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Are banks and credit institutions the same concept? In the following article, ASL LAW will introduce some basic differences in the definition between a bank and a credit institution in Vietnam.
Definition
Clauses 1 and 2, Article 4 of the Law on Credit Institutions 2017 No. 17/2017/QH14 amending and supplementing a number of articles of the Law on Credit Institutions 2010 No. 47/2010/QH12 provide:
1. Credit institution means an enterprise conducting one. some or all banking operations. Credit institutions include banks, non-bank credit institutions, microfinance institutions and people’s credit funds.
2. Bank means a type of credit institution which may conduct all banking operations under this Law. Based on their characteristics and operation objectives, banks include commercial banks, policy banks and cooperative banks.
Thereby, by definition, a bank can be understood as a type of credit institution. However, credit institutions can include other types such as non-bank credit institutions, microfinance institutions and people’s credit funds.
Other differences between banks and credit institutions
Type
Banks and credit institutions have different types of activities.
According to the provisions of the Law on Credit Institutions No. 2017, types of banks include commercial banks, policy banks, and cooperative banks, while credit institutions have a broader definition including banks, non-bank credit institutions, microfinance institutions and people’s credit funds.
In particular, non-bank credit institutions include finance companies, financial leasing companies and other non-bank credit institutions, is a type of credit institution which may conduct one or some banking operations under this Law, except taking deposits of individuals and providing services of payment via client accounts.
Operation range
Banks and credit institutions can both conduct Deposit taking and Credit extension.
In which, Deposit taking means receiving money from an organization or individual as demand or term deposit, savings deposit, issuing deposit certificates, bills or treasury bills, and other forms of receiving deposits on the principles of full payment of principals and interests to depositors under agreement.
Credit extension means an agreement allowing an organization or individual to use a sum of money or a commitment allowing the use of a sum of money on the repayment principle by such professional operations as lending, discount, financial leasing, factoring, bank guarantee and other credit extension operations.
As part of the definition of a credit institution, a credit institution will have all the characteristics of a bank. However, it should be noted that because in the concept of a credit institution, there are other definitions such as a non-banking credit institution, when performing transactions and cooperating with different credit institutions, the transactors need to pay attention to the different nature between types of credit institutions.
Accordingly, it should be noted that not all characteristics of a credit institution apply to a bank or type of non-bank credit institution.
For example, a fundamental difference between a bank and a non-bank credit institution (both of which are considered credit institutions) is that a bank is allowed to operate in the Provision of services via-account payment and Non-bank credit institutions are not allowed.
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