Illegal regulations make it difficult to borrow capital

Circular 06 is contrary to the Civil Code.

On the first day of the new year, the State Bank of Vietnam (SBV) announced the allocation of the entire credit growth target for 2024 at 15%, much higher than the credit growth rate of the whole year just passed. In particular, the allocation of all credit "room" at the beginning of the year by SBV is in contrast to many previous years when only a part was allocated and continued to be implemented in the middle of the year. This can be seen as a sign to promote credit growth and inject capital into the economy . However, according to many businesses and economic experts, although the credit "room" has increased, when regulations and lending conditions remain unchanged, many companies still have difficulty borrowing capital.

As a result, the capital flow absorbed into the economy may still not reach the set target. One of the current regulations related to lending activities from the commercial banking system is Circular 06/2023 of the State Bank of Vietnam, which has taken effect since September 2023. Specifically, Point c, Clause 6, Article 1 of Circular 06 stipulates that credit institutions "must have measures to block the amount of loan disbursement at the lending credit institution according to the provisions of law and the agreement of the parties in the loan agreement until the termination of the guarantee obligation" which many businesses have reflected as unreasonable and unrealistic.

The regulation on freezing loan amounts in Circular 06 is contrary to the 2015 Civil Code.

Photo: Dao Ngoc Thach

Speaking to Thanh Nien on January 3, Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that he had heard that the Department of Inspection of Legal Documents ( Ministry of Justice ) had just concluded its inspection of Circular 06 of the State Bank of Vietnam. In which, this agency also affirmed that the request to freeze the amount of disbursed loan capital mentioned above was contrary to the provisions on security measures under the 2015 Civil Code.

Since Circular 06 was issued, HoREA has had many documents recommending the review and amendment of some unreasonable regulations, even contrary to relevant provisions of the Civil Law. Including the regulation on blocking the loan disbursement amount mentioned above. In addition, HoREA also believes that Clause 2, Article 22 of Circular 06 requires banks: "In case of lending to pay for capital contribution under a capital contribution contract, investment cooperation contract or business cooperation contract to implement a project, there must be measures to inspect, monitor, and evaluate the financial situation and debt repayment sources of customers, ensure the ability to fully recover the principal and interest of the loan on time as agreed, and control the use of loan capital for the right purpose" has limited the right to use capital of enterprises.

For example, in the case of lending to deposit for future housing purchases, according to Circular 06, the project investor (the party receiving the deposit) has the deposit frozen and is not allowed to use the money deposited by the buyer. This is unreasonable and does not guarantee the ownership of the property owner, including the right to use the deposit.

Meanwhile, the failure of the parties to properly perform the agreement on the guarantee obligation (if any) is within the scope of the 2015 Civil Code. At the same time, in reality, about 30% of customers who buy real estate and future housing borrow credit to make a deposit, but this deposit is frozen by the bank, while about 70% of customers who use their own capital to make a deposit, the money is transferred to the investor's account and the investor has full rights to use it. Therefore, the above regulation is also not suitable for practice.

Need to quickly amend unreasonable regulations

Lawyer Truong Thanh Duc, Director of ANVI Law Firm, said that some regulations in Circular 06 have been proposed for revision in the past, so they need to be implemented quickly from the beginning of the year. In particular, the regulation at Point c, Clause 6, Article 1 of Circular 06 on blocking loan capital is not consistent with other regulations. Specifically, according to the provisions of Article 12 of Decree No. 101/2012 of the Government on non-cash payments, banks are only entitled to block accounts in cases such as when there is a decision or written request from a competent authority as prescribed; when the paying bank discovers mistakes or errors in money transfers; when there is a dispute between joint payment account holders. In addition, banks are only allowed to block accounts in cases where there is an agreement with the account holder.

Furthermore, it must be understood that lending to contribute capital is not a "case of lending to pay money to ensure the performance of obligations" that requires blocking the loan. If understood in the way that the enterprise borrows money but is not allowed to use the money, how can the capital recipient implement the project and fulfill the obligation to the capital contributor? This also means that there must be double collateral (for the bank to lend and for the bank to release the disbursed amount) for the same loan. This regulation is too unreasonable, causing waste of resources, increasing costs for the enterprise, and even confusing the enterprise.

On the last day of the old year 2023, HoREA sent a document to the Prime Minister proposing the implementation of the Government's and the Prime Minister's instructions in the past year but not yet implemented by ministries and branches. In particular, HoREA pointed out that a number of regulations issued by the State Bank of Vietnam were inappropriate. Specifically, HoREA said that in Official Dispatch 1177 dated November 23, 2023 of the Prime Minister, the State Bank of Vietnam requested the State Bank of Vietnam to amend, supplement or abolish inappropriate regulations to facilitate access to credit for people and businesses. Therefore, the association requested the State Bank of Vietnam to review and evaluate the implementation of Circular No. 02/2023, Circular No. 03/2023 and Circular No. 06/2023 in the direction of amending, supplementing or abolishing inappropriate regulations.

Mr. Le Hoang Chau proposed: "In addition to the unreasonable regulations in Circular 06 mentioned above, we also propose that the State Bank of Vietnam remove the regulation on credit institutions controlling the use of loans for the right purposes at Point c, Clause 6 and Point b, Clause 9, Article 1 of Circular 06". Because it is almost impossible for banks to implement this regulation in the case of lending to pay for capital contributions under capital contribution contracts, investment cooperation contracts or business cooperation contracts to implement projects. At the same time, consider abolishing Clauses 8, 9 and 10, Article 8 of Circular No. 39/201 (supplemented by Clause 2, Article 1 of Circular 06) because these regulations have only ceased to be effective from September 1, 2023. Enterprises hope that arising problems will be promptly resolved, ensuring that regulations are consistent, effective, and suitable to the actual situation, contributing to supporting enterprises in particular and the economy as a whole to grow again.

In early December 2023, the Government Office also issued Official Dispatch No. 9470 conveying the Prime Minister's opinion on the content of Thanh Nien Newspaper's reflection on Circular 06. The Prime Minister directed the Governor of the State Bank to study press information to consider and have solutions to handle the reflected content in accordance with regulations and in the spirit of listening to the opinions of relevant entities, businesses, and people to complete a suitable, feasible, and effective legal framework that does not cause congestion or blockage of credit capital flows in the economy.

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