Strict regulations on credit conditions and procedures
Delegate La Thanh Tan (Hai Phong) said that regarding early intervention in credit institutions and foreign bank branches, the draft Law submitted to the National Assembly this time adds a provision that the State Bank must have a document terminating early intervention. According to the delegate, this provision changes the nature of early intervention, shifting early intervention from an early, remote intervention mechanism of the management agency to a specific handling state.
With the early intervention mechanism, when a credit institution is found to be in need of early intervention, the State Bank will send a document to the credit institution requesting restrictions to correct operational problems so that the credit institution can return to normal operations. This is not a document deciding to place the credit institution in early intervention. The State Bank's document clearly states the restrictions and the implementation period. The State Bank's requests and restrictions will end when the implementation period expires, when the credit institution has corrected its problems.
The National Assembly discusses in the hall the draft Law on Credit Institutions (amended). Photo: Pham Kien/VNA
With this approach, the State Bank will apply requirements, restrictions or no longer apply requirements, restrictions to credit institutions that are allowed to intervene early without a written decision on early intervention, so there is no need for a written decision to terminate early intervention.
"In the case of having to have a document (decision) for early intervention and then a document (decision) when terminating early intervention, it will be unfavorable information for the credit institution, which can negatively affect the market, affect the psychology of depositors, and create risks of mass withdrawals for the credit institution that received early intervention in particular and the credit institution system in general," the delegate emphasized.
From the above analysis, the delegates proposed to maintain the provisions on early intervention as in the draft submitted to the National Assembly at the 6th Session or to remove the provision that the State Bank must issue a document terminating early intervention in Article 161 of the draft Law. This would be more consistent with international practice, avoiding the case where the market reacts negatively to the case where the State Bank decides to intervene early with the bank.
Point b, Clause 2, Article 43 of the draft Law stipulates: A member of the Board of Directors must not be an independent member. A member of the Board of Members of a credit institution must not concurrently hold the position of manager, executive of another credit institution, or manager of another enterprise.
National Assembly delegate of Thanh Hoa province Vo Manh Son speaks. Photo: Pham Kien/VNA
Delegate Vo Manh Son (Thanh Hoa) said that this regulation aims to avoid conflicts of interest when members of the Board of Directors can influence decisions of the bank to benefit their other businesses. However, it should be considered carefully because it may cause many problems in practice.
“Being a member of the Board of Directors of a credit institution is not a full-time job, so these people often have other jobs. Limiting the conditions for Board members as in the draft Law may lead to difficulty in finding people with enough capacity, experience, and knowledge to join the Board of Directors,” the delegate pointed out.
According to delegate Vo Manh Son, the key issue is to control transactions, especially lending transactions between credit institutions and other enterprises that Board members concurrently manage and operate. Therefore, a more appropriate measure is to strictly regulate the conditions and procedures for granting credit to enterprises in which Board members have related interests.
Protecting the rights of borrowers
National Assembly delegate of Bac Giang province Pham Van Thinh speaks. Photo: Pham Kien/VNA
Delegate Pham Van Thinh (Bac Giang) highly appreciated the process of receiving, explaining, and revising, and expressed high agreement with many contents of the draft Law. The delegate said that in the previous two sessions, the issue of commercial banks acting as life insurance agents was raised, and the drafting agency accepted part of it, but the delegate still had concerns.
The delegate stated: The maximum discount for life insurance agents with two popular life insurance products (term life insurance and mixed insurance) is 4% for the first year's insurance premium. At commercial banks that are affiliated with life insurance agents, there is a phenomenon of suggesting and forcing loan customers to buy life insurance with an annual payment of 2 - 4% of the loan value. At commercial banks, bank employees are assigned targets for the number of insurance contracts and life insurance premium revenue.
The delegate added that according to the inspection conclusion of the Ministry of Finance in July 2023 on 4 life insurance companies providing insurance products to customers through commercial banks, the rate of contract cancellation after the first year of customers is up to 70%. If customers cancel in the first year, they will lose all the premiums they have paid. Just one life insurance company selling through a commercial bank alone had about 2,000 billion VND in insurance premiums that customers canceled in the first year.
Many banks also suggest that borrowers pay fees for the first two years, so the amount of money borrowers must pay is up to 4-8% of the loan value. The real interest rate of capital released into the economy due to the purchase of additional life insurance can increase from 50-100% in the first two years compared to the interest rate on the credit contract.
Citing data from some banks, according to delegate Pham Van Thinh, in the period from 2018 to 2022, income from life insurance agents of commercial banks accounts for a very large proportion of the profits of these banks.
With such great reality and benefits, the delegate said that if the draft Law only accepts the direction of adding Clause 2, Article 113: "Commercial banks are allowed to conduct insurance agency activities according to the provisions of the law on insurance business, in accordance with the scope of insurance agency activities according to the regulations of the Governor of the State Bank", there will be no guarantee for the situation of forcing customers to borrow money to buy insurance or taking advantage of the lack of knowledge of customers with savings deposits to buy life insurance products as in the recent past.
"The ease of cross-selling life insurance through banks has caused commercial banks and insurance companies to ignore professional boundaries and accumulated reputations to enter the profit-seeking vortex," delegate Thinh analyzed.
Delegates suggested that if the ban on cross-selling life insurance through commercial banks is not implemented, the draft Law should add an article assigning the Government to issue regulations on the trading of insurance products for which commercial banks and credit institutions act as agents to ensure publicity, transparency, and protect the rights of customers borrowing capital as well as depositing savings at banks.
This will be good for both the image of commercial banks and especially the life insurance business, a profession that requires more ethics and humanity than many other business sectors.
National Assembly delegate of Dong Thap province Pham Van Hoa speaks. Photo: Pham Kien/VNA
Sharing the same view, delegate Pham Van Hoa (Dong Thap) said that the consequences of joint venture and joint banks selling insurance in the past have been very clear. Insurance companies do not have headquarters but sell through banks, so customers face many difficulties when they have problems that need to be resolved. Mr. Hoa gave an example of the entire Mekong Delta region having 13 provinces but only 2 insurance company headquarters. "I support the view that joint venture and joint banks are not allowed to sell insurance," delegate Pham Van Hoa emphasized.
According to VNA/Tin Tuc Newspaper
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