In the morning of June 5, 2023, at the fifth session of the 15th National Assembly, Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) provided a briefing on the draft revised Law on Credit Institutions.
Improving the legal frameworks for monetary and banking operations, restructuring of the credit institutions to ensure a prudent banking sector
According to the SBV Governor, the formulation of the draft revised Law on Credit Institutions is aimed to improve the legal frameworks on the credit institutions’ operations, address the shortcomings and limitations of the current Law on Credit Institutions; codify several regulations to create a legal corridor for the resolution of non-performing loans (NPLs) at the credit institutions
Moreover, the draft revised Law is also expected to strengthen the risk control, further enhance the self-inspection capacity, the internal control and the self-accountability of the credit institutions; develop tools for the management of the credit institutions; detect at an early stage any violations and ensuring the accountability and liability of the management personnel and leaders at the credit institutions; etc.
The draft revised Law will also help to ensure a prudent banking sector; enhance the means of inspection and supervision by the SBV, in coordination with the Government Inspectorate, the Ministry of Finance and other Ministries/agencies to better manage and control the credit activities, prevent any manipulation, cronyism, cross ownership; supplement regulations on response measures in an event of mass withdrawals; supplement effective mechanisms for the restructuring of a credit institution which is put under special control measures.
The SBV Governor also mentioned that the formulation of the draft revised Law on Credit Institutions had followed closely the policy of the Party and the resolutions of the National Assembly, and had been aligned with the directions and guidance of the Government and the Prime Minister, the international experience and the banking development strategy.
Improving the governance and administration capabilities of the credit institutions
About the governing scope, the draft revised Law has inherited the regulations as stipulated in the current Law on Credit Institutions; amended and supplemented regulations on the resolution of NPLs and their collaterals. About the subjects of application, the draft revised Law supplements additional subjects being the institutions with 100% state ownership operating in debt trading and handling. Moreover, the draft Law amends and supplements a number of terms, codifies several regulations in the direction of common principle for policy banks, etc.
The draft revised Law also amends and supplements several regulations in order to improve the governance and administration capabilities of the credit institutions, such as increasing the responsibilities of the members of the Boards of Directors; the amendments and supplementations of regulations on independent members of the Boards of Directors in order to separate the governance and management functions, as well as to protect the legitimate interests of individual and small shareholders; the amendments and supplementations of regulations on the internal audit, the tasks and authority of the owner of a credit institution in order to be consistent with the laws on the management and the use of the state capital invested into enterprises, etc.
An overview of the NA session on June 5, 2023
For the credit institutions being cooperatives, the draft revised Law has supplemented the cases in which it is forbidden for the related persons of the members of the Boards of Directors, members of the Supervisory Boards, Directors and Deputy Directors, to assume certain positions at the credit institutions; supplemented requirements related to qualifications and conditions for a manager/leader of a cooperative bank or a people’s credit fund; amended and supplemented regulations on the number of members of the Supervisory Board at a people’s credit fund.
In addition, the draft revised Law has also amended and supplemented regulations on the related persons; regulations on reducing the maximum ownership ratio of a shareholder, a shareholder and their related persons; supplemented the rights and obligations of a manager/leader at a credit institution; etc.
Creating favorable conditions to expand the credit accessibility of the people
The SBV Governor shared that, in order to improve the credit accessibility of the people, the draft revised Law has amended and supplemented regulations on the credit granting activities in the direction of simplifying the procedures for the consumer loans, small loans serving daily life needs; creating a legal corridor for providing banking services via electronic means, such as the supplementation of a regulation on granting credit via electronic means; the regulatory sandbox framework for fintech in the banking sector, etc.
The draft revised Law also clarifies the nature of a letter of credit; supplements the operations of treasury services, etc.; amends and supplements the functions and tasks of the Cooperative Bank in order to improve its role in the system of people’s credit funds, etc.
In order to limit the risks from the credit concentration, according to Governor Nguyen Thi Hong, the draft revised Law has also amended and supplemented regulations on the credit limits in the direction of reducing the credit limits applied to a customer, a customer and their related persons; amended and supplemented regulations on the limits of capital contributions and share purchases at a credit institution, etc.
Le Hang