Several commercial banks had suspended their bancassurance services as of July 1, 2024, when the 2024 Law on Credit Institutions took effect. This is attributable to the absence of clear guidelines for the regulation that prohibits banks from associating the sale of insurance policies with the provision of banking products and services in any form.

The 2024 Law on Credit Institutions was passed by the National Assembly (NA) at a time when the life insurance sector is mired in numerous scandals. An NA deputy proposed that commercial banks be disallowed to sell insurance due to unresolved issues between bank tellers and customers. Another deputy of the legislature suggested either banning the sale of life insurance through banks or legally mandating the Government to regulate the trading of insurance products with credit institutions working as agents, ensuring openness, transparency, and protection for both borrowers and depositors. Reflecting the NA deputies’ proposals, the Law on Credit Institutions stipulates that commercial banks can operate as insurance agents in accordance with the Law on Insurance Business. The scope of the insurance agency is to be regulated by the governor of the State Bank of Vietnam (SBV) to align with the nature and operations of the banking sector (Article 113). The law also prohibits “credit organizations, foreign bank branches, and leaders, managers, and staff of credit organizations and foreign bank branches from associating the sale of non-compulsory insurance products with the provision of their banking products and services in any form” (Clause 5, Article 15). That said, under the Law on Credit Institutions, commercial banks can still act as insurance agencies. However, some banks have suspended this operation since the law took effect on July 1, 2024, due to the lack of guiding circulars. Additionally, banks and insurance companies are confused by the regulation that bans banks from linking the sale of non-compulsory insurance products with the provision of their banking products and services in any form. Recently, the Vietnam Banks Association met with more than 20 commercial banks. At the meeting, the participating banks had different interpretations of Clause 5 of Article 15 and raised multiple questions. What are “non-compulsory insurance products”? What does it mean to associate the sale of non-compulsory insurance products with the provision of banking products and services? And what does “in any form” mean? Does it include insurance product consulting and introduction? Under the 2022 Law on Insurance Business, compulsory insurance products include only insurance for civil liability of motor vehicle owners, fire and explosion insurance, and insurance in construction investment activities. However, to ensure safety in credit operations, both at home and abroad, regulations require all assets used as collateral for bank loans to be covered by insurance. From this perspective, these could be considered compulsory insurance products. “So, are these insurance products under the jurisdiction of Clause 5, Article 15 or not?” asked Le Thi Quynh Hoa, deputy general director of VietinBank Insurance. “We have asked legal experts and discussed to determine what is meant by ‘associating’ non-compulsory insurance products, but no one can give a satisfactory answer,” said Nguyen Hong Phong, general director of Agribank Insurance. The banks’ suspension of bancassurance services as a result of the lack of guidelines has immediately affected the performance of insurance companies. A representative of BIDV Insurance said the company’s insurance sales through BIDV plunged by as much as 50% in the first two days of July. If this situation persists, it will impact not only the development of insurance businesses and the insurance market but also the interests of customers, especially in the non-life insurance sector. Commercial banks and insurance companies expect the SBV to promptly issue a guiding document for insurance agency operations and clarify the regulation that prohibits banks from associating insurance products with the provision of their banking products and services. This clarity is needed to provide a legal basis for implementation and compliance. However, a significant obstacle is that the 2024 Law on Credit Institutions does not give the SBV governor authority to provide details concerning the ban. Under the Constitution, the authority for legal interpretation rests with the NA Standing Committee. The confusion among commercial banks and insurance companies over Clause 5 of Article 15 of the Law on Credit Institutions highlights a concerning issue with the drafting of legal documents. This is a limitation in the law making process. A typical problem is the use of unclear and inaccurate legal terms, leading to different interpretations and making it difficult to comply. To address this issue, the National Assembly, through its relevant committees, should gather experts to review legal drafts for legal structure and interpretation to ensure clarity. This effort aims to prevent different interpretations of regulations and avoid legal loopholes and overlaps. While legal experts are already involved in drafting work, this process should be more substantial by listening to and incorporating their opinions, thereby drafting legal documents with greater professionalism and better quality.