On the afternoon of January 15, discussing the draft Law on Credit Institutions (amended), many opinions were concerned about the issue of the State Bank considering and intervening early when foreign banking organizations operate at risk to customers.
The draft Law on Credit Institutions adds a provision that the State Bank must issue a written decision to terminate early intervention in credit institutions and foreign bank branches. According to Deputy La Thanh Tan (Hai Phong), this provision has changed the nature of early intervention.
According to the delegate, this change has shifted early intervention from the early, remote intervention mechanism of the management agency to a specific handling state. With the early intervention mechanism, when detecting a credit institution in the early intervention case, the State Bank will send a document to the credit institution to implement the requirements and restrictions to overcome the problems in its operations, so that the credit institution can return to normal operations. This is not a document deciding to put the credit institution into early intervention. The State Bank's document clearly states the requirements for restrictions, along with the time limit for implementing those requirements and restrictions. The State Bank's requirements and restrictions will end when the implementation period expires, when the credit institution has overcome its problems, so there is no need for a document deciding to terminate early intervention.
The National Assembly member said that the regulation as in the draft law could have a negative impact on the market, creating the risk of mass withdrawals, so this regulation should be carefully considered.
Regarding the State Bank's decision to intervene early, whether to issue a document or not, Deputy Pham Duc An (Hanoi) agreed with Deputy La Thanh Tan that the issue of making and withdrawing that decision should not be raised.
Deputy Ha Sy Dong (Quang Tri) is concerned about the regulations on handling weak credit institutions. The deputy believes that the problem of panic or "running away" from banks and the threat of spreading risks that undermine the safety of the system often occurs in commercial banks. When such incidents occur, good international practices as well as valuable lessons learned from Vietnam show that the State Bank, as the central bank of Vietnam, should be given more and stronger authority to be able to respond and handle banking incidents quickly and effectively to minimize damage and prevent the risk of system insecurity.
Delegate Doan Thi Le An (Cao Bang) said that controlling the share ownership ratio could affect banks. Specifically, according to the revised draft law, the share ownership ratio for individual shareholders is proposed to be kept as it is currently, that is 5%. The limit for institutional shareholders (including shares that such shareholders indirectly own) is reduced from 15% to 10%; shareholders and related persons are reduced from 20% to 15%. The purpose of reducing this share ownership ratio is to eliminate cross-ownership, using the share ownership ratio to manipulate and control the operations of credit institutions by a number of large shareholders and groups of shareholders.
However, the delegate said that adjusting this ownership ratio does not have much meaning in limiting cross-ownership because this can only be controlled in terms of documents. Controlling the ratio is not as important as supervising the implementation of regulations, not to mention the possibility of creating barriers to prevent foreign capital from flowing into the banking system when bank owners holding 15%-20% of the bank's capital cannot monopolize the lending activities of that organization.
Delegate Doan Thi Le An analyzed that, in fact, recent violations showed that the actual ownership ratio of these entities was much higher than prescribed through subsidiaries, affiliated companies or individuals in their names.
“Amending the law to suit reality is very necessary. However, controlling the ownership ratio at banks is not enough to prevent a recurrence of incidents similar to SCB because cross-ownership or bank manipulation is inherently very complicated. If looking at the documents, many shareholders own less than the permitted ratio but still hold controlling power. Therefore, in addition to tightening the ownership ratio with rather vague effectiveness, it is necessary to consider strict regulations on conditions and procedures for granting credit to related customers. Shareholders must have a cross-monitoring system, it is necessary to establish a specific legal framework in the financial sector to clarify the ownership structure, real owners and accountability, and strictly handle cases of intentional violations,” proposed Deputy Doan Thi Le An.
Explaining the opinions of the deputies, Chairman of the National Assembly's Economic Committee Vu Hong Thanh said that handling cross-ownership, manipulation and control by credit institutions is a very important issue, requiring measures to ensure consistency throughout and to be implemented synchronously. Regarding early intervention, the draft law has been revised and incorporated compared to the 6th session, in which, a review and decision mechanism has been added; in some cases, the State Bank has been given the initiative.
Regarding the issue of whether a document from the State Bank is needed to decide to end early intervention as the Delegate is concerned about, the Chairman of the Economic Committee said that, taking into account the Delegate's opinion, the drafting agency and the reviewing agency will continue to consider to ensure harmony in the relationships between the subjects...
PHAN THAO
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