The Law on Credit Institutions (Credit Institutions) 2024 was approved by the National Assembly on January 18, 2024 and officially takes effect from July 1, 2024. The content of the Law has many positive new points, which are assessed to contribute to ensuring the healthy and stable development of financial activities of credit institutions.

Credit institutions play an important role in opening up and operating the economy. Therefore, regulations related to credit institutions are always focused, paid attention to and improved. The Law on Credit Institutions 2024, from July 1, 2024, will replace the effect of the Law on Credit Institutions 2010, amended and supplemented in 2017. Some notable new regulations are as follows:

Firstly, the Law on Credit Institutions in 2024 prohibits the sale of non-compulsory insurance for the provision of banking services in any form.

Secondly, the Law on Credit Institutions in 2024 expands the subjects that must provide, disclose and publicize information in order to control and avoid manipulation and cross-ownership. Clause 2, Article 49 of the Law stipulates that shareholders owning 01% or more of charter capital of a credit institution must provide the credit institution with the following information: a) Full name; personal identification number; nationality, passport number, date and place of issue of the foreign shareholder; number of enterprise registration certificates/equivalent legal documents of shareholders being organizations; date of issuance and place of issuance of this paper; b) Information about related persons as prescribed by law; c) The number and percentage of their share ownership in that credit institution; d) The number and percentage of shares owned by related persons in that credit institution.

Thirdly, the Law on Credit Institutions in 2024 reduces the maximum share ownership rate of shareholders in credit institutions. Specifically, a shareholder being an organization is not allowed to own shares in excess of 10% of the charter capital of a credit institution; Shareholders and related persons of such shareholders are not allowed to own shares exceeding 15% of the charter capital of a credit institution. Major shareholders of a credit institution and related persons of such shareholders are not allowed to own shares of 05% or more of the charter capital of another credit institution.

For shareholders who own shares in excess of the new regulations, from the effective date of the Law on Credit Institutions 2024, shareholders and related persons who own shares in excess of the prescribed share ownership ratio may continue to maintain their shares but not increase their shares until they comply with the regulations on share ownership regulations in accordance with the Law on Credit Institutions in 2024, except for the case of receiving dividends in shares.

Fourth, the Law on Credit Institutions in 2024 supplements regulations on credit approval and approval. Accordingly, credit institutions must have at least information about the purpose of lawful use of capital, financial capacity of customers before deciding to extend credit for credit grants of small value, including: a) Loans for living needs, credit extension via cards of commercial banks, etc foreign bank branches; b) Financial leases, consumer loans, credit extension via cards of non-bank credit institutions; c) Loans in service of the people’s credit fund’s living needs; d) Loans of microfinance institutions

Fifth, the Law on Credit Institutions in 2024 stipulates early intervention of weak credit institutions. Accordingly, the Law has added a chapter on early intervention of credit institutions.

Sixth, the Law on Credit Institutions in 2024 gradually reduces the credit limit. The prescribed credit level will gradually decrease year by year, starting from 2026. On the one hand, this regulation reduces the risk of cross-bank ownership, on the other hand, it affects the access to capital of enterprises. Therefore, from the time after the Law on Credit Institutions 2024 comes into effect to 2026 (the time when the gradual reduction of credit levels begins), enterprises need to have investment and business plans to gradually reduce the dependence on credit levels of credit institutions, ensuring the stability of their long-term production and business activities.

Seventh, the Law on Credit Institutions in 2024 supplements regulations on handling bad debts and collateral.

This newsletter is only for the purpose of information about newly issued legal regulations, not used as advice or application to specific cases.

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