After a series of articles documenting the reality of many banks offering customers interest rates higher than the listed rates, Nhip Song Doanh Nghiep reporters raised questions about this issue with lawyers as well as relevant associations and competent authorities.
“BANKS HAVE NO RIGHT NO WAY TO STOP, BUT THEY DON’T WANT TO”
Regarding the situation of banks “colluding” with interest rates, quietly increasing deposit interest rates in the current context, in response to Nhip Song Doanh Nghiep reporter, Mr. Nguyen Quoc Hung – General Secretary of the Vietnam Banking Association said: “ Banks are reluctant to do so, they do not want to. As for depositors, customers choose banks with higher interest rates to deposit. Credit institutions also do not want customers to withdraw their money, so they can also come up with a more attractive form. Basically, banks are very upset about the fact that one bank after another keeps increasing interest rates. That is the problem that I think is the most difficult .”
When asked about the case of a bank using the “trick” of issuing certificates with terms from 3 to 7 years, but after 1 year, customers were able to withdraw by transfer but still received interest rates exceeding the ceiling, up to 11.2%. Talking about this case, the General Secretary said: “It is their business if the credit institution allows early withdrawal and pays customers a subsequent interest rate. In terms of regulations, they are doing the right thing, not wrong. According to the law, this is a civil agreement.”
“ It should also be added that long-term deposits with low liquidity reserve ratios are also a way to reduce input costs. If short-term mobilization is used , the reserve ratio will be higher ,” Mr. Hung analyzed.
In the case of banks not fulfilling their commitments, secretly increasing interest rates, and adding interest rates compared to the listed rates, Mr. Hung affirmed that the violating banks can be handled. If this happens, the State Bank of Vietnam (SBV) will rectify and consider handling that transaction office. At the same time, there is also a document directing the SBV Directors of provinces and cities to inspect and examine.
If the bank is found to have violated the law, the State Bank will impose a fine. Regarding the allocation of credit quotas, if the bank increases the interest rate to open a credit quota, it may not allow the bank to open a credit quota anymore. As for the Association, it cannot handle this because this is a voluntary agreement of member banks.
STRONGER MEASURES ARE NEEDED FOR VIOLATIONS IN CAPITAL MOBILIZATION ACTIVITIES
Responding to a reporter from Nhip Song Doanh Nghiep about inviting customers with interest rates higher than the listed rate, Lawyer Le Thi Thanh Huyen (HTH Global Law Firm and Associates) affirmed: “Inviting customers to deposit transactions with interest rates higher than the interest rates publicly listed by the bank is not in accordance with the provisions of Article 3 of Circular No. 07/2014/TT-NHNN “.
Specifically, according to the provisions of law, there are currently no measures to handle the act of inviting customers to deposit savings with interest rates higher than the listed rate. However, if such invitation leads to “colluding” with interest rates, that is, receiving deposits with interest rates that are incorrect (specifically higher) than the interest rates publicly listed by the bank as required in Article 3, Circular No. 07/2014/TT-NHNN regulating interest rates for deposits in Vietnamese Dong of organizations and individuals at credit institutions (” Circular 07/2014/TT-NHNN “), the bank may be fined from VND 20,000,000 to VND 40,000,000 according to the provisions of Point b, Clause 1, Article 12, Decree 88/2019/ND-CP regulating administrative sanctions in the monetary and banking sector.
Article 3 of Circular No. 07/2014/TT-NHNN stipulates: “Credit institutions shall publicly post interest rates on deposits in Vietnamese Dong at deposit receiving locations in accordance with regulations of the State Bank of Vietnam. Credit institutions are strictly prohibited from conducting promotions in any form (in cash, interest rates and other forms) when receiving deposits that are not in accordance with the provisions of law and this Circular .”
Clause 13, Article 4 of the Law on Credit Institutions No. 47/2010/QH12 (” Law on Credit Institutions “) stipulates: ” Receiving deposits is the activity of receiving money from organizations and individuals in the form of demand deposits, term deposits, savings deposits, issuing deposit certificates, promissory notes, treasury bills and other forms of receiving deposits on the principle of fully repaying principal and interest to depositors according to the agreement “.
The lawyer also said that the State has Decree No. 88/2019/ND-CP regulating administrative sanctions in the monetary and banking sector, with specific sanctions for violations in capital mobilization activities as prescribed in Articles 12 and 13. However, the above regulations only stop at administrative sanctions, so they may not be strict enough to deter and prevent violations in the monetary and banking sector.
Lawyer Le Thi Thanh Huyen raised the question, should the State/SBV consider stronger handling measures along with a strict control mechanism, strengthen inspection and examination of capital mobilization and lending activities of credit institutions, creating a transparent environment and healthy competition in this field.
Regarding the content of “civil agreements”, Lawyer Le Thi Thanh Huyen said that Civil Law is considered the common law/root law of private law in the legal system, a synthesis of norms regulating property relations and some personal relations in civil transactions on the basis of equality, self-determination and self-responsibility of the subjects participating in civil relations. However, for each different field of activity, we also have specialized laws and this issue will be under the scope of regulation of the Law on Credit Institutions and related Decrees/Circulars in addition to the general principles of Civil Law.
Regarding the transfer of deposit certificates before maturity, Lawyer Le Thi Thanh Huyen cited Clause 1, Article 17 of Circular No. 01/2021/TT-NHNN regulating the issuance of promissory notes, treasury bills, deposit certificates, and domestic bonds by credit institutions and foreign bank branches: ” Valuable papers are transferred in the forms of purchase, sale, donation, exchange, inheritance and other forms in accordance with relevant legal provisions “. Thus, deposit certificates can be transferred before maturity, but the risk for customers is that when the time comes to transfer (customers need to withdraw money before maturity), there is no transferee to carry out the transaction and the transfer value at that time may not be as expected by the customer (the agreed value between the transferor and the transferee; at that time, the Bank is only the unit that carries out the transfer procedure and maintains the original interest rate for the transferee). This makes Certificates of Deposit a riskier asset while being significantly less liquid than savings deposits, a factor that may not be taken into account by many depositors.
CREDIT INSTITUTIONS MUST PUBLICLY POST DEPOSIT INTEREST RATES AT DEPOSIT RECEIVING LOCATIONS
Responding to Nhip Song Doanh Nghiep on this issue, the State Bank of Vietnam affirmed: “It is strictly forbidden for credit institutions (CIs) to receive deposits and conduct promotions in any form (in cash, interest rates and other forms) that are not in accordance with the provisions of law and this Circular. Accordingly, CIs must publicly post deposit interest rates at deposit receiving locations.”
This is specified in detail in Clause 2, Article 91 of the Law on Credit Institutions 2010 (amended and supplemented), which stipulates that credit institutions are entitled to set and must publicly post capital mobilization interest rates and service provision fees in the business activities of credit institutions; in Article 3 of Circular No. 07/2014/TT-NHNN dated March 17, 2014, it is stipulated that credit institutions must publicly post interest rates on deposits in Vietnamese Dong at deposit receiving locations according to the regulations of the State Bank.
The SBV added that in the last months of 2022, credit institutions continuously adjusted deposit interest rates upward in the context of central banks raising interest rates, increasing inflationary pressure, capital demand for economic growth recovering, the SCB event… In that situation, the SBV has implemented a number of measures to stabilize interest rates as follows: (i) Directing credit institutions to maintain a stable and reasonable mobilization interest rate level, consistent with the ability to balance capital, the ability to expand healthy credit and risk management capacity; not affecting the stability of the money market and the market interest rate level; strictly prohibiting the implementation of technical measures to circumvent the ceiling on mobilization interest rates, strictly prohibiting unfair competition in capital mobilization. The SBV will monitor cases where credit institutions continue to increase interest rates and take measures to handle these credit institutions. (ii) Early 2023. The State Bank of Vietnam continues to direct credit institutions to strictly control deposit interest rates to stabilize market interest rates. (iii) In February 2023, the State Bank of Vietnam had a meeting with commercial banks on stabilizing interest rates and reducing deposit interest rates to create conditions to reduce lending interest rates to support businesses and the economy to recover production and business. Accordingly, commercial banks basically agreed to reduce deposit interest rates by 0.2-0.5%/year for deposits with terms of 6 to 12 months.
Based on the management and direction of the State Bank, up to now, basically, commercial banks have not adjusted deposit interest rates continuously as before and the interest rate level has gradually stabilized in the first month of 2023 and is on a downward trend. Currently, the average new deposit interest rate is around 7%/year (in which, some commercial banks have sharply reduced deposit interest rates compared to the end of 2022).
The State Bank emphasized: “In the coming time, the State Bank will continue to closely monitor the developments in market interest rates; at the same time, strengthen the inspection, examination and supervision of deposit-taking activities of credit institutions, including the content of publicly posting deposit interest rates and actual interest rates of credit institutions. In case the press or people have sufficient information and evidence of credit institutions secretly agreeing on deposit interest rates with customers higher than the posted deposit interest rates according to regulations, they should report to the State Bank so that the State Bank can have more information to check, supervise and rectify the activities of credit institutions to ensure safe and transparent banking activities”.
