What are cases of credit restrictions in Vietnam under the Law on Credit Institutions 2024?
What are cases of credit restrictions in Vietnam under the Law on Credit Institutions 2024?
Pursuant to Article 135 of the Law on Credit Institutions 2024, there are specific instructions regarding credit restrictions. According to the law:
Credit institutions and branches of foreign banks are not allowed to grant unsecured credit or provide preferential credit conditions to organizations or individuals in the following cases:
(1) Auditing organizations and auditors currently auditing the credit institution or branch of a foreign bank; decision-makers for inspections, members of inspection teams, and supervisors of inspection teams currently inspecting the credit institution or branch of a foreign bank;
(2) Chief accountants of the credit institution or branch of a foreign bank; Chairperson and other members of the Board of Directors, Head and other members of the Control Board, Director, Deputy Director of the People's Credit Fund;
(3) Major shareholders and founding shareholders of the credit institution;
(4) Enterprises where one of the following individuals owns more than 10% of the charter capital of that enterprise:
- Members of the Board of Directors, members of the Board of Members, members of the Control Board, General Director (Director), Deputy General Director (Deputy Director), and equivalent positions as stipulated in the Charter of the credit institution; General Director (Director), Deputy General Director (Deputy Director) of the branch of a foreign bank; legal entities as shareholders with the representative of capital contribution being a member of the Board of Directors, a member of the Control Board of the credit institution being a joint-stock company; legal entities as contributing members, owners of the credit institution being a limited liability company;
- Spouses, parents, children, siblings of members of the Board of Directors, members of the Board of Members, members of the Control Board, General Director (Director), Deputy General Director (Deputy Director), and equivalent positions as stipulated in the Charter of the credit institution; General Director (Director), Deputy General Director (Deputy Director) of the branch of a foreign bank.
(5) Appraisers and credit approvers at the credit institution or branch of a foreign bank, except for credit issuance in the form of credit cards for individuals;
For cases (1), (2), (3), (4), (5) mentioned above, it is important to note:
The total credit debt granted to these subjects must not exceed 5% of the credit institution's or branch of a foreign bank's own capital.
(6) Subsidiaries and affiliated companies of the credit institution, except for credit issuance to a subsidiary that is a credit institution transferred compulsorily.
*Note:
The granting of credit to all subjects with credit restrictions must be approved by the Board of Directors, the Board of Members of the credit institution, except for subject (5) which is regulated by the Governor of the State Bank. The granting of credit must be made public within the credit institution or branch of a foreign bank.
The total credit debt granted to one subject (6) must not exceed 10% of the credit institution's own capital; for all subjects (6) combined, it must not exceed 15% of the credit institution's own capital.
The total credit debt specified in Clause 2 of Article 135 of the Law on Credit Institutions 2024 includes the total amount of purchases, holdings, and investments in bonds issued by subjects specified in items (1), (3), and (4); the total credit debt specified in Clause 4 of Article 135 of the Law on Credit Institutions 2024 includes the total amount of purchases, holdings, and investments in bonds issued by subjects specified in item (6)..
What are cases of credit restrictions in Vietnam under the Law on Credit Institutions 2024?
What is the new roadmap for credit extension limits in Vietnam?
Under Article 136 of the Law on Credit Institutions 2024, there are new regulations on the gradually decreasing total credit limit.
The roadmap for credit extension limits according to the new regulations is as follows:
- The total credit limit for a customer, a customer and their affiliated person of that customer from commercial banks, cooperative banks, branches of foreign banks, people's credit funds, and microfinance institutions must not exceed the following ratios:
- From July 1, 2024, until December 31, 2025: 14% of own capital for a customer; 23% of own capital for a customer and their affiliated person;
- From January 1, 2026, until December 31, 2026: 13% of own capital for a customer; 21% of own capital for a customer and their affiliated person;
- From January 1, 2027, until December 31, 2027: 12% of own capital for a customer; 19% of own capital for a customer and their affiliated person;
- From January 1, 2028, until December 31, 2028: 11% of own capital for a customer; 17% of own capital for a customer and their affiliated person;
- From January 1, 2029, onwards: 10% of own capital for a customer; 15% of own capital for a customer and their affiliated person.
In addition, the total credit limit for a customer must not exceed 15% of the own capital of non-bank credit institutions; the total credit limit for a customer and their affiliated person must not exceed 25% of the own capital of non-bank credit institutions
Vietnam: When will the latest Law on Credit Institutions 2024 come into force?
Pursuant to the newly officially promulgated Law on Credit Institutions 2024, specifically Article 209 of the Law on Credit Institutions 2024 stipulates:
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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