The State Bank of Vietnam submitted to the government for approval the draft Law on Credit Institutions, with 164 articles and 99 pages in June this year. Even though it was assessed carefully and is relatively accomplished, there have still existed some wonders by credit institutions and commercial banks.
Twin-license complication
Mentioning many conditions of capital, founding members and managers, dossier and tight procedures in Articles 19-21, the draft law has only dealt with half of the problems regarding regulations on the setup of credit institutions. To become operational, credit organisations must meet at least 10 conditions relating to capital, store, headquarters, organisation, risk management, information technology and internal management in Articles 24-26.
Accordingly, after the setup, the credit institutions must be recognised by the State Bank of Vietnam to satisfy a series of tight and complicated conditions before operations. These are supplementary but essential certificates that are not less important than the major ones. This means that the time of licensing will be prolonged to a longer period than the 360-day period mentioned in the Article 22 of the draft law.
In fact, instead of granting one license, authorities issue two; therefore, it is necessary to separate setup license from operation license of a credit institution to foster transparency and the essence. The setup license is the first condition that will be the foundation for the operation license. The issuance of these licenses will foster the complicated and inefficient administrative procedure but indicate the essence of the matter.
Also, it is necessary to change the regulation on collection fees of licensing at the Article 23 in two phases with the majority of the fees to be paid for operation license. It will be unacceptable to not be allowed operation after paying the minimal fee of VND30 billion or one percent of the legal capital of VND3 trillion by 2010 when combining these licenses into one in accordance with the government’s regulation.
Strict regulations on business activities
Clause 2, Article 90 of the draft law on licensed activities by credit organisations speculated, “Credit organisations are not allowed to undertake any business activities regardless of banking activities as well as other activities mentioned in their operation licenses granted by the State Bank of Vietnam”. Operations of credit organisations must strictly follow their setup and operation licenses. No authorities have given explanations about this matter.
It is true that credit organisations are not allowed to do business activities that are not banned by the law like other enterprises but it is unacceptable to compel credit organisations to strictly follow activities that are legally allowed by the State Bank of Vietnam and state agencies. Such a strict regulation will pose a lot of legal inadequacies. It is hard to consent to an argument that it is impossible to allow credit organisations to do all business activities that are not banned by the law due to the lack of bans and various and variable banking products and services. This means that it is impossible to mention all and detailed activities of credit organisations in their setup and operation licenses and state agencies will be hurried to follow amendments and supplementations of operation licences to keep up with daily business activities by hundreds of credit organisations. It is also hard to avoid inadequacies.
Therefore, it is essential to draw out new solutions to allow credit organisations to do business activities that are not banned by the law and authorized by the State Bank of Vietnam upon the existence of legal documents. Accordingly, contents of operation licenses should not fully mention all authorized business activities at present. For example, it will not be meaningful to mention in credit organisations’ operation licenses such a sentence “Conducting international payment service as the law mentions” as it does not make clear whether or not these institutions are allowed to conduct such a service. Therefore, licenses should only mention major contents including receiving deposits, granting credit and payment service provision at the expense of what activities and how they are performed, which should be speculated in laws, decrees, circulars and extra licenses.
The draft law on credit organisations should outline limits and tighten conditions to strictly control instead of massive banning. It is not necessary to issue a ban upon hard management. Issues that should be mentioned in sub legal documents should also be mentioned in the draft law to ensure legal framework.
Lawyer Truong Thanh Duc, Chairman of BASICO Law Company
Vietnamese
