Perfecting the Law on Lending of Foreign-Invested Commercial Banks in Vietnam to Ensure the Implementation of Vietnam's Commitments in

“… develop a Vietnamese commercial banking system with diverse ownership and organizational types, fully applying international institutions and standards on banking governance. Accelerate the equitization of state-owned commercial banks. Improve credit quality, profitability, quickly handle outstanding debts, reduce bad debt ratio to a safe level; increase equity capital of commercial banks to meet international standards. Create favorable conditions for residents and businesses to access banking products and utilities .” and “… Implement the opening of the banking service market according to the international integration roadmap, ensuring the business rights of foreign banks and financial institutions in the banking sector in accordance with our country’s international commitments.

Forming a transparent and public legal environment on currency and credit. Eliminating forms of protection, subsidies, incentives and discrimination among credit institutions. Enhancing the effectiveness of law enforcement and preventing the criminalization of civil and economic relations in the banking sector .” [4, p.242]

With the above general guidelines and policies, the current requirements for the law on lending to foreign-invested commercial banks in Vietnam are to both overcome and resolve immediate difficulties and obstacles, and to aim for long-term perfection and stability according to the socio-economic development strategy set forth by the Party. Ensuring the maximum promotion of autonomy in business activities and self-responsibility for business results of the entities participating in business, commercial and civil relations, while ensuring the conformity of the law with the conditions and actual situation of Vietnam, and with common international standards. In fact, up to now, the law on lending to foreign-invested commercial banks in Vietnam has not fully met the requirements, so the completion of the law on lending to foreign-invested commercial banks in Vietnam is urgent. Therefore, it is necessary to study and perfect the policy mechanism on lending in Vietnamese Dong and foreign currency, interest rates on capital mobilization for lending (interest rates on mobilization are regulated by administrative decisions but interest rates on lending in Vietnamese Dong are allowed to be negotiated by the parties), on conditions for mortgage and pledge of assets for lending.

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loan guarantees and procedures for handling collateral to recover loans, creating favorable conditions for credit institutions to proactively promote and expand lending activities, while businesses and people have enough conditions to borrow bank loans to develop production and business, meeting the needs of daily life and consumption. Doing this well not only contributes to the health of lending activities of banks but also helps to overcome the lack of capital of economic organizations, promoting the development of production and business of economic entities in our country today.

4.1.2. Perfecting the law on lending by foreign-invested commercial banks in Vietnam to ensure the implementation of Vietnam's commitments in the financial and banking sector when joining the World Trade Organization.

International economic integration requires innovation in banking operations and improvement of legal documents related to lending by foreign-invested commercial banks in Vietnam. During the process of negotiating to join the WTO, Vietnam has signed a series of bilateral and multilateral agreements with WTO member countries according to the basic principles and roadmap for opening up stipulated in the WTO's General Agreement on Trade in Services (GATS), such as: national treatment, most-favored-nation status, transparency of policies related to trade in services. The Vietnam - US Bilateral Trade Agreement was signed on July 13, 2000 and took effect from December 10, 2001, according to which commitments to open banking services were implemented according to a 9-year roadmap before all restrictions on US banks were removed, such as: restrictions on accepting Vietnamese Dong deposits, issuing credit cards, installing ATMs outside transaction offices... From December 2010, US banks were allowed to establish 100% US-owned subsidiary banks in Vietnam.

On January 11, 2007, Vietnam officially became the 150th member of the WTO with the commitment: from April 1, 2007, Vietnam allows foreign banks to establish 100% foreign-owned subsidiary banks, the parent bank must have total assets of at least 10 billion USD at the end of the year before the application; the provision of other banking and financial products or services must comply with the requirements

Regarding the legal form and related institutions on a general and non-discriminatory basis; from 01/01/2011, branches of foreign banks are allowed to receive deposits in Vietnamese Dong at the same level as domestic banks (i.e. enjoying full national treatment) but are not allowed to open other transaction points outside the branch's headquarters, etc.

After Vietnam joined the WTO and signed bilateral and multilateral trade agreements with a number of countries in the world, the Vietnamese legal system has been amended and supplemented to comply with Vietnam's commitments to international organizations and countries participating in those agreements. However, only a few countries recognize Vietnam's economy as a market economy because business, trade, civil relations in general and bank lending relations in particular have not been fully regulated by law but also by administrative decisions (interest rates, foreign currency loans, overseas loans, etc.) or by sub-licenses, etc. Therefore, a number of legal provisions have not been amended or abolished to comply with international practices and the legal provisions of member countries that have signed bilateral and multilateral trade agreements with Vietnam. The law on lending to foreign-invested commercial banks in some countries around the world has been mentioned by us in section 2.3 of Chapter 2 with some outstanding features: considering a bank credit contract as a specific form of civil contract, rarely changed (amended or replaced, with long-term stability), foreign-invested commercial banks are equal to domestic commercial banks, the loan amount and interest rate are decided by the lender, agreed with the customer on the basis of supply - demand, market signals and the capabilities and conditions of each party.

In early October 2015, Vietnam concluded negotiations on the Trans-Pacific Strategic Economic Partnership Agreement (TPP) with 11 member countries. TPP is a comprehensive regional free trade agreement that could bring great opportunities for Vietnam to connect its economy with the United States and other TPP member countries, such as Australia, Japan, Canada, New Zealand, Singapore, etc. After TPP

approved, Vietnam has a number of sectors and products that benefit when exporting goods to TPP countries, and can enjoy an import tax rate of 0. In return, domestic service and manufacturing enterprises may have to suffer certain disadvantages and challenges when Vietnam opens its market under TPP, including challenges due to the legal system not changing in time to be suitable, especially issues related to labor relations, relations between trade union organizations... to meet integration requirements (independent and effective role in fighting to protect the legitimate rights of workers).

International integration in banking activities creates a driving force to promote innovation and improve the transparency of the Vietnamese banking system, meeting integration requirements, and fulfilling commitments with financial institutions and international trade organizations. This requirement requires continuing to improve the legal system to create an effective legal corridor, ensuring equality and safety for all service providers operating in Vietnam in the fields of credit, banking services and other financial operations, putting pressure on innovation and improving operational efficiency for domestic banks such as reducing costs, improving service quality, diversifying products and services, etc. Therefore, the law on lending to foreign-invested commercial banks in Vietnam needs to continue to be reviewed to be amended and supplemented in accordance with international practices in order to move towards a true market economy and all entities are equal in business, meeting the requirements of the international economic integration process.

4.1.3. Perfecting the law to meet practical needs, overcoming the shortcomings and limitations of the law on lending by foreign-invested commercial banks in Vietnam

Improving the quality of laws is an urgent requirement to improve the effectiveness of law enforcement on lending by foreign-invested commercial banks in Vietnam. The current legal status on lending by foreign-invested commercial banks in Vietnam in the context of international economic integration still has some shortcomings and limitations, failing to meet current practical requirements as we have analyzed in Chapter 3. Current legal status

The above law is requiring amendments and supplements to create a suitable legal basis for foreign-invested commercial banks in Vietnam to proactively lend to the economy according to market mechanisms, limit legal risks due to legal regulations not being suitable to reality, and create favorable conditions for foreign-invested commercial banks in Vietnam to mobilize capital and handle secured assets, and effectively recover debts.

In addition, the process of perfecting the legal system on civil matters and other related fields (Enterprise Law, Housing Law, Real Estate Business Law, Land Law, etc.) requires that the law on lending by credit institutions to customers must also be amended and supplemented accordingly. In recent years, most of the legal documents on civil matters and other related fields were issued during the period when our country's economy was strongly transforming to a market mechanism, so Vietnam did not fully apply the provisions of foreign law or international practices to these legal documents. Therefore, some non-market factors are still maintained and regulated in the above legal documents. Meanwhile, the legal documents on lending by credit institutions to customers, after many amendments or new issuances, have become somewhat more suitable to reality. That has made our country's legal system an inconsistent, overlapping and contradictory entity. The new legal documents on lending are only temporary, short-term (short-term) and unstable, and have not really ensured the general principles of regulating private legal relations in society, causing many complications in the application and determination of responsibilities of relevant parties. In both theory and practice, social relations do not exist independently and separately but are related to each other, so groups of legal norms regulate different groups of relations and norms in the same group always exist in relation to each other. That is the objective requirement for the systematic nature of law. On the other hand, different legal bodies in the legal system are governed by the basic principles of law, which is also the reason to affirm that the law has relative unity. Therefore, the improvement of the law on

Lending by foreign-invested commercial banks in Vietnam must be placed in relation to the improvement of the legal system, and must be associated with the improvement of legal departments in related legal fields. Therefore, the improvement of the law on lending and handling of secured assets must be carried out simultaneously with other relevant provisions of law.

4.2. Some solutions to improve the law on lending of foreign-invested commercial banks in Vietnam

4.2.1. Amendment and supplementation of some concepts

- Add the concept of "100% foreign-owned subsidiary bank" to be consistent with Vietnam's commitments to the WTO and the Vietnam - US Trade Agreement. Because as mentioned above, foreign credit institutions are allowed to have a commercial presence in Vietnam in the form of joint venture banks and 100% foreign-owned banks. The Law on Credit Institutions 2010 and Circular No. 40/2011/TT-NHNN dated December 15, 2011 of the State Bank of Vietnam only stipulate the concept of 100% foreign-owned banks and joint venture banks (mentioned in Section 2.1.2, Chapter 2). In terms of ownership, Clause 30, Article 4 of the Law on Credit Institutions 2010 stipulates that a subsidiary of a credit institution is a company in which the credit institution or the credit institution and its related persons own more than 50% of the charter capital or more than 50% of the voting shares. Therefore, the Law on Credit Institutions 2010 has restricted foreign banks from establishing “100% foreign-owned subsidiary banks” in the form of limited liability companies with two or more members, in which the foreign bank owns more than 50% of the charter capital, meaning that the bank established in Vietnam must be a subsidiary of a foreign bank (owning more than 50% of the charter capital) and have charter capital owned by that foreign bank and other foreign banks.

- Change the name of “Credit Contract” to “Loan Contract” and define the loan contract. Loan is just a form of credit and has specific characteristics compared to other forms of credit, such as: loan term, interest rate during the term, overdue interest rate, principal repayment term, interest repayment term, etc. Therefore, the loan contract needs to have specific characteristics compared to other credit contracts.

In addition, other forms of credit are also regulated by separate legal documents corresponding to that type of credit. For example, currently, bank guarantee operations are regulated by Circular No. 07/2015/TT-NHNN dated June 25, 2015 of the State Bank of Vietnam, which includes a definition of a guarantee contract; Discounting of transfer instruments and other valuable papers of credit institutions and foreign bank branches for customers is regulated by Circular No. 04/2013/TT-NHNN dated March 1, 2013 of the State Bank of Vietnam, which defines the contract for discounting transfer instruments and other valuable papers... On the other hand, the concept of credit contract in Article 51 of the Law on Credit Institutions 1997 has been abolished and is no longer regulated in the Law on Credit Institutions 2010. Current lending regulations only regulate lending in Vietnamese Dong and foreign currencies of credit institutions to customers who are not credit institutions to meet capital needs for production, business, services, investment, development and living conditions; The lending regulations do not regulate the granting of credit in other forms (guarantee, discount, rediscount, factoring...). Therefore, in our opinion, the concept of credit contract in Article 17 of the Lending Regulations should be renamed "loan contract" and defined as follows: A loan contract is a written agreement between a credit institution (called the lender) and a customer (called the borrower), according to which the lender provides the borrower with a sum of money to be used for a specified purpose within a certain period of time and when due, the borrower must repay both principal and interest to the lender according to the agreement .

- Adding the concept of "person" in the 2005 Civil Code. In practice, the methods of handling secured assets mentioned in Chapter 3 have different opinions on the concept of "person", making it difficult for banks to implement in practice. Currently, there is a view that only individuals and legal representatives of legal entities can authorize others to establish and perform civil transactions (Clause 1, Article 143 of the 2005 Civil Code), so in many cases, courts, prosecutors, notary offices, etc. have not accepted authorization contracts or authorization documents signed between customers (organizations, individuals) and foreign-invested commercial banks in Vietnam regarding the handling of secured assets. Although Clause 1, Article 138 of the 2015 Civil Code (effective from

From January 1, 2017, it is stipulated that " Individuals and legal entities may authorize other individuals and legal entities to establish and perform civil transactions ", but this provision has not yet thoroughly resolved the above-mentioned problems. Therefore, the study of the 2015 Civil Code needs to be continued in combination with summarizing the implementation practices to clarify and supplement the concept of "person". In our opinion, the concept of "person" in the Civil Code needs to be understood to include legal entities and individuals.

4.2.2. Amendment of conditions on loan subjects

- The conditions for borrowing capital of customers must have supporting documents as stipulated in Article 7 of the Lending Regulations. For example: for general partners of a general partnership, there must be documents proving that they have legal capacity and civil capacity. These supporting documents must be accurate and legal. The accuracy and legality of the above documents have a great influence on the validity of the credit contract because it determines the subject status of the borrowing customer as being allowed or not allowed to participate in the bank loan relationship. After receiving all the documents and papers provided by the customer, the foreign-invested commercial bank in Vietnam conducts an appraisal to decide whether to lend or not to lend. In fact, determining the civil capacity of an individual or the legal representative of an organization when establishing a bank loan relationship is very difficult and has no clear basis. Foreign-invested commercial banks in Vietnam cannot observe the appearance to assess and determine whether a person has civil capacity (the ability of an individual to establish and exercise civil rights and obligations through his or her own actions) or has limited civil capacity (a drug addict, an addict of other stimulants leading to the dispersion of family assets, etc.) or has lost civil capacity (a person with a mental illness or other illness that prevents him or her from perceiving or controlling his or her own actions) to establish or refuse to establish a loan relationship with that person. Meanwhile, the document proving that a person has lost civil capacity or has limited civil capacity is a court decision based on the conclusion of a competent medical examination organization. Even when a person is no longer limited in civil capacity or has lost civil capacity, the court must still

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