Safety of credit activities is a legal regulation. Therefore, it is necessary to study the issue of ensuring safety in credit activities of commercial banks in a more scientific and accurate manner.
Another issue that needs to be clarified is how is the doctoral thesis topic that the author is researching different from the two Master's theses in Law by author Pham Thanh Chung and author Ta Chuong Lam as mentioned above?
Although the title of the thesis has certain similarities related to the law on ensuring safety in banking activities, the first difference is in the research object: author Pham Thanh Chung identifies the research object as the law on ensuring safety in banking activities of credit institutions including banks, non-bank credit institutions and other types of credit institutions; author Ta Chuong Lam identifies the research object as the law on ensuring safety in banking activities of commercial banks. Banking activities include three most basic activities: capital mobilization, credit granting and providing payment services through accounts. Thus, the research object in the two theses of the above authors is broader than the thesis topic of the author. Therefore, the author of the thesis topic has the opportunity to research more deeply on the law on ensuring safety in banking activities of commercial banks. In addition, the research of the two authors mentioned above was conducted quite a long time ago (author Pham Thanh Chung defended in 2005 and author Ta Chuong Lam defended in 2009) in the context of the Law on the State Bank of 1997 and the Law on Credit Institutions of 1997 being in effect. However, up to now, the current legal system in Vietnam has changed a lot compared to the previous time with the promulgation of the Law on the State Bank of 2010, the Law on Credit Institutions of 2010, the Civil Code (BLDS) of 2015 and a series of new documents coming into effect, the legal mechanism to ensure safety in banking activities has changed a lot compared to before. Therefore, the thesis topic that the author researched has many new points compared to previous similar topics.
In summary, there are a number of research works by scientists related to the aspect of ensuring safety in the credit activities of commercial banks. The content of the above studies focuses on issues such as: the concept of safety in credit activities as well as ensuring safety in credit activities. However, the concepts of safety and ensuring safety in credit activities need to be further studied in more detail; some works approach ensuring safety in credit activities of commercial banks in specific aspects such as international integration, financial safety and security; some works analyze aspects of ensuring safety in credit activities for a long time, not ensuring updating... However, the above studies are valuable documents for the author of the thesis in absorbing, selecting and developing to clarify the theoretical basis of the law on ensuring safety in credit activities of commercial banks in Vietnam.
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1.2. Research situation related to the law on ensuring safety in credit granting activities of commercial banks
Scientists have been interested in researching the theoretical basis of the law on ensuring safety in credit activities of commercial banks as well as researching from different perspectives the law on ensuring safety in credit activities of commercial banks.
Specifically, author Nguyen Ngoc Luong, in his doctoral thesis in Law “ Law regulating credit granting activities of commercial banks in Vietnam” 8 , has clarified general issues on credit granting and the law on credit granting activities of commercial banks; the current status of the law on credit granting activities of commercial banks in Vietnam; thereby providing solutions and recommendations to improve the law and enhance the effectiveness of law enforcement regulating credit granting activities of commercial banks in Vietnam. In this thesis, author Nguyen Ngoc Luong has clarified a number of
The issues that serve as theoretical basis for the study of safety assurance in credit activities of commercial banks include: concepts, characteristics, nature and principles of credit activities of commercial banks; the role of credit activities of commercial banks in the market economy; factors affecting the law regulating credit activities of commercial banks. In particular, the author analyzes the law regulating safety limits in credit activities of commercial banks. This content is closely related to the law on safety assurance in credit activities of commercial banks in Vietnam.
However, due to the purpose, scope and content of the research by author Nguyen Ngoc Luong focusing on the legal regulations governing the credit activities of commercial banks, the analysis and evaluation of the regulations on safety in the credit activities of commercial banks has only stopped at a certain level and has not received due attention.
Studying the theoretical issues of law on ensuring safety in banking activities through analyzing the role, impact and level of legal regulation on safety in banking activities, two professors Jeroen Klomp and Jacob De Haan, in the work: " Banking risk and regulation: does one size fit all?" 9 , used data from more than 200 banks from 21 countries in the Organization for Economic Cooperation and Development.
Economic Development (OECD), in the period from 2002 to 2008, to examine the impact of banking regulations and supervision on banking risks. The author concludes that banking regulations and supervision have a significant impact on high-risk banks. On the contrary, banking regulations and supervision have no significant impact on low-risk banks.
8 Nguyen Ngoc Luong (2017), Law regulating credit activities of commercial banks in Vietnam, PhD thesis in Law, Hanoi Law University.
9 Jeroen Klomp, Jacob De Haan, “Banking risk and regulation: does one size fit all?” DNB Working Paper, November 2011. Jeroen Klomp is currently working at the University of Groningen, the Netherlands; Jacob De Haan is a researcher
in Economics from Munich, Germany. See the authors' paper at: http://www.dnb.nl/binaries/Working%20Paper%20323_tcm46-261983.pdf.
Along with this research direction, professors Abdelkader Boudriga, Neila Boulila Taktak and Sana Jellouli have an article “ Banking supervision and nonperforming loan: a cross – country analysis” 10. The authors of the article believe that: high minimum capital adequacy ratio and good risk provisioning policy will reduce bad debt; the most effective way to reduce bad debt is to enhance the effectiveness of the legal system, increase information transparency and public
owners, increase the participation of foreign investors in the banking system, and enhance the health of the banking financial system in each country.
Two doctors, Tung-Hao Lee and Shu-Hwa Chih (National Chengchi University, Taiwan), in the article “ Does financial regulation affect the profit efficiency and risk of banks? Evidence from China'commercial banks” 11 , examined the new regulations on safety standards of the China Banking Regulatory Commission (CBRC), analyzed the impact of those regulations on the efficiency of banks.
performance and risk of Chinese banks. The two authors concluded that the risk provision ratio and cost-to-income ratio are only suitable for large banks, while the loan-to-deposit ratio, minimum capital adequacy ratio, and liquidity ratio are suitable for small banks. Also according to Tung-Hao Lee, the current liquidity ratio does not affect risk and may lead to different results in efficiency between large and small banks.
Another approach, Dr. George Hanc, in the article “ The future of banking in America, summary and conclusion” 12 , was interested in researching the challenges of the law regulating the organization and operation of large banks, because large banks often have complex organizational structures, operate with a wide scope through many different businesses, so the risks are also higher than small banks.
In general, the content of the above research works affirms the indispensable role of law as one of the most important means to regulate social relations arising in the organization and implementation of measures to ensure safety in the credit activities of commercial banks.
10 Abdelkader Boudriga, Neila Boulila Taktak and Sana Jellouli, “Banking supervision and nonperforming loan: a cross – country analysis”, Journal of Financial Economic Policy, April 2009. Abdelkader Boudriga is professor of finance at the University of Cathage and visiting professor at the University of Orleans, France; Neila Boulila Taktak is professor at the University of Tunis, Tunisia; and Sana Jellouli is teaching at the School of Electronic Commerce, Tunis, Tunisia.
11 Tung-Hao Lee and Shu-Hwa Chih, “Does financial regulation affect the profit efficiency and risk of banks? Evidence from China'commercial banks” North American Journal of Economics and Finance, 2013.
12 George Hanc, “The future of banking in America, summary and conclusion” , FDIC Banking Review, 16, 2004. He is former Vice Chairman of Insurance and Research, Federal Deposit Insurance Corporation of the United States.
One of the important issues when studying the law on ensuring safety in banking activities is the level of regulation of the law on the safety of banking activities. Dr. Nguyen Van Tuyen, in the article "Determining the limits of State intervention in commercial transactions of commercial banks in the market economy conditions in Vietnam" 13 , stated that the State only intervenes to ensure safety in banking activities.
activities of commercial banks at the macro level, that is, through the construction of a complete, synchronous and appropriate legal system, creating a safe and effective legal basis for the construction and implementation of safety assurance activities in the credit activities of commercial banks. This is a very suitable approach in the current period because the State does not need to deeply intervene in the activities of enterprises in general and banks in particular. The most important thing is that through the law, the State creates a legal corridor for the operation of the economy in general, for banking activities as well as ensuring the safety of banking activities in particular.
Researching issues related to the content of the law regulating banking activities in general and ensuring safety in credit activities in particular, Professor Roland Benediker, in the article “ European answers to the Financial Crisis: Social Banking and Social Finance” 14 , clarified the nature of “social banking” with 3 basic characteristics: responsibility to the community, transparency and sustainability. At the same time, the author has
points out the “social banks” in Europe and gives ideas for finding effective and safe banking activities in the future.
In fact, when the economy has adverse fluctuations or crises, directly affecting areas of socio-economic life in general and banking activities in particular, countries need to find solutions to overcome the difficulties and disadvantages caused by the crisis. According to Roland Benediker, building a banking model based on criteria such as responsibility to the community, transparency and sustainability is an approach to ensure safety in banking activities that countries can apply. This is a fairly new and interesting approach, which can be studied when building laws on ensuring safety in banking activities of commercial banks in Vietnam today.
From a broader perspective, author Ngo Quoc Ky, in his doctoral thesis in Law "Improving the law regulating the activities of commercial banks in the socialist-oriented market economy in Vietnam" 15 , analyzed three basic factors:
13 Nguyen Van Tuyen, “Determining the limits of State intervention in commercial transactions of commercial banks under market economic conditions in Vietnam” , State and Law Magazine, No. 11, 2003.
14 Roland Benediker is a researcher in politics and society at the Center for International Studies at the University of
University of California, Santa Barbara. From 2009-2013, he was a Visiting Professor at the Stanford University European Center. He currently collaborates, researches and teaches at the European University, Germany. See his articles at: http://spice.stanford.edu/docs/european_answers_to_the_financial_crisis_social_banking_and_social_finance/
15 Ngo Quoc Ky (2003), Perfecting the law regulating the activities of commercial banks in the socialist-oriented market economy in Vietnam, PhD thesis in Law, Hanoi Law University.
The factors affecting the law regulating the activities of commercial banks are: the specificity of the activities of commercial banks, the economic management mechanism and the level of socio-economic development. These are also the factors affecting the adjustment of the law on ensuring safety in the credit activities of commercial banks. In the thesis, in addition to analyzing the basic contents of the law regulating the activities of commercial banks such as credit granting, capital mobilization and payment, the author also assesses the current situation of ensuring safety in banking activities, thereby proposing solutions to improve safety in the activities of commercial banks, including basic contents such as compulsory reserves, risk provisions, deposit insurance, inspection, examination and supervision of banks.
It can be seen that the law regulating the activities of commercial banks has a very broad content, because it includes regulations on capital mobilization, credit granting, and provision of payment services through accounts. With the scope of the doctoral thesis, author Ngo Quoc Ky has tried to research quite comprehensively the above issues. However, because of that, the author has not gone into depth in analyzing the law on ensuring safety in credit activities of commercial banks. On the other hand, the measures to ensure safety in banking activities that the author has mentioned include mandatory reserves, risk provisions, deposit insurance, inspection, examination, and supervision of banks that need to continue to be clarified in relation to ensuring safety in credit activities.
In summary, there are a number of research works by domestic and foreign authors related to the law on safety assurance in credit activities of commercial banks. The content of the above studies focuses on issues such as: the nature, role, scope and content of the law on safety assurance in credit activities... However, the concepts of the law on safety assurance in credit activities need to be further studied in more detail; some research works approach from a very broad perspective (studying the law regulating credit activities in general or safety assurance in credit activities in particular). Therefore, it is necessary to have in-depth research on theoretical and practical issues of the law on safety assurance in credit activities of commercial banks. The author of the thesis finds that the above research results are valuable documents to absorb, select and develop in order to clarify the theoretical basis of the law on safety assurance in credit activities of commercial banks in Vietnam.
1.3. Research situation related to safety measures in credit granting activities from the perspective of risk prevention
Risk prevention is an important content of safety assurance in credit activities of commercial banks. There are many domestic and foreign research projects related to this issue.
First of all, the monograph "Laws on measures to limit risks in lending activities of credit institutions in Vietnam and some countries in the world" edited by Associate Professor, Dr. Le Thi Thu Thuy, published by Hanoi National University Publishing House.
2016. This work has solved three important problems: First, clarifying theoretical issues about risks and measures to limit risks in lending activities of credit institutions; Second, studying the law on measures to limit risks in lending activities of credit institutions in some countries in the world and lessons for Vietnam; Third, analyzing the current situation and providing solutions to improve the law on measures to limit risks in lending activities in Vietnam today.
The author of the thesis finds that this research work is closely related to the thesis topic, providing scientific and practical bases for continuing to research and perfecting the law on ensuring safety in the credit activities of Vietnamese commercial banks. The thesis inherits the research results from this work, especially related to the theoretical basis of the law on limiting risks in lending activities; experience in building laws on limiting risks in lending activities in the UK, the US, Australia, Russia, Japan as well as solutions to perfect the law on limiting risks in lending activities of credit institutions. From there, the thesis continues to clarify the theoretical and practical basis on ensuring safety in the credit activities of commercial banks.
Besides, there are some studies discussing the concept, scope and content of risk prevention in banking activities from many different perspectives, including risk limitation, risk management, risk control and risk governance.
Author Le Thi Ngan Ha, in her master's thesis: "Laws on risk limitation in loan appraisal activities of commercial banks" 16 , analyzed in relatively detail the contents of loan appraisal activities as well as risks arising in this activity. Although not mentioning the nature and specific content of credit risk limitation, the author of the thesis analyzed the aspects of the law regulating loan appraisal activities to limit risks such as the borrower's subject capacity,
Borrower's financial capacity, purpose of loan use, loan usage plan, appraisal of loan collateral.
Taking a similar approach to risk limitation but from a broader perspective, author Dinh Thi Thuy Nga, in her Master's thesis in Law: "Legal analysis of measures to limit risks in lending activities of commercial banks in Vietnam " 17 , analyzed risks, consequences of risks and criteria for assessing risk in lending activities of commercial banks. However, author Dinh Thi Thuy Nga has not yet clarified the nature of risk limitation although this is an important theoretical issue of the problem being studied.
There are a number of theses, dissertations and articles on risk management in banking operations. The most notable is the PhD thesis in Economics by author Le Thi Huyen Dieu: “ Scientific arguments on
16 Le Thi Ngan Ha (2011), Law on risk limitation in loan appraisal activities of commercial banks , Master's thesis in Law, Ho Chi Minh City University of Law.
17 Dinh Thi Thuy Nga (2010), Legal analysis of measures to limit risks in lending activities of commercial banks in Vietnam, Master's thesis in Law, Hanoi National University.
determining the credit risk management model in the Vietnamese commercial banking system" 18 . According to author Le Thi Huyen Dieu, credit risk management is the establishment of a mechanism to identify, measure, manage and control current and potential risks in credit activities in a complete and comprehensive manner to maximize profits adjusted according to credit risk factors within an acceptable range. Also according to the content of the thesis, risk management is the process of organized and targeted impact of
Bank administrators aim to improve the safety level, profitability and achieve the growth goals of each commercial bank.
Approaching from this perspective, author Truong Thi Anh Tu, in her master's thesis in Law: "Law on risk management in lending activities of credit institutions" 19 , affirmed: risk management is the identification and proposal of measures to limit the occurrence of risks and damages when they arise, while determining the reasonable correlation between the bank's own capital and the level of possible risk in using bank capital. Although there are certain differences, the views of the two authors mentioned above on risk management
Risk management has two main points in common: (i) Risk management aims to ensure safety in banking operations; (ii) Risk management is not about eliminating risks, but accepting the level of risk, which means maintaining an acceptable level of risk.
Researching on credit risk control, author Tran Vu Hai has an article "Legal issues on credit risk control activities" 20 . Based on the content of Basel on credit risk monitoring, the author analyzed and proposed a number of solutions to improve the legal regulations on credit risk control. Although not giving the concept of risk control, author Tran Vu Hai believes that the regulations on credit risk control include: internal control system and internal audit; regulations on debt classification and provisioning; regulations on safety ratios
regulations on supervisory activities of the State Bank (SBV).
Researching on risk management, author Nguyen Huu Duong, in the article " Promoting credit information activities to improve the quality of risk management at Vietnamese commercial banks" 21 , analyzed the theory of operational efficiency of the credit information system; presented the results of the World Bank's survey on the operational efficiency of credit information; evaluated the effectiveness of credit information activities for Vietnamese banking activities. From there, the author proposed a number of solutions to promote activities.
Credit information of banks in Vietnam to ensure the safety of banking activities.
18 Le Thi Huyen Dieu (2010), Scientific argument on determining credit risk management model in Vietnam's commercial banking system , PhD thesis in Economics, Banking Academy.
19 Truong Thi Anh Tu (2010), Law on risk management in lending activities of credit institutions,
Master's thesis in Law, Hanoi National University.
20 Tran Vu Hai “Legal issues on credit risk control activities”, Journal of Law, No. 12, 2007. 21 Nguyen Huu Duong, “Promoting credit communication activities to improve the quality of risk management at Vietnamese commercial banks”, Banking Journal, special issue in 2005.
The research of author Nguyen Huu Duong on risk management through credit information activities is quite detailed, because credit information plays an important role in ensuring the safety of credit activities. The reality in Vietnamese banks has demonstrated this issue. During the credit granting process, banks need to clearly understand information about customers such as the capacity of the subject, the purpose of using the loan, security measures and collateral, debt repayment ability... Once the information is not grasped or the credit information is incorrect, it will increase the risk and risk of loss for banks.
In his research on methods and ways to prevent risks in banking activities, famous economist Ross Levine, in his article “ The corporate governance of banks: A concise discussion of concept and evidence” 22 , analyzed and proposed banking governance policies to ensure safety and efficiency for banks through strengthening the accounting and auditing systems as well as banking information issues.
inspection, supervision of banks and handling of violations. Along with this research direction but narrower, the Organization for Economic Cooperation and Development (OECD) published a scientific report “ Policy brief on corporate governance of banks in Asia ”, June 2006 23 . This report analyzes the basic features of bank governance, in which it especially emphasizes the responsibility of governance for transactions of related parties with banks to prevent risks for banks.
In the monograph “ Measures to secure loans with assets of credit institutions” 24 , Associate Professor, Dr. Le Thi Thu Thuy affirmed that loan security measures contribute to the safety of credit grants, and emphasized that these measures both act as effective security measures for the transfer of capital and make it easier for those in need of capital to borrow. In her research, Dr. Le Thi Thu Thuy believes that the law on
Loan security measures continue to need to be improved in the direction of creating more favorable conditions for entities participating in loan security transactions in receiving and handling secured assets, enhancing the autonomy and self-responsibility of credit institutions.
Also following this research direction, Dr. Pham Van Tuyet and Dr. Le Kim Giang, in the reference book " Credit contracts and loan security measures" 25 , gave
22 Ross Levine, “The corporate governance of banks: A concise discussion of concept and evidence”, www.elibrary.worldbank.org/.../10.../1813-9450-340. Ross Levine is an American economist, currently at the University of California at Berkeley. He is also a senior fellow at the Milken Institute, a member of the Council on Foreign Relations, and an adviser to the World Economic Forum. As of February 2013, he is the 13th most cited economist in the world.
23 The Organization for Economic Cooperation and Development, abbreviated as OECD, is a forum of 34 of the world's most developed market economies and 70 non-member countries. The OECD's purpose is to discuss and exchange experiences to solve economic and other common problems. The OECD is headquartered in Paris, France. See more articles at: www.oecd.org/dataoecd/43/41/38187317.pdf.
24 Le Thi Thu Thuy (2006), Measures to secure loans with assets of credit institutions , Justice Publishing House.
25 Pham Van Tuyet and Le Kim Giang (2012), Credit contracts and loan security measures", Justice Publishing House.