,” suggested Representative Doan Thi Le An.
Responding to the opinions of the National Assembly deputies, the Chairman of the National Assembly's Economic Committee, Vu Hong Thanh, stated that addressing cross-ownership, manipulation, and control by credit institutions is a very important issue, requiring consistent and synchronized measures. Regarding early intervention, the draft law has been revised and incorporated compared to the 6th session, including the addition of a mechanism for review and decision-making; and in some cases, granting the State Bank of Vietnam the authority to act proactively.
Regarding the question of whether a document from the State Bank of Vietnam is needed to decide on ending early intervention, as the delegate expressed concern, the Chairman of the Economic Committee stated that, taking into account the delegate's opinion, the drafting and reviewing agencies will continue to consider the matter to ensure a harmonious balance of relationships between the relevant parties…
PHAN THAO
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