Vietnam's Draft Decision Amending Decision No. 35 – Implications for Onshore Banks and Life Insurers
Vietnam imposes a registration requirement for 'standard contracts and general trading conditions' of certain services offered by both onshore banks and life insurers through Decision No. 351 in relation to the Law on Consumer Protection. The Ministry of Industry and Trade (MOIT) recently proposed to the Prime Minister a draft Decision amending Decision No. 35 (the Draft Decision). Specifically, the list of essential goods and services which are subject to the 'standard contracts and general trading conditions' registration requirements under the Law on Consumer Protection will be shortened. In relation to onshore banks, this Draft Decision proposes relaxing these requirements for onshore banks by removing the retail banking services from the list. This follows an earlier plan of the MOIT issued on 21 February 2017 for abolishing unnecessary administrative procedures and reducing compliance costs for onshore banks.2 In relation to life insurers, however, the Draft Decision does not offer a similar concession.
Specific implications for onshore banks
Under the current regulations, onshore banks are required to register standard contracts and general trading conditions for "issuance of local debit cards, opening and use of payment accounts (applicable to individual customers), and borrowing of capital for individuals (for consumption purposes)". This has been in force since 15 October 2015 under Decision No. 35 in connection with the Law on Consumer Protection.
The Draft Decision proposes that, from its effective date, the above-specified banking services are removed from the list of essential goods and services and, accordingly, standard contracts and general trading conditions for those services are no longer required to be registered with the MOIT under the Law on Consumer Protection.
However, the Draft Decision also includes a transitional provision to govern registration dossiers that are submitted before the effective date of this proposed decision. For those dossiers, the Draft Decision provides that the dossier-receiving authorities (i.e., the MOIT's Vietnam Competition Authority and local Departments of Industry and Trade) are required to continue handling relevant dossiers and issue registration results within 20 working days from receipt of a valid and complete application dossier.
Implications for onshore life insurers
The Draft Decision is silent on "life insurance," which was previously added by Decision No. 35 to the list of essential goods and services. This means that if no further amendment is made to the Draft Decision, the registration requirement with the MOIT for policy forms and terms and conditions of life insurance services will remain unchanged.
In late 2015, Decision No. 35 created certain overlapping procedures and increased compliance costs for the local life insurers as the onshore life insurers were separately required to apply for approval with the Ministry of Finance (MOF) for life insurance products under the Law on Insurance Business.
More recently, in response to concerns from insurance businesses over administrative burdens, the Government of Vietnam has introduced, under Decree No. 733 and Regulation No. 43304, a coordinated process between the MOIT and the MOF that connects the MOF's approval of life insurance products under the Law on Insurance Business with the MOIT's registration of life insurance policy templates and terms and conditions under the Law on Consumer Protection.
However, the effectiveness of the coordinated process between the two ministries is debatable given the fact that certain consultations with the MOIT for comments still exist, leading to extended timelines for issuing the approvals of life insurance products for onshore life insurers. As noted previously, under Regulation No. 4330, the combined timeline for the process of MOF product approval and MOIT registration of policy terms & conditions can last around 37 working days or more.5 Under Decree No. 73, the timeline for registration of life insurance products with the MOF is 21 working days upon the receipt of a full and valid application dossier, a shorter timeline than under Regulation No. 4330.6 In this respect, Regulation No. 4330 has not addressed the life insurers' concerns about the prolonged timeline for the approval and registration process, which, therefore, may impact the business plans of life insurers.
Actions to consider
In light of the above, onshore life insurers may need to consider whether to recommend including a removal of "life insurance" under the Draft Decision. If so, this recommendation should be made as soon as possible before the Prime Minister proceeds to sign this proposed Decision.
In the meantime, if you would like to discuss issues in relation to the Draft Decision and the impact of the registration requirements or how our Firm can assist you in your business in Vietnam, please do not hesitate to contact us.
1Decision No. 35/2015/QD-TTg of the Prime Minister dated on 20 August 2015 amending and
supplementing Decision No. 02/2012/QD-TTg of the Prime Minister dated 13 January 2012, on the list of essential goods and services for which contract forms and general transaction terms must be registered (Decision No. 35).
2Decision No. 507/QD-BCT of the MOIT dated 21 February 2017 on issuance of the operation plan of the MOIT for implementation of Resolution No. 19/2017/NQ-CP.
3Decree No. 73/2016/ND-CP dated 01 July 2016 of the Government providing detailed regulations on the implementation of Law on Insurance Business and amended Law on Insurance Business (Decree No. 73).
4Coordination Regulation No. 4330/QCPH/BTC-BCT of the Ministry of Industry and Trade and the Ministry of Finance dated 31 March 2017 regarding their coordination in the approval of life insurance products and registration of contract templates and terms & conditions for life insurance (Regulation No. 4330).
5Article 3 and Annex 2, Regulation No. 4330.
6Article 40.1, Decree No. 73.