The State Bank of Vietnam (SBV) has just issued Document No. 5228/ NHNN-CSTT on the activities of peer lending to credit institutions and foreign bank branches.
According to SBV, peer-to-peer (P2P lending) activities can contribute to financial literacy, expand capacity and create more access to financial resources to the economy, especially for vulnerable objects in society (having access to the Internet). Thereby, it can contribute to pushing back the shadow banking.
However, SBV said that Vietnamese law currently had no regulations on P2P lending, at the same time warning that P2P Lending operations exposed to many potential risks (loan risks, information risks, risks of money laundering and cyber security risks), which could adversely affect the social security.
In Vietnam, a number of business registration companies are financial advisors, financial brokers and self-referrals as P2P lending companies that provide services to connect investors and borrowers.
Notably, according to a review by SBV, some P2P lending companies took advantage of the lack of information and ignorance of people to advertise and give unclear and misleading information that led investors to misunderstand on the investment and lending activities through P2P Lending’s platforms.
“Recently formed and developed P2P lending, the online trading platforms of P2P lending companies have not been examined and evaluated by authorities yet, so there may be a risk of cyber attack and stealing information causing damage to the parties “, SBV said.
It added, some P2P Lending companies were distribution channels, seeking customers for financial companies, pawn companies or pawn companies cooperating with technology companies to build online trading platforms looking for borrowers and making loans. In particular, some pawn companies use foreign or domestic loans to re-lend.
“Some people may take advantage of the P2P lending model to conduct illegal acts (shadow banking operations, loan sharking, lend-sum loans and multi-level financial operations), giving false advertisements, promising high profits, competitive interest rates for frauds, appropriating people’s capital, adversely affecting people’s lives, destabilising social and economic security”, SBV warned.
Even in some cases, P2P lending and pawn companies have signs of violating Article 8 of the amended Law on Credit Institutions (CIs) when performing banking activities in the form of credit.
From the above contents, in order to ensure the safety of the system, SBV recommends credit institutions to carefully study and understand the risks arising from P2P lending activities to guide and notify within the CI (including subsidiaries and member companies of the CI) on the potential risks of P2P lending activity, including legal risks and other risks arising from P2P lending, in the context that Vietnam currently has no complete legal framework for P2P lending.
SBV also proposes credit institutions to be cautious in signing and implementing cooperation agreements with P2P lending companies to strictly comply with legal regulations, maintaining the operation and reputation of credit institutions and the banking system.
“In the course of dealing with and collaborating with P2P lending companies, the CI considers the proposal of P2P lending companies to publish fully, transparently and honestly information about cooperation and transaction between P2P lending companies with CIs in all advertising messages, media and sales that P2P Lending company conveys to consumers and related parties “, SBV requires.
In addition, CIs must regularly monitor the publication of information on the partnership between P2P lending and CIs to promptly disclose information that P2P lending has published incorrectly, incompletely, which can cause harm to consumers and related parties (if any) for proper handling.
In addition, the cooperation, connection and transaction between credit institutions (including subsidiaries and affiliates of credit institutions) and P2P lending companies must be safe, efficient and effective, ensuring the legal benefits of credit institutions and customers, complying with relevant laws.
