What are the cases of ineligibility for credit extension in Vietnam under the Law on Credit Institutions 2024?
- What are the operations of people’s credit funds in Vietnam under the Law on Credit Institutions 2024?
- What are the cases of ineligibility for credit extension in Vietnam under the Law on Credit Institutions 2024?
- What are the regulations on credit extension roadmap in Vietnam?
- Vietnam: When does the Law on Credit Institutions 2024 come into force?
What are the operations of people’s credit funds in Vietnam under the Law on Credit Institutions 2024?
Pursuant to the provisions of Article 126 of the Law on Credit Institutions 2024, operations of people’s credit funds are as follows:
Operations of people’s credit funds.
- Receiving deposits in Vietnam Dong.
- Granting loans in Vietnam Dong.
- Providing money transfer, collection and payment services for their members and clients, except for opening of payment accounts for clients
Other business activities:
- Receiving capital under entrustment by organizations and individuals for giving loans;
- Acting as agents that provide payment services for cooperative banks with respect to their members and clients;
- Borrowing loans and depositing money at cooperative banks; borrowing loans from credit institutions and foreign bank branches. People’s credit funds must not grant loans and make deposits with each other;
- Participating in contribution of capital to cooperative banks;
- Opening payment accounts at the State Bank, commercial banks, cooperative banks, foreign bank branches;
- Acting as agents in a number of fields related to banking operations and asset preservation;
- Acting as insurance agents in accordance with the law on insurance business within the scope of insurance agency activities as specified by the Governor of State Bank;
- Giving advice on banking operations and other business activities specified in licenses to their members.
What are the cases of ineligibility for credit extension in Vietnam under the Law on Credit Institutions 2024? (Image from the Internet)
What are the cases of ineligibility for credit extension in Vietnam under the Law on Credit Institutions 2024?
Pursuant to the provisions of Article 134 of the Law on Credit Institutions 2024, cases of ineligibility for credit extension include:
(1) A credit institution or foreign bank’s branch must not extend credit to the following organizations and individuals:
- Members of the Board of Directors, Board of Members or Board of Controllers, the Director General (Director), Deputy Director(s) General (Deputy Director(s)) and holders of equivalent positions under regulations of the credit institution’s charter; Director General (Director), Deputy Director(s) General (Deputy Director(s)) of the foreign bank’s branch; juridical persons that are shareholders whose stake representatives are members of the Board of Directors or Board of Controllers of the credit institution, (with regard to credit institutions that are joint-stock companies), or juridical persons that are capital contributors or owners of the credit institution, (with regard to credit institutions that are limited liability companies);
- Parents, spouses, children and siblings of members of the Board of Directors, Board of Members or Board of Controllers, the Director General (Director), Deputy Directors General (Deputy Directors) and holders of equivalent positions under regulations of the credit institution’s charter; Director General (Director), Deputy Director(s) General (Deputy Director(s)) of the foreign bank’s branch.
Note: The above regulations do not apply to people's credit funds and credit extension in the form of issuance of personal credit cards.
(2) Each credit institution/foreign bank’s branch must not extend credit to its clients on the basis of guarantee offered by any entity specified in Clause 1 of this Article. Each credit institution/foreign bank’s branch must not offer guarantee in any form for credit extended to any entity defined in (1) by another credit institution or foreign bank’s branch.
(3) The credit institution must not extend credit to a securities enterprise which is its subsidiary or associate company.
(4) The credit institutions must not extend credit on the basis of acceptance of its own stocks or stocks of its subsidiary or associate company as guarantee.
(5) The credit institution or foreign bank’s branch must not extend credit for the purpose of capital contribution or purchase of shares of another credit institution.
Credit extension specified above includes purchase, hold of and investment in corporate bonds
What are the regulations on credit extension roadmap in Vietnam?
Pursuant to the provisions of Article 136 of the Law on Credit Institutions 2024, the limits on credit extension are as follows:
The credit extension roadmap according to new regulations is as follows:
The total balance of credit extension to a single client or a single client and his/her related persons of a commercial bank, cooperative bank, foreign bank’s branch, people’s credit fund or microfinance institution must not exceed:
- From the effective date of this Law to before January 1, 2026: 14% of its equity for a single client; 23% of its equity for a single client and his/her related persons;
- From January 1, 2026 to before January 1, 2027: 13% of its equity for a single client; 21% of its equity for a single client and his/her related persons;
- From January 1, 2027 to before January 1, 2028: 12% of its equity for a single client; 19% of its equity for a single client and his/her related persons;
- From January 1, 2028 to before January 1, 2029: 11% of its equity for a single client; 17% of its equity for a single client and his/her related persons;
- From January 1, 2029: 10% of its equity for a single client; 15% of its equity for a single client and his/her related persons;
With regard to a non-bank credit institution, the total balance of credit extension to a single client must not exceed 15% of its equity; the total balance of credit extension to a single client and his/her related persons must not exceed 25% of its equity.
Vietnam: When does the Law on Credit Institutions 2024 come into force?
In the newly officially promulgated Law on Credit Institutions 2024, specifically Article 209 of the Law on Credit Institutions 2024:
The Law on Credit Institutions 2024 comes into force from July 1, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024, which come into force from January 1, 2025. .
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