NA approves amended Law on Credit Institutions

Members of SCNA during a discussion of the Law on Credit Institutions (amended) in Hà Nội. VGP Photo

HÀ NỘI The National Assembly (NA) passed the Law on Credit Institutions (amended) during an extraordinary meeting in Hà Nội yesterday.

The amended law aims to better regulate the establishment, organisation, operation, early intervention, special control, restructuring, dissolution and bankruptcy of credit institutions; and the establishment, organisation, operation, early intervention, dissolution and termination of activities of foreign bank branches. It also includes the establishment and operation of representative offices in Việt Nam of foreign credit institutions, other foreign organisations engaged in banking activities, the handling of bad debts and collateral assets of bad debts of credit institutions, foreign bank branches, and organisations where the State owns 100 per cent charter capital and has functions of buying, selling and handling debts.

Chairman of the NA Economic Committee Vũ Hồng Thanh said there have been calls to change certain provisions related to cross-ownership, manipulation and control of credit institutions (CIs), as well as measures to reduce the ownership ratio, limit credit issuance, cross-ownership and manipulation in the banking sector. 

The NA Standing Committee (SCNA) said it supports provisions on providing and publicly disclosing information of shareholders with 1 per cent or more of a CI’s charter capital to ensure greater transparency.

The SCNA advised the government to instruct the State Bank of Vietnam (SBV) to enhance coordination with relevant ministries and sectors, along with solutions to improve the effectiveness of inspection, examination and supervision to ensure the highest limitation on cross-ownership, manipulation and control of CIs.

NA deputies have long called for legislation to impose sanctions on violations by CI staff, such as inadequate consultation leading to confusion between insurance and banking products or requiring insurance purchases linked to bank loans, even going so far as to ban commercial banks from affiliating with insurance sales and to prohibit cross-selling of life insurance.

In response, the SCNA added provisions to prohibit CIs, foreign bank branches, managers, operators and employees of CI and foreign bank branches from selling non-mandatory insurance products in connection with banking products and services in any form. Additionally, the SBV Governor will regulate the scope of activities of CI’s insurance agents to align with the nature and activities of the banking sector.

In addition, the amended law requires CIs to improve operational transparency by providing information on reserve for unreleased risks, unallocated interest receivables in financial reports and publicly disclosed financial reports in the draft law.

Under the amended law, the SBV has been tasked with issuing documents for implementation and termination of early intervention. The central bank is responsible for monitoring, supervising, and making sure the issues faced by CIs are resolved. Regarding special lending for People’s Credit Funds, the SCNA supports cooperative banks’ right to decide on special loans. 

In response to the demand by NA deputies, the SCNA has made adjustments to the law by specifying the transfer of the entire or a part of real estate projects as collateral assets for debt recovery. VNS