22 September 2023

On 1 September 2023, Circular No. 06/2023/TT-NHNN of State Bank of Vietnam (“SBV”) (“Circular 6”) came into effect. Circular 6, issued on 28 June 2023, amends Circular No. 39/2016/TT-NHNN (“Circular 39”) which regulates lending activities of credit institutions such as commercial banks and foreign bank branches (“credit institutions”).

This article highlights some of the key points of Circular 6.

New lending restrictions introduced but subsequently suspended

Circular 6 supplements Circular 39 to include the following types of loans which credit institutions shall not be permitted to grant:

  • Loans for making or acquiring capital contributions or shares in other companies which have not yet been listed on the securities market or registered for trading on the unlisted public company market (UPCoM) system.
  • Loans for paying capital contributions under capital contribution contracts, investment cooperation contracts, or business cooperation contracts for implementation of investment projects that fail to satisfy conditions for being put into business operation.
  • Loans to provide financial compensation, unless the loan fully satisfies the following conditions:
    • The customer has advanced its own capital to pay the expenses of the implementation of the business operation project, however such expenses for the implementation of this business operation project are incurred less than 12 months from the time the credit institution decides to lend;
    • The expenses paid by the customer's own capital for the implementation of the business operation project are expenses using the borrowed capital of the credit institution according to the capital use plan sent to the credit institution for consideration for medium and long-term lending to implement that business project.

It should be noted, however, that the subsequently issued Circular No. 10/2023/TT-NHNN, which also came into effect on 1 September 2023, suspends the implementation of these new restrictions meaning that credit institutions can continue to extend loans for these purposes until further implementing regulations are issued by the SBV.

New regulations on e-lending

In order to lend via electronic means, credit institutions must do so in a manner that complies with their business operation conditions and the characteristics of the loan. Circular 6 also requires credit institutions to ensure the security and safety of data messages and keep information confidential in accordance with the provisions of the Law on Anti-Money Laundering, e-transactions, guidance of the State Bank of Vietnam on risk management and other relevant legislation.

The systems utilised to conduct e-lending must satisfy level-3 or higher-level information system security requirements provided in the regulations on the security of information systems in banking operations.

Credit institutions must also:

  • store and preserve information and data in accordance with relevant legislation;
  • store and back up the information and data to ensure the completeness and integrity of dossiers permitted for access and use when necessary or to serve inspection, collation, settlement of inquiries, complaints, disputes and provide information upon request from competent state management agencies;
  • keep the information confidential;
  • be able to conduct effective know-your-client processes; and
  • have effective risk management policies in place.

Know-Your-Client requirements

Circular 6 specifies that credit institutions engaged in e-lending:

  • must adopt solutions and technologies:
    • to identify its customers; and
    • to verify customer identification data during its provision of digital lending services;
  • shall assume responsibility for all risks that may arise.

Other e-lending requirements

Circular 6 stipulates that loan agreements shall be made in writing, and where they are e-contracts, comply with the law on e-transactions. Credit institutions must also create and maintain loan dossiers in the form of data messages in conformity with the provisions of the law on archiving, the law on e-transactions and relevant laws, and include the loan agreement, report on financial status, loan decision e-signed by a competent person, customer identification information and date, information and data arising during the loan term.