(HNMO) - The drafting of the Law on Credit Institutions (amended) aims to perfect regulations and handle difficulties and inadequacies of the law on credit institutions; to legalize to create a legal corridor for handling bad debts of credit institutions.
Continuing the program of the fifth session of the 15th National Assembly, on the morning of June 5, under the direction of Vice Chairman of the National Assembly Nguyen Khac Dinh, Governor of the State Bank of Vietnam Nguyen Thi Hong, authorized by the Prime Minister, presented the Report on the draft Law on Credit Institutions (amended). Governor of the State Bank Nguyen Thi Hong said that the development of the Law on Credit Institutions (amended) aims to strengthen risk prevention, enhance the capacity for self-inspection, internal control, and self-responsibility of credit institutions. At the same time, build tools to manage credit institutions; early detect violations and promptly handle the responsibilities of individuals in charge of managing and operating credit institutions. Strengthen decentralization and delegation of authority associated with inspection, supervision, and individualization of individual responsibilities; ensure publicity and transparency in banking activities.
The Law on Credit Institutions (amended) also aims to ensure the safety of the credit institution system; strengthen inspection and supervision measures of the State Bank. At the same time, there is the participation of the Government Inspectorate, the Ministry of Finance and other ministries and branches to manage and control credit activities, prevent manipulation, group interests, cross-ownership; handle situations where depositors withdraw money en masse and have an effective mechanism to restructure specially controlled credit institutions.
Regarding the viewpoint on law-making, the Governor of the State Bank of Vietnam said that the drafting of the Law on Credit Institutions (amended) needs to closely follow the viewpoints of the Party and the State in order to perfect the legal framework on currency, banking activities, and restructure credit institutions to ensure system safety, enhance transparency, publicity, and compliance with market principles and international best practices, facilitating the digital transformation process in the banking industry.
Regarding the scope of regulation, the draft Law inherits the provisions of the current Law on Credit Institutions and adds the handling of bad debts and handling of collateral of bad debts. Regarding the subjects of application, the draft Law adds the subjects of application to be organizations in which the State owns 100% of the charter capital and has the function of buying, selling and handling debts.
The Governor of the State Bank of Vietnam said that with the aim of creating conditions to improve people's access to credit, the draft Law has amended and supplemented regulations on credit granting. In particular, it simplifies procedures for consumer loans and small loans for daily life; creates a legal corridor for providing banking services via electronic means, promotes digital transformation in banking activities such as supplementing regulations on credit granting activities via electronic means.
Regarding restrictions to ensure safety in the operations of credit institutions and to limit risks from credit concentration, the draft Law amends and supplements regulations in the direction of reducing the credit limit ratio of a customer, a customer and related persons. At the same time, the draft Law also amends and supplements regulations adjusting the capital contribution and share purchase limits of credit institutions to increase the popularity in the operations of credit institutions.
Presenting the Review Report of the draft Law on Credit Institutions (amended), Chairman of the National Assembly's Economic Committee Vu Hong Thanh said that one of the new points, which caused many concerns for the review agency right from the preliminary review, is the addition of a regulation that credit institutions are allowed early intervention by the State Bank.
Accordingly, the draft Law allows the use of special loans right from the early intervention step, while expanding some concepts such as unsecured loans, special lending designation; setting the special lending interest rate at 0%/year and a support mechanism for credit institutions to provide special loans. Specifically, banks are eligible for early intervention when they are subject to mass withdrawals leading to insolvency, or credit institutions fail to maintain payment ratios and capital safety for 3 and 6 consecutive months, respectively, and have accumulated losses greater than 20% of the value of charter capital and reserve funds.
One of the measures applied to this group is special loans, without collateral, with an interest rate of 0% per year from the State Bank, deposit insurance and other banks. The Economic Committee believes that the State Bank, as the lender of last resort, implementing special loans is necessary to ensure liquidity, system safety, prevent mass withdrawals, and stabilize security, social order and safety.
“However, it is necessary to review cases of access to special loans in the direction of only applying them in the event of a mass withdrawal or in the event of a risk of collapse affecting the safety of the banking system, causing social instability and the State Bank must be responsible for the decision to grant special loans, solutions to support credit institutions in difficulty, although not using the state budget, but indirectly affecting the budget,” the review agency emphasized.
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