not exceeding 15% of ABBank's charter capital. The fault factor here is intentional violation. However, in September 2015, EVN divested all its capital at ABBank, divesting the number of shares held by EVN Hanoi, which is 4,731,972 shares (accounting for 1% of the total outstanding shares of ABBank) through auction 269 .
* In the case involving defendant Pham Cong Danh, Pham Cong Danh was previously the Chairman of the Board of Directors of VNCB and also the Chairman of the Board of Members of Thien Thanh Group. Pursuant to Article 126 of the Law on Credit Institutions 2010, Pham Cong Danh could not borrow capital from Vietnam Construction Bank. Therefore, in many ways, Pham Cong Danh avoided the above regulations : through 6 of his companies, he borrowed money from another bank, using the collateral as VNCB's money at this bank. Therefore, on September 9, 2016, the Ho Chi Minh City People's Court sentenced Pham Cong Danh (former Chairman of the Board of Directors of VNCB), Phan Thanh Mai (former General Director of VNCB), Mai Huu Khuong (former member of the Board of Directors), Hoang Dinh Quyet (former Deputy Director in charge of VNCB Saigon Branch, Director of VNCB Lam Giang Branch), Nguyen Quoc Vien (Head of VNCB Control Board), Phan Minh Tung (In charge of accounting of Thien Thanh Group) and Bach Quoc Hao (former Deputy Director of VNCB Debt Management and Asset Exploitation Company (Trust Asset) for the crimes of "Intentionally violating State regulations on economic management causing serious consequences" and "Violating regulations on lending in the operations of credit institutions" 270 . Because this is not an interwoven investment activity, but a violation of regulations on credit granting activities as analyzed in section 4.1.
* In the case involving defendant Nguyen Duc Kien , on November 5, 2009, the Standing Board of Directors of ACB Bank issued Notice No. 4478/CV-TH.09 on the conclusion of the meeting on November 2, 2009, agreeing to grant a limit of VND 700 billion to the Investment Council to buy a number of stocks with good prices and high liquidity and assigning Mr. Nguyen Duc Kien, Chairman of the Investment Council, to directly direct this investment case. Then, to circumvent the current regulations not allowing ACBS Company (a securities company 100% owned by ACB Bank) and the regulations in Article 29 of Decision 27/2007/QD-BTC to buy ACB's own stocks, Nguyen Duc Kien directed ACBS Company to sign a cooperation agreement with Asia Joint Stock Company (ACI Company and ACI-HN Company) to invest in buying stocks. In order for ACBS to buy shares, ACB lent interbank loans to Kien Long Bank and Vietbank. Then, Kien Long Bank and Vietbank lent back to ACBS through the purchase of bonds from ACBS. Then, ACBS transferred the money and equity capital to the two companies ACI and ACI-HN to buy ACB shares. Although ACI and ACI-HN later returned the money.
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269 Vietnam Electricity Group, (2015), op. cit. 268, p.25
270 First Instance Criminal Judgment No. 332/2016/HSST, op. cit. 2, p. 206
ACB stock investment money for ACBS company but this behavior also caused damage to ACB Bank about 687 billion VND 271 .
* Regarding the case of VCB, according to the conclusion announcement of the Government Inspectorate dated December 29, 2017 on compliance with legal policies, Vietcombank had a number of shortcomings and violations in credit activities such as: incomplete credit records, incomplete project legal documents, inaccurate appraisal of loan records, financial capacity, appraisal reports that have not analyzed and evaluated debt repayment ability, debt repayment sources, project efficiency, loan plans; appraisal to determine credit limit, capital turnover, loan term, equity capital, other mobilized capital is not sufficient and inaccurate 272 ; some credit records were disbursed when they did not meet the approved conditions, disbursed new loans to pay old loans or pay loan interest; there were cases of disbursement without checking and controlling invoices and documents, leading to customers forging, correcting and increasing the value of invoices many times to withdraw capital from the bank 273 ; Some credit applications accept mortgaged assets that do not meet the conditions as prescribed; the collateral does not meet the committed ratio in the credit contract; the mortgage contract is not re-signed when the mortgage contract expires .
In terms of behavior, VCB violated the following regulations: Article 96 of the Law on Credit Institutions 2010 on keeping credit records 275 , Article 29 of Circular 39/2016/TT-NHNN on keeping loan records; Clause 5, Article 8 of Circular 39/2016/TT-NHNN on capital needs that are not allowed to be lent: to repay the loan debt at the lending credit institution.
In summary, violations of commercial banks in the use of capital by commercial banks mainly focus on the prohibition of granting credit to certain subjects; violations of the ratio of credit granting to mobilized capital. Prohibited regulations in the use of capital by commercial banks to grant credit have been presented in section 4.2. Regulations on the limit of the ratio of credit granting to mobilized capital have been analyzed in section 4.3 above.
Based on the above-mentioned practical QPPL and violations of the law on credit granting, the provisions of the Penal Code on violations related to credit granting activities have undergone major changes:
The 2015 Penal Code (hereinafter referred to as the 2015 Penal Code) and the amended Penal Code (hereinafter referred to as the 2017 Penal Code) have removed the crime of "Intentionally violating the provisions of law".
271 Supreme People's Procuracy (2013), op. cit. 180, pp. 19, 20, 21
272 Government Inspectorate (2017), “Notice No. 3216/TB-TTCP concluding the inspection of compliance with policies and laws at the Joint Stock Commercial Bank for Foreign Trade of Vietnam”, December 29, 2017, p.1
273 Government Inspectorate (2017), op. cit. 272, p.2
274 Government Inspectorate (2017), op. cit. 272, p.2
275 Article 96. Retention of credit records. Credit institutions must retain credit records, including:
a) Credit contract and documents clearly stating the purpose of capital use; documents on security measures;
b) Report on the customer's financial status;
c) The credit granting decision must be signed by the authorized person; in case of a collective decision, there must be a record clearly stating the approved decision;
d) Documents arising during the use of the loan related to the credit contract.
regulations on economic management causing serious consequences" and the crime in Article 179 "Crime of violating regulations on lending in the activities of credit institutions" of the 1999 Penal Code. Previously, Article 179 of the 1999 Penal Code only dealt with two specific acts: lending without security in violation of the provisions of law; lending beyond the prescribed limit. Then, the 2015 Penal Code added a new crime in Article 206, "Crime of violating regulations in the activities of credit institutions and foreign bank branches". Now, the 2017 Penal Code has revised it to "Crime of violating regulations on banking activities and other activities related to banking activities".
The current 2017 Penal Code has listed many more acts considered as violations of criminal law related to credit granting by commercial banks. The most important amendment in the 2015 Penal Code and the 2017 Penal Code is the use of the word “credit granting” instead of the word “lending” in the 1999 Penal Code. This comes from the fact that the Law on Credit Institutions 2010 clearly distinguishes between lending activities in particular and credit granting activities in general.
The composition of this crime is as follows:
Objectively , compared to the 1999 Penal Code, Article 206 of the 2017 Penal Code lists a series of acts causing property damage that will be subject to criminal prosecution as follows: Granting credit to cases where credit is not granted; granting credit without security or granting credit with preferential conditions to subjects who are not entitled to credit; violating restrictions to ensure safety for credit activities; intentionally inflating the value of collateral when appraising prices to grant credit in cases where collateral is required; violating the provisions of law on total outstanding credit balance for subjects subject to credit restrictions; granting credit beyond the limit compared to equity capital for a customer and related persons; violating the provisions of law on credit granting conditions.
In addition, in terms of consequences, according to Clause 1, Article 206 of the 2017 Penal Code, subjects with the above acts cause damage to others from 100 million VND (VND) to 300 million VND. Thus, the damage of 100 million is the minimum damage level to serve as a basis for criminal prosecution.
Regarding the object : the violations have violated the state management order of credit granting activities.
Subject : According to current regulations, subjects committing crimes in the banking sector can only be individuals. Because Article 76 of the 2015 Penal Code does not stipulate that legal entities such as commercial banks must bear criminal responsibility for crimes related to commercial banking activities.
Through major cases in the banking sector as analyzed above, the subjects of crimes related to capital use activities of commercial banks are subjects with positions and powers. For example, Chairman of the Board of Directors of VNCB, General Director of VNCB, member of the Board of Directors, former Deputy Director in charge of VNCB Saigon branch, Director of VNCB Lam Giang branch; Head of the Board of Supervisors, Head of Accounting of Thien Thanh Group
and former Deputy Director of VNCB Debt Management and Asset Exploitation Company (Trust Asset). Although the 2015 Penal Code and the 2017 revised Penal Code do not list crimes related to credit granting activities of credit institutions in the group of crimes related to positions, the reality of major cases in the banking sector shows that only those entities with certain authority in approving and submitting the acceptance of such credit grants are the subjects of the crime of capital use activities of commercial banks.
Subjective : The subject performing the above acts is at fault intentionally or unintentionally.
Regarding sanctions, the subject who commits a criminal violation of this crime will be punished with a penalty corresponding to the level of damage caused.
Clause 1: causing damage from 100,000,000 VND to under 300,000,000 VND: fine from 50,000,000 VND to 300,000,000 VND or imprisonment from 06 months to 03 years:
Clause 2: causing damage from 300,000,000 VND to under 1,000,000,000 VND: imprisoned from 03 years to 07 years.
Clause 3: causing property damage from 1,000,000,000 VND to under 3,000,000,000 VND: imprisoned from 07 years to 12 years.
Clause 4: causing damage from 3,000,000,000 VND or more, shall be punished with imprisonment from 12 years to 20 years.
Compared with the crimes stipulated in Article 179 of the 1999 Penal Code, the sanctions in Article 206 of the 2015 and 2017 Penal Codes have significant differences. In Article 179 of the 1999 Penal Code, the penalty in bracket 1 is only a fine from 10 million VND to 50 million VND, imprisonment from 1 year to 7 years; the penalty in bracket 2 is for crimes causing very serious consequences from 5 years to 12 years; the penalty in bracket 3 is for crimes causing especially serious consequences from 10 years to 20 years. The 2017 Penal Code stipulates the specific level of damage corresponding to each penalty bracket while the 1999 Penal Code only stipulates the type of crime corresponding to each penalty bracket.
Regarding additional penalties, all Penal Codes stipulate that offenders may also be banned from holding positions, practicing a profession or doing certain jobs from 01 year to 05 years. However, the 1999 Penal Code stipulates more clearly that they are banned from holding positions, practicing a profession or doing jobs related to credit activities. Meanwhile, the 2015 and 2017 Penal Codes generally stipulate that they are banned from holding positions, practicing a profession or doing certain jobs.
4.5. Inadequacies and recommendations for improving the law on capital use by commercial banks to provide credit
Based on the principles analyzed in Chapter 2 and the specific characteristics of the law on the use of capital by commercial banks to provide credit, the improvement of the law on the use of capital by commercial banks through investment must follow the following directions: Must help minimize the capital risks of commercial banks; Must meet the requirements of sustainable development.
economic stability; Must be consistent with the policies of the Party and the State; Must ensure the freedom of business and contract signing within the legal framework; Must help reduce administrative procedures and compliance costs
4.5.1. Inadequacies and recommendations related to credit for the real estate sector
Vietnamese law currently has no distinction in intervening in the capital use activities of commercial banks in each segment: consumer credit and credit for real estate business. Therefore, Vietnamese law needs to divide the granting of real estate-related credit into 2 groups and have separate regulations for each group: credit group serving investment needs and real estate credit group serving people's housing needs. For real estate credit for people's housing needs, it belongs to the consumer credit segment. For real estate credit serving investment needs, the risk to the capital source of banks is very high because currently the supply is increasing, real estate is still frozen, and prices are inflated much compared to real prices.
The current regulations in Vietnam do not clarify the difference between real estate credit and consumer and investment credit while the risk for these two types of credit activities is clearly not the same. After determining the difference between these two types of credit, we need to apply different risk factors when granting credit. The researcher agrees with author Doan Thanh Ha 276 that we should proceed as follows:
- The State Bank needs to separately determine the outstanding real estate loan ratio for each type of real estate credit. This is done based on the source of debt repayment and personal factors of the borrower.
- The government needs to issue regulations to regulate real estate lending activities according to market developments. Specifically, when real estate prices are increasing at a high rate, the State Bank of Vietnam will set the real estate lending risk coefficient at a low level and vice versa. We should maintain a high credit granting ratio according to market developments, that is, when the real estate lending risk coefficient is low and vice versa. However, in his proposal, author Doan Thanh Ha only discussed solutions to regulate the flow of bank credit into the real estate market in Ho Chi Minh City. The researcher believes that the above solutions can still be applied nationwide and not just limited to Ho Chi Minh City.
Previously, the two authors Ly Hoang Anh and Hoang Thi Thanh Hang also proposed to regulate a limit on the ratio of outstanding real estate loans to total outstanding loans. Regulation of this ratio limit is necessary but only applies in the condition of a developing market.
276 Doan Thanh Ha (2014), Some solutions to regulate bank credit flows into the real estate market in Ho Chi Minh City , Banking Magazine No. 1+2, pp. 118-119
Overheating development. When the real estate market develops stably or freezes, this regulation should be abolished . 277
In addition, we should think of indirect ways to distinguish between credit for real estate business and consumer credit. Through that, the state will limit the provision of credit for the real estate sector. In this regard, we can refer to the experiences of some countries as follows:
China has been implementing credit control measures for real estate since 2010 by tightening home purchase restrictions (HPR) and restricting credit to the real estate sector. From March 1, 2013, the income tax rate will increase to 20% on profits from home sales (previously, the income tax rate applied was only 1-2% of the selling price). Central bank branches in provinces and cities must also introduce credit restriction policies for real estate in accordance with the socio-economic conditions of each region (increasing the amount of down payment when buying a house, increasing mortgage interest rates) to prevent speculation and help reduce housing prices. Recently, the authorities of Beijing, Shanghai and Chongqing have issued regulations prohibiting commercial banks from providing credit to local people to buy a third or more house, and the amount of down payment for a second house has also been increased to 70% of the house value. In particular, the Beijing government also issued a regulation prohibiting people with permanent residence in Beijing from buying a second apartment 278 .
In Hong Kong, Special Stamp Duty has been applied to the housing sector to limit speculation since November 20, 2010. Accordingly, regardless of individual or organization, when buying a house and reselling it within 24 months, the stamp duty is imposed with the method that the shorter the holding period, the higher the tax rate. Specifically, if the house is resold within 6 months, the tax rate will be 20%, if it is resold within 6-12 months, the tax rate will be 15%, and if it is resold within 12-36 months, the tax rate will be 10 % .
Thus, by the above methods, some countries and territories have monitored consumer lending, separated real estate lending hidden in consumer lending, helping to tighten credit into real estate. Inheriting the research results of author Nguyen Van Tuyen (2003), the researcher found that through macroeconomic policies such as credit interest rate management policy (increasing lending interest rates), tax policy (increasing
277 Ly Hoang Anh, Hoang Thi Thanh Hang (2014), Bank credit solutions for sustainable development of real estate market , Banking Magazine No. 10, May 2014, p.35
278 Tran Ngoc Lan, Nguyen Dinh Trung (2013), Experience in controlling consumer credit in some Asian countries, [https:// www.sbv.gov.vn/webcenter/portal/vi/menu/trangchu/hdk/hdkhcn/htnc/htnc_chitiet?leftWidth=20%25&s howFooter=false&showHeader=false&dDocName=CNTHWEBAP01162520955&rightWidth=0%25¢erWi dth=80%25&_afrLoop=191370739480000#%40%3F_afrLoop%3D191370739480000%26centerWidth%3D80
%2525%26dDocName%3DCNTHWEBAP01162520955%26leftWidth%3D20%2525%26rightWidth%3D0%25
25%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.ctrl-state%3D31f2prvn7_9], posted on July 19, 2013, accessed on December 30, 2018, p.2.
279 Tran Ngoc Lan, Nguyen Dinh Trung (2013), op. cit. 278, pp. 4, 5.
income tax rate, special registration tax), housing policy, real estate policy (discouraging or prohibiting the purchase of a second or third home) and from the experience of the above countries, the Vietnamese government should study and apply to Vietnam to reduce credit in the real estate sector. For example, banks should reduce the loan-to-value ratio for second or more properties, and limit the time for transferring real estate to avoid real estate speculation.
4.5.2. Inadequacies and recommendations related to specific regulations on credit granting activities to meet environmental requirements
Vietnam's socio-economic development strategy for the 2011-2020 period has set out the requirement for rapid development associated with sustainable development. In sustainable development, the commercial banking system plays an important role because banks are the main capital channel for the economy. Commercial banks must pay special attention to environmental factors when approving loans that are beneficial to the environment and rejecting loans that are harmful to the environment. Based on this strategy, the following documents have been issued: Directive No. 03/CT-NHNN in 2015 on promoting green credit growth and managing environmental and social risks in credit granting activities; Decision No. 1552/2015/QD-NHNN promulgating the action plan of the banking industry to implement the national strategy on green growth until 2020, requiring the review, adjustment and improvement of banking and credit institutions in line with green growth goals. Specifically, review and supplement the content on green credit and banking into the Banking Industry Development Strategy to 2020, and develop a project to develop green banking in Vietnam.
In addition, regulations on credit incentives, capital and land support for organizations and individuals participating in providing environmental services have been issued. According to Decision No. 249/QD-TTg dated February 10, 2010 on approving the Project on developing environmental services until 2020, organizations and individuals participating in providing environmental services are entitled to support policies on land, capital and credit incentives at the highest level according to the provisions of law.
Resolution No. 100/NQ-CP, issued on November 18, 2016, stipulates the government's action program for the 2016-2021 term, stipulating the main tasks that need to be focused on directing and operating are to develop strategies, plans, and projects in accordance with the market mechanism as a basis for orienting and allocating capital resources for sustainable and effective economic development. Next, Article 4 of Circular 39/2017/TT-NHNN stipulates that lending activities of credit institutions to customers must be carried out in accordance with relevant legal provisions, including environmental protection laws. Based on the above provisions and current practices in granting credit to projects that meet environmental requirements, the researcher has a few recommendations as follows:
First, Vietnam needs to soon issue detailed guidelines on granting credit to projects that meet environmental requirements.
According to the assessment of the GIZ Development Cooperation Organization (Germany), Vietnamese banks still face difficulties in providing credits for new energy because commercial banks do not have much experience in assessing the risks of these projects 280 . Currently, the State Bank of Vietnam has coordinated with the International Finance Corporation to develop a handbook on environmental and social risk assessment for 10 economic sectors in credit granting activities such as: agriculture, chemicals, construction and infrastructure; energy; food processing; textiles; oil and gas; waste treatment; mining and non-metallic mineral products. This will help Vietnam shorten the time to deploy green credit in Vietnam. It took China nearly 5 years from the issuance of the policy until it developed detailed guidelines to implement the policy and the implementation has not achieved the desired results due to the lack of a reliable environmental pollution assessment system to help banks classify capital projects 281 .
Second, specific regulations on granting credit to projects that ensure environmental protection requirements should include three contents:
- Set a minimum requirement for the amount of capital that commercial banks must use to provide credit for projects that meet environmental protection requirements such as projects on afforestation, climate change response, clean energy development, renewable energy, etc. The reason here will be analyzed in section 4.5.4.
- There are specific environmental indicators to help commercial banks identify which projects meet environmental requirements.
- Specific sanctions if violating the above requirements
Regarding the research question “Do commercial banks need to check and ensure that the projects they finance meet the conditions prescribed by law when the projects are in the conditional business sector?”, the researcher believes that commercial banks are not management agencies and are not entities that understand environmental issues and business conditions of conditional businesses like state management agencies. Therefore, commercial banks can only rely on the results announced by environmental management agencies and business management agencies as a basis for assessment before granting credit.
280 Le Thi Thuy Van (2016), Green finance - green banking in APEC cooperation and practices in Vietnam , Banking Magazine No. 12, p.20
281 See Tran Thi Thanh Tu, Tran Thi Hoang Yen (2016), op. cit. 95, p.8.