Banking Position Paper 2010

Recommendation: It is recommended that a working group comprised of the SBV,banks and the World Bank be created to review and overhaul the reporting requirementsto ensure that reporting is appropriate and robust and unwanted duplication of reports iseliminated.6. Offshore borrowingsVietnam’s long term economic growth and infrastructure development will requiresubstantial long-term debt capital to be raised from offshore capital markets. One of theimpediments towards Vietnamese companies from accessing the international capitalmarkets is the imposition of “withholding tax” on interest paid to offshore lenders. Thishas led to companies shying away from accessing the capital markets and relying onmismatched short-term loans from the onshore Vietnamese market.Recommendation: The government has made progress on addressing this issuethrough the ratification of Double Taxation Agreements with several jurisdictions. Thegovernment is encouraged to continue to negotiate double taxation agreements withadditional jurisdictions and to ensure a straightforward process is implemented to alloworganizations to efficiently claim tax credits allowed under these agreements as well asinsuring equal treatment for all countries. The government should also consider thewaiver of withholding tax on interest payment to offshore lenders for loan tenors overone year to encourage potential borrowers to tap this important pool of funding.III. Consumer Banking (Pillar 3)1. Wealth Management ProductsWealth management products are now globally a core offering for banks to its retailclients. This has proved advantageous for consumers, given that banks providesignificant oversight and expertise to ensure that products are appropriately provided tocustomers by proper assessment of client’s risk appetite and purpose.Recommendation: Given that current regulation is silent on investment products, thegovernment is encouraged to bring into place a law that allows commercial banks tooffer investment products to their customers, provides protection to investors in the salesprocess, and requires transparency in the pricing/returns and risks of such products.2. Credit BureauAccording to Credit Information Centre (CIC), conditions for granting operation licensefor a credit bureau are at least 20 commercial banks committing to provide creditinformation exclusively to that credit bureau. In return, those 20 commercial banks canobtain data from the credit bureau that they commit to provide information. Suchregulation on information exchange between CIs and credit bureaus is to ensure CIs’sresponsibility of providing sufficient and proper information to the credit bureau.Furthermore, the regulation that there should be at least 20 commercial bankscommitting to provide information to a credit bureau is to limit the number of creditbureaus. This regulation is drafted based on international specialists’ recommendations7