investment /// to attract capital sources in society, expand medium and long-term capital sources. (...) Modernize and innovate the technology of the banking system, accelerate the application of information technology, strive for the financial - banking system to reach the average level in the region". The development of Financial Companies in the coming years needs to harmoniously combine the interests of the State - corporations, Financial Companies - enterprises.
- Second, develop Finance Companies in accordance with their proper role and importance. The operations of Finance Companies must ensure active, synchronous attention and more effective solutions from the State Bank, relevant Ministries and sectors.
- Third, the amendment, promulgation and supplementation of laws must be based on the assessment of the current state of socio-economic development, and must consider different goals. Ensure consistency and synchronization in the provisions of the law on Finance Companies. The process of perfecting the law needs to anticipate arising obstacles and create initiative, with timely remedies such as implementation capacity, social psychology, etc.
- Fourth, it is necessary to ensure compliance with the internationalization trend in the operations of Financial Companies in the context of international integration.
The current situation shows that the activities of the Vietnamese financial and banking sector are not only limited within the territory but also related to foreign organizations and individuals. The process of internationalization forces us to play by the “common rules of the game”, so legal regulations must ensure international standards, ensuring that our integration process is not slower than that of other countries in the region and can reach out to the world.
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3.2. Proposals and recommendations to amend and supplement legal regulations on Finance Companies in Vietnam
First, amend and supplement the concept of Finance Company.
Regarding the revised concept of Finance Company, it is necessary to change the classification approach and more clearly define the types of Finance Company. To do this, it is necessary to provide a clear, basic classification criteria system or characteristics of Finance Company right in the definition. The current definition according to the Law on Credit Institutions has not solved this problem. In the author's opinion. The definition of Finance Company, Bank, or any type of credit institution, must first of all come from the basic definition that this is a type of enterprise established in accordance with the provisions of Vietnamese enterprise law with specific industry characteristics related to the field of finance and banking. Example of criteria for classifying Finance Company:
Based on criteria, capital can be divided into:
- State Finance Company: 100% charter capital held by the State.
The state operates, organizes activities and manages.
- Private Finance Company: charter capital held by different economic sectors (may have a part of state capital).
Based on business purpose criteria can be divided into:
- Sales Finance Company. These Finance Companies indirectly provide credit to consumers to purchase goods from a retailer or a manufacturer. The credit is provided in the form of: businesses selling goods on installments to customers according to a standard contract provided by this type of Finance Company, then the contract is sold back to the Finance Company. Thus, the customer's debt to the manufacturer or retailer has been converted into the customer's debt to the Finance Company. These types of Finance Companies are often established by manufacturing companies or retail distributors to support their goods consumption activities.
- Consumer Finance Company. This type of Finance Company provides most of its capital to families and individuals for loans for the purpose of purchasing consumer goods in the form of periodic installment payments or issuing credit cards.
These types of Finance Companies can be established by banks or operate independently in the form of joint stock companies.
- Business Finance Company. This type of Finance Company provides credit to businesses in the following forms: Factoring (FACTORING and FORFATING services) - The company provides credit in the form of buying back (discounting) the business's receivables; Financial leasing (LEASING services) - The company provides credit in the form of buying machinery and equipment that customers request and then leasing them to customers; etc.
Second, amending and supplementing the activities of capital contribution and share purchase in the Law on Credit Institutions 2010 stipulates:
- “Article 129. Limits on capital contribution and share purchase
… 3. The level of capital contribution and share purchase of a financial company and its subsidiaries and affiliates into an enterprise as prescribed in Clause 2, Article 110 of this Law shall not exceed 11% of the charter capital of the enterprise receiving the capital contribution.
- “Article 110. Capital contribution and purchase of shares of financial companies
… 2. Finance companies are allowed to contribute capital and buy shares of enterprises and investment funds.”[25,81]
According to the above regulation, it can be understood that the Finance Company is only limited to 11% for capital contribution to Enterprises, or for both Enterprises and Investment Funds? On the other hand, Circular 36/2014/TT-NHNN Section 6 Limits on capital contribution and share purchase - Article 18. Limits on capital contribution and share purchase of Commercial Banks and Finance Companies, Clause 3 also only stipulates: "The level of capital contribution and share purchase of a finance company and its subsidiaries and affiliated companies in an enterprise must not exceed 11% of the charter capital of the enterprise" ; and according to the Enterprise Law 2014, Article 1., enterprises under the provisions of this law include: Limited liability companies, Joint Stock Companies, Partnerships and Private Enterprises; Thus, investment funds
not recognized as a form of enterprise under the provisions of the Enterprise Law 2014;
Therefore, the investment of Finance Companies in Invisible Investment Funds generally has no limit on the safety guarantee ratio nor specific guidance. Therefore, each different understanding and application of the law will lead to unpredictable legal consequences. Therefore, it is recommended that the State Bank and the National Assembly study and consider to clarify this content.
Third, amending and supplementing the Banking activities of Finance Companies, the Law on Credit Institutions 2010 stipulates:
“Article 108. Banking activities of finance companies
1. A finance company is allowed to perform one or more of the following banking activities:
a) Receive deposits from organizations;
b) Issuing deposit certificates, promissory notes, treasury bills, and bonds to mobilize capital for organizations;
c) Borrow capital from domestic and foreign credit institutions and financial institutions in accordance with the provisions of law; borrow from the State Bank in the form of refinancing in accordance with the provisions of the Law on the State Bank of Vietnam;
d) Lending, including installment loans and consumer loans; e) Bank guarantees;
e) Discounting and rediscounting negotiable instruments and other valuable papers;
g) Issuing credit cards, factoring, financial leasing and other forms of credit after being approved by the State Bank.
2. The Government shall specify the conditions for finance companies to carry out banking activities as prescribed in Clause 1 of this Article.”
The provision at Point g, Clause 1, Article 108 is at risk of leading to an incorrect understanding that all points a, b, d, and dd do not require approval from the State Bank. Therefore, it contradicts the spirit of Article 98 of the Law on Credit Institutions 2010. “1. The State Bank shall specify the scope, type, and content of banking activities and other business activities of credit institutions in the License granted to each credit institution. 2. Credit institutions shall not conduct any business activities other than banking activities and other business activities stated in the License granted to the credit institution by the State Bank.”
On the other hand, in the current capital mobilization activities, Finance Companies are only allowed to mobilize capital from organizations, not from individuals. Meanwhile, lending activities are allowed to lend for consumption with small loans to serve the consumption life of these individuals. This leads to the capital channel and capital source of Finance Companies being more limited than Commercial Banks. Considering that with the scale of contact with each individual without being able to mobilize capital from this source, it will be a big barrier in competing with other types of credit institutions. Therefore, capital mobilization activities and lending activities of Finance Companies must be adjusted appropriately to ensure "fairness" in the market. It is proposed to study and add the form of capital mobilization from individuals of Finance Companies.
Fourth, amend and supplement the activities of entrusting and receiving entrustment for lending and investment. Currently, the Law on Credit Institutions 2010 does not stipulate that Finance Companies
The government is allowed to carry out trust activities, receive trust loans, and invest. Meanwhile, the State Bank's guiding circular No. 30/2014/TT-NHNN dated November 20, 2014 on trust activities and receiving trust still stipulates
Article 12. Entrustment and acceptance of entrustment by financial companies
1. The finance company is authorized to:
a) Commercial banks and other financial companies to make loans to customers;
b) Cooperative banks to make loans to customers who are not members of cooperative banks;
c) People's credit funds to make loans to customers who are not members of people's credit funds;
d) Microfinance institutions to provide loans to low-income individuals, households, and micro-enterprises;
d) Financial leasing companies and other financial companies to carry out financial leasing.
2. Finance companies are:
a) Receive investment trust in production and business projects of organizations and individuals;
b) Receive entrustment from commercial banks, policy banks, foreign bank branches, other financial companies, cooperative banks, organizations and individuals to make loans to customers;
c) Receive authorization from financial leasing companies and other financial companies to perform financial leasing.
Thus, the State Bank's guidance is inadvertently guiding the content that has not been specifically regulated for Finance Companies. Considering that the activities of entrusting and accepting entrustment for lending and investment are activities that arise regularly and continuously in the financial market not only in Vietnam but also around the world, the regulations and guidance of the State Bank are completely appropriate and necessary. However, to ensure the uniformity of the legal system on Finance Companies, it is necessary to include this content in the Law on Credit Institutions.
3.3. Proposals and recommendations on the implementation of the Legal Regulations on Finance Companies in Vietnam
3.3.1. Increase the attention of the State Bank's leaders and units, raise awareness and the role of organizations and individuals in perfecting legal regulations on Finance Companies.
Completing the law on Finance Companies requires profound innovation in thinking and awareness of the organization of this work. Due to the limitations and shortcomings of the work of building laws on Finance Companies in the past, it is necessary to strengthen the direction and implementation of administrative reforms right from the central level in a drastic manner. To effectively carry out this work, it is necessary to have political determination from high-level leaders of the Party and State, and from the heads of agencies that build and organize the implementation of laws on Finance Companies. It is necessary to strengthen the leadership of Party committees at all levels, the management of authorities at all levels; and to link the responsibilities of heads of agencies, organizations and enterprises in implementing the provisions of the law on Finance Companies. It is necessary to focus on summarizing and drawing experience from the implementation of guiding documents on Finance Companies in the past time and strengthening the direction of the development and implementation of legal regulations on Finance Companies in the coming time to further improve the legal system on Finance Companies.
* State apparatus organization
Innovate the state management method of Finance Companies in the direction of controlling Finance Companies well, controlling the loan-to-mobilization ratio, ensuring the bad debt ratio is under sustainable control, managing according to modern banking technology, applying information technology according to legal regulations. Gradually have a roadmap to solve existing problems in state management of Finance Companies such as: sustainable development, control
Control the amount of money generated by the Finance Company but do not prevent market demand...
Perfecting the organization of the specialized state management apparatus in the financial sector. Clearly assigning the responsibility of presiding over and coordinating between the State Bank in management work in the direction of clearly assigning responsibilities between relevant ministries, branches, governments and ministerial-level agencies. Resolutely implementing administrative reform in licensing some contents related to the management of Finance Companies, at the same time allocating funds to perfect the apparatus and invest resources to ensure the effectiveness of state management of State Finance Companies.
* Human resources
In the past, the law-making activities on Finance Companies in particular and Credit Institutions in general have received support from many different funding sources, including direct support from Law projects on training and fostering of officials. Therefore, in the coming time, it is necessary to continue to take advantage of the support of projects to expand the scope of training and coaching to raise awareness and skills in law-making on Finance Companies to all officials and civil servants of the State Bank, especially leaders of units. Focus on training a team of officials and civil servants who are not only good at legal work but also have knowledge of the financial sector. Because in the context of integration in general, to build a legal system on Finance Companies, officials and civil servants need to be knowledgeable about their profession. In addition, training in foreign languages and information technology is also needed. The work of drafting legal documents on Finance Companies in the integration period requires comparison with commitments, agreements, treaties, and specialized financial terms in foreign languages. This requires the team drafting laws on Finance Companies to have a certain level of foreign language proficiency to be able to understand those regulations.