Clarifying the responsibility of commercial banks for re-lending if risks occur

In case a commercial bank re-lends to a public service unit that is at risk of not being able to repay its debt, what is the responsibility of the commercial bank? National Assembly Chairman Tran Thanh Man emphasized the need for this provision in the Law. If only a part of the risk must be shared, what is the proportion and on what basis is it determined? If it is not stipulated in the law, the Government should provide guidance.

Ensuring transparency, publicity, proactiveness and effectiveness in public debt management

Speaking at Group 11 (including the National Assembly Delegation of Can Tho City and the National Assembly Delegation of Dien Bien Province) this morning, November 3, on the draft Law amending and supplementing a number of articles of the Law on Public Debt Management, National Assembly Chairman Tran Thanh Man stated that by the end of 2025, public debt is estimated to be about 35 - 36% of GDP, government debt about 33 - 34% of GDP, and foreign debt about 31 - 32% of GDP, all lower than the allowable limit.

National Assembly Chairman Tran Thanh Man speaks at Group 11

"Thus, with the leadership of the Party Central Committee, the Politburo , the Secretariat, the National Assembly promulgating laws, the Government promulgating decrees, and specialized ministries promulgating guiding circulars, the management and operation of public debt in recent years has been relatively good, contributing to achieving the goals of ensuring growth, stabilizing the macro-economy, curbing inflation and ensuring social security," the National Assembly Chairman emphasized.

Informing that the Government plans to submit to the National Assembly a comprehensive amendment to the Law on Public Debt Management in 2026, the National Assembly Chairman stated that the draft Law submitted to the National Assembly at this Session according to a shortened procedure aims at 3 goals:

Firstly, focus on amending and supplementing a number of contents to implement decentralization and delegation of power in line with the State Budget Law and the Public Investment Law.

Second, promoting administrative procedure reform helps speed up the implementation of ODA projects, especially in the current conditions of two-level local government, with many ODA projects located at the commune level.

Third, ensure transparency, publicity, proactiveness and effectiveness in public debt management.

The draft Law supplements 17/63 articles, abolishes some provisions in 5 articles and supplements provisions in 5 articles. The National Assembly Chairman agreed with many contents in the draft Law on: public debt classification, principles of public debt management, contents of decentralization and delegation of authority to the Prime Minister and the Ministry of Finance in some tasks of debt management, and enhances the initiative and responsibility of local authorities in deciding and using the budget.

Regarding the provisions on the allocation and use of ODA capital and foreign preferential loans, the draft Law supplements the provisions: The Government shall prescribe the cases of allocation to the People's Committees of provinces and public service units. The National Assembly Chairman suggested that during the implementation process, the Government must strictly prescribe the conditions for allocation, the allocation rate, and assess the impact on the central budget.

Noting that localities may propose larger foreign loans, while the burden of debt obligations is concentrated in the central budget, the National Assembly Chairman suggested that it is necessary to strengthen the monitoring and sanctioning mechanism, ensure strict management, and effective use of loan capital allocated to localities.

For projects from ODA sources, the locality must have counterpart capital and a guarantee. For localities with conditions, counterpart capital is easy, but for localities with difficulties, such as Dien Bien, it is also very difficult to have counterpart capital, the Central Government must support almost 100%.

National Assembly Chairman Tran Thanh Man speaks at discussion session group 11

"Therefore, the Ministry of Finance has guidelines to facilitate the receipt of ODA capital, ensuring rapid implementation and coordination between the central and local governments in capital allocation. This is an extremely important issue," the National Assembly Chairman emphasized.

Regarding the method of ODA capital lending, the draft Law supplements regulations in the direction that commercial banks re-lend to public service units in the form of lending agencies not bearing credit risks (Clause 2, Article 35); re-lend to enterprises to invest in programs and projects on the state's priority investment list in the form of re-lending agencies bearing part of the credit risks (Clause 4, Article 35).

Proposing to carefully assess the impact of the above contents, the National Assembly Chairman analyzed that the case of re-lending without taking on credit risks could lead to lax procedures for evaluating borrowers, thereby creating large risks concentrated entirely on state agencies.

"Recently, this story has actually happened. Lending is not linked to efficiency, and the lending bank is irresponsible in monitoring the loan, affecting the ability to repay the debt and public debt safety. The most frightening thing is that people borrow this amount but then invest it in something else, and the bank lacks guidance on inspection and monitoring procedures."

Noting the above issue, the National Assembly Chairman requested to clarify how the responsibility of commercial banks is regulated in the law in case of loan default risk. "We must have this provision so that if we only have to share a part of the risk, what is the ratio, and what basis is it determined on, there must be regulations in the law. If the regulations in the law are not suitable, then the Government will guide and issue a decree," said the National Assembly Chairman.

Head of the National Assembly Delegation of Can Tho City Nguyen Tuan Anh chaired the group discussion session.

More clearly define the responsibilities of the appraisal agency deciding to grant government guarantees.

Regarding the issuance of Government guarantees, the draft Law amends the conditions for issuing Government guarantees in the direction that the Ministry of Finance does not appraise financial plans but only relies on the appraisal results of a number of credit institutions at Point g, Clause 1, Article 43.

Believing that such a process does not clearly demonstrate the responsibility of the guarantee-issuing agency, National Assembly Chairman Tran Thanh Man proposed clarifying the creation of additional intermediate levels, increasing administrative procedures, and at the same time not clarifying the responsibilities and obligations of credit institutions appraising financial plans.

"The drafting agency and the reviewing agency must clarify this point. Consider more clearly defining the responsibilities of the appraisal agency that decides to grant government guarantees. This time, the regulations on government issuance and guarantees must be clear. The National Assembly must decentralize more strongly to the Government. As for the content that the Government decentralizes to ministries, branches, and localities, the Government must quickly clarify the administrative procedures," the National Assembly Chairman emphasized.

Bonds should be issued centrally and then allocated to localities.

Regarding the organization of borrowing and debt repayment of local governments, the draft Law stipulates that for the issuance of local government bonds in the domestic capital market, the Provincial People's Committee shall prepare a bond issuance project and report to the Provincial People's Council for approval at Point a, Clause 1, Article 55. Decentralization aims to increase local autonomy, help reduce administrative procedures, shorten issuance time, and create conditions for localities to mobilize capital faster for projects.

However, the National Assembly Chairman pointed out that the complete delegation of authority to the Provincial People's Council to approve the issuance of local government bonds must be done within the total loan amount approved by the National Assembly and within the local budget deficit limit as prescribed to ensure public debt safety.

Group 11 meeting scene

In fact, not many localities have been able to issue bonds recently, except for a few large, developed cities such as Hanoi and Ho Chi Minh City... Therefore, the National Assembly Chairman suggested that bonds should be issued centrally, then the Government will manage and allocate to localities to ensure conditions for borrowing and debt repayment of local authorities, "because if the locality cannot pay, the Government must pay instead".

The National Assembly Chairman requested the Ministry of Finance - the drafting agency - and the Economic and Financial Committee - the appraisal agency - to continue to work hard to review and amend the Law to facilitate better public debt management in the coming time, ensuring public debt is below the allowable limit and contributing to national development.

Pointing out that the public debt issue is also related to the confidence of investors in Vietnam and the people, the National Assembly Chairman suggested that the draft Law must be carefully reviewed, while also promoting information and propaganda work so that people and investors can see that "we have public debt, but ensure effective public debt management".

"The people are most afraid of having a lot of debt. You see, in the world, the bigger the country, the more debt it has, like the US, France, China, Japan, South Korea... As our grandparents said "big boat, big waves", if you want to do business, if you want to develop, you have to borrow from many sources. For example, now we decided to invest in the North-South high-speed railway line, estimated at 67 billion USD, so we have to balance the sources, if the budget is short, we have to mobilize, we have to borrow. Then the urban railway lines of Hanoi, Ho Chi Minh City, the Hanoi - Lao Cai railway line, Hai Phong..., the National Assembly has also decided on the investment policy. The important thing now is that we have to review, calculate the total, the loans of the Central Government, loans of localities, how to develop well. This revised Law on Public Debt Management is also to suit the conditions in which our country strives for double-digit growth from now until 2030, 2045", the National Assembly Chairman emphasized.

Management at one point is effective.

Discussing and clarifying the issues raised by National Assembly Chairman Tran Thanh Man and delegates of Group 11, Minister of Finance Nguyen Van Thang, National Assembly Delegation of Dien Bien province, stated, "This amendment to the Law on Public Debt Management has opened up for enterprises to directly propose instead of having to go through the managing ministry; 100% state-owned companies and subsidiaries of 100% state-owned companies can propose directly.

Sharing the view of the Economic and Financial Committee that the above regulation may cause the risk of the parent company or the parent enterprise "standing outside", the Minister pointed out that in reality, state-owned enterprises that can borrow ODA capital are mainly state-owned corporations and groups. The subsidiaries of these corporations and groups are also very large and proactive in implementing their business plans, so if they are proposed for ODA loans and take responsibility, the procedure will be faster.

Minister of Finance Nguyen Van Thang speaks

However, the Minister also said, "the parent company still has to take responsibility. Now we have to regulate how to minimize internal procedures of each enterprise," the Minister said.

Minister Nguyen Van Thang also pointed out that the biggest difficulty in managing and using ODA capital is that the loan period from the time we raise the issue, negotiate to the time we prepare project documents and sign the agreement takes too much time. This leads to many projects, after signing the agreement, having to wait half the time of the agreement before disbursing, or even after the end of the agreement, the disbursement is not yet complete. Therefore, negotiations must be prolonged, taking a lot of time. If the sponsor does not agree to extend, the project will be unfinished, we will have to change the form, close the project, and look for other sources of capital to continue implementing.

"This is a huge problem for ODA capital sources. Recently, the Ministry of Finance has been very determined in dealing with this," the Minister said.

Specifically, after consulting with the World Bank, the Ministry of Finance reported to the Government and amended the Decree on ODA in accordance with the goal: ensuring that the time for normal loans must be completed within 12 months to sign the agreement, and for very complicated projects, it can take up to 14 months. Only then can ODA loans be effective," Minister Nguyen Van Thang emphasized.

Along with the amendment of the Decree, the Minister stated that this amendment of the Law on Public Debt Management must "integrate all" the problems and topical issues to be managed at one focal point to be effective. "ODA management from now on must ensure a very thorough assessment of financial efficiency," the Minister emphasized.

Source: https://daibieunhandan.vn/lam-ro-trach-nhiem-cua-ngan-hang-thuong-mai-cho-vay-lai-neu-xay-ra-rui-ro-10394129.html