Creating a legal corridor for handling bad debts of credit institutions
Authorized by the Prime Minister to present the Report on the draft Law on Credit Institutions (amended), Governor of the State Bank of Vietnam Nguyen Thi Hong said that the drafting of the Law on Credit Institutions (amended) aims to perfect regulations and handle difficulties and inadequacies of the law on credit institutions; legalize to create a legal corridor for handling bad debts of credit institutions.
In addition, the development of the Law on Credit Institutions (amended) aims to strengthen risk prevention, enhance the capacity for self-inspection, internal control, and self-responsibility of credit institutions; develop tools to manage credit institutions; early detection of violations and timely handling of responsibilities of individuals managing and operating credit institutions; strengthen decentralization and delegation of authority associated with inspection, supervision, and individualization of individual responsibilities; ensure publicity and transparency in banking activities...
Regarding the viewpoint on law making, the Governor of the State Bank of Vietnam said that the drafting of the Law on Credit Institutions (amended) needs to closely follow the viewpoints of the Party and the State in order to perfect the legal framework on currency, banking activities, and restructuring of credit institutions to ensure system safety, enhance transparency, publicity, and be consistent with market principles and international best practices, facilitating the digital transformation process in the banking sector. The drafting of the Law on Credit Institutions (amended) needs to overcome current obstacles and shortcomings; refer to international practices and experiences, and be consistent with the development strategy of the banking sector.
Regarding the scope of regulation, the draft Law inherits the provisions of the current Law on Credit Institutions and adds the handling of bad debts and handling of collateral of bad debts. Regarding the subjects of application, the draft Law adds the subjects of application to be organizations in which the State owns 100% of the charter capital and has the function of buying, selling and handling debts...
Regarding the organization, governance and operation of credit institutions, the draft Law amends and supplements many regulations to improve the governance and operation capacity of credit institutions such as enhancing the responsibility of members of the Board of Directors, amending and supplementing regulations on independent members of the Board of Directors to separate governance and operation functions as well as protect the legitimate rights of small shareholders; expanding human resources for the position of independent members of the Board of Directors; supplementing regulations on handling the absence of legal representatives, amending and supplementing regulations on the internal control system; amending and clarifying the content of requirements on independent audit; amending and supplementing regulations on the duties and powers of owners of credit institutions to be consistent with the law on management and use of State capital invested in enterprises, etc.
The Governor of the State Bank of Vietnam said that, with the aim of creating conditions to improve people's access to credit, the draft Law has amended and supplemented regulations on credit granting, including simplifying procedures for consumer loans and small retail loans for daily life; creating a legal corridor for the provision of banking services via electronic means, promoting digital transformation in banking activities such as supplementing regulations governing credit granting activities via electronic means; supplementing regulations on the Controlled Testing Mechanism and implementing new products, services, and business models in banking activities; regulations on requirements to ensure the safety of electronic transactions in banking activities...
Regarding the restrictions to ensure safety in the operations of credit institutions, to limit risks from credit concentration, the draft Law amends and supplements regulations in the direction of reducing the credit limit ratio of a customer, a customer and related persons. At the same time, the draft Law also amends and supplements regulations adjusting the capital contribution and share purchase limits of credit institutions to increase the popularity in the operations of credit institutions.
In addition, regarding finance, accounting, and reporting, in addition to inheriting regulations on finance, accounting, and bookkeeping, the draft amended Law aims to legalize some contents that have been applied stably and for a long time, such as: regulations on internal audit, independent audit, risk provisioning; financial management, capital use, revenue, and expenses; fund provisioning and use; purchase and investment in fixed assets, etc.
Consider amending credit limits
Presenting the report on the review of the Draft Law on Credit Institutions (amended), the Economic Committee agreed with the necessity of amending the Law on Credit Institutions. Chairman Vu Hong Thanh said that the Economic Committee agreed with the necessity of amending the Law on Credit Institutions for the reasons stated in the Government's Submission.
Regarding the conformity of the draft Law on Credit Institutions (amended) with the Constitution, relevant laws and compatibility with international commitments and treaties, the Inspection Committee believes that the draft Law is consistent with the provisions of the 2013 Constitution and is basically consistent with relevant laws. However, it is recommended to continue reviewing and updating the draft Law with provisions in relevant laws, especially laws that will be submitted to the National Assembly for approval at the 5th Session, to minimize conflicts and inadequacies in the implementation of the provisions of the Law in the future; review FTAs to ensure compatibility with international commitments and treaties.
Regarding some specific contents, the Inspection Committee believes that, regarding the credit limit (Article 127), it is recommended to consider amending the credit limit, because: Reducing the total outstanding credit balance will immediately affect the capital supply for the economy, especially in the context that the stock market and corporate bond market are not really stable capital mobilization channels for the economy and still have many risks; It may negatively impact Vietnam's FDI attraction due to reduced domestic borrowing capacity.
In addition, expanding the definition of related persons while simultaneously narrowing the total credit limit granted to a customer and related persons will have a double negative impact on both customers and banks; In case of syndicated loans or reporting to the Prime Minister, it will take more time and procedures because the credit limit is narrower than the current Law; International practice all stipulates a higher rate (about 25%) than the provisions in the draft Law.
There are opinions suggesting that in case of applying this regulation, there should be a roadmap for loans and borrowers who borrowed capital before the effective date of the Law to ensure that capital flow does not suddenly stop, affecting production and business activities.
Regarding early intervention of credit institutions (from Article 144 to Article 148), the Inspection Committee proposed: Review all regulations in the Chapter on early intervention in the direction of minimizing State support or having very specific conditions, especially solutions to support loans from the State Bank, the Cooperative Bank, the Deposit Insurance of Vietnam, credit institutions with 0% interest rate and special lending without collateral; consider not using special lending sources from the Cooperative Bank, the Deposit Insurance of Vietnam and credit institutions; for early warning cases, it is necessary to review and legalize cases of enhanced supervision that have been implemented stably and effectively in practice to properly demonstrate the nature of "early intervention", not to convert handling measures in special control cases into cases of early intervention.
In particular, increase the responsibility of shareholders/capital contributors, managers and supervisors of credit institutions that allow weak credit institutions to occur, and at the same time prescribe strong and drastic sanctions against the above subjects to enhance the effectiveness of policy implementation, ensuring compliance with principles and regulations on handling losses and damages according to the provisions of the Civil Code and the Labor Code;.
In addition, it is necessary to define and prescribe appropriate measures to handle credit institutions that suffer from mass withdrawals; Clarify measures applicable to credit institutions and foreign bank branches to ensure appropriateness; Clarify the responsibility of the State Bank to monitor, inspect and supervise the implementation of the plans.
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