The State Bank of Vietnam's consideration of amending Circular 20/2024/TT-NHNN immediately following the implementation of the Law on Credit Institutions 2024 demonstrates a proactive approach to policy adjustment, ensuring compatibility with the evolving nature of banking operations and the requirements for market transparency.
The necessity of redefining and standardizing concepts
A central issue of concern for experts and credit institutions is the clarification of the "factoring" concept to avoid overlap with guarantees or other documentary credit operations. Practice shows that inconsistent interpretations of regulations can lead to legal risks for banks during debt recovery or dispute resolution. Internalizing international practices (such as the Unidroit Convention on International Factoring) into the draft amendment not only protects the rights of debt purchasers but also creates a safe harbor for credit institutions to boldly expand this service in cross-border transactions.
Removing bottlenecks in processes and documentation
The primary bottleneck in implementing factoring currently lies in the complexity of documentation required to prove the purpose of capital use and to control cash flows. Given that factoring is inherently based on issued invoices, applying traditional credit control regulations can sometimes result in unnecessary rigidity. Stakeholders have emphasized the need to simplify the verification process from the debtor (buyer) side. Without binding mechanisms or flexible authentication processes, factoring will struggle to flourish, as cooperation from the buyer is often the weakest link in the transaction chain.
Digital transformation: The key to enhancing competitiveness
The draft amendment to Circular 20 places high expectations on promoting electronic factoring. Permitting the application of e-KYC, digital signatures, and blockchain platforms in managing electronic invoices will help mitigate fraud risks (such as using a single invoice for collateral at multiple banks). This is a core element in improving operational risk management—a long-standing challenge in the banking industry. As information becomes transparent on digital platforms, transaction costs will decrease, leading to lower lending rates and enabling businesses to access more affordable capital.
Towards a sustainable financial ecosystem
Refining Circular 20 is not merely a technical update of a banking service. From a macroeconomic perspective, it represents an effort to build a sustainable Supply Chain Finance ecosystem. As factoring becomes more prevalent and secure, the reliance on real estate collateral will gradually diminish, replaced by confidence in actual cash flows from business operations. This aligns perfectly with the orientation towards developing a transparent and efficient financial market pursued by the Government and the State Bank of Vietnam.
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