Decentralization of Authority: A New Era for Vietnam’s Special Loans

In a move aimed at streamlining processes and bolstering teh independence of the State Bank of Vietnam (SBV), the National Assembly is considering a proposal to grant the SBV greater authority over special loan decisions. This shift, presented by SBV Governor Nguyen Thi hong on May 20th, focuses on transferring decision-making power regarding “special loans with guarantee” (TSDB) directly to the SBV.

The Proposed Changes: Streamlining and Strengthening the System

Currently, the Prime Minister holds the authority to make decisions on special loans, particularly those with a 0% annual interest rate or those issued without a guarantee. The proposed amendment seeks to decentralize this power,entrusting the SBV with complete autonomy over these critical financial instruments. The government believes this will reduce bureaucratic delays, expedite processing times, and ensure the security and stability of the credit institution system.

This regulatory adjustment is expected to enhance the SBV’s role and increase accountability among government members. By cutting out intermediate steps, the SBV can respond more swiftly to emerging financial needs and potential crises. This is particularly crucial in a rapidly evolving global economic landscape, where timely interventions can prevent significant disruptions.

Furthermore, the proposal addresses the rights of credit institutions and negotiation organizations concerning the management of questionable receivables and guarantees. these entities will be empowered to access guarantees under specific conditions outlined in security contracts, ensuring a fair and obvious process that respects the rights of all parties involved.

safeguards and Ethical Considerations

The proposed regulations emphasize that the entry into guaranteed goods must be conducted fairly, publicly, and transparently, safeguarding the legitimate rights and interests of all stakeholders. Credit institutions are explicitly prohibited from employing measures that violate the law or contravene social ethics during the seizure process. Their authority is limited to managing assets within receivable management companies, while debt negotiation organizations can only operate within credit selling institutions.

Examining Current regulations and Preventing Abuse

The Economic and Financial Committee (ECF), led by Phan Van Mai, has endorsed the government’s clarification regarding the legalization of the three policies outlined in Resolution 42. Though, concerns have been raised about the potential for abuse. Some committee members have suggested a thorough examination of the scope of these policies to prevent credit institutions from exploiting the right to seize guarantees to relax loan conditions or engage in risky lending practices. This scrutiny aims to protect the legitimate rights of all parties involved and maintain the integrity of the financial system.

Looking Ahead: Strengthening control and Transparency

The SBV has also agreed to adjust the decision-making authority on special loans for interest rate loans of 0%/year and the Prime Minister’s without guarantee to the State Bank.

The revision agency has proposed a comprehensive review of existing special loan regulations, focusing on establishing clear and transparent criteria for 0% interest rate loans and loans without guarantees. This includes defining detailed conditions,streamlining loan procedures,and implementing robust control measures to prevent potential losses. Moreover, amendments to the law on Credit Institutions 2024 are being considered to align with the decentralization of authority to the SBV, addressing potential implementation challenges.