Practice of real estate mortgage in vietnam joint stock commercial bank for industry and trade vietinbank

Practice of Real Estate Mortgage in Vietinbank Hoang Linh DECLARATIONS I declare the following: (1) that the material contained in this master’s thesis is the end result of my own work and that due acknowledgement has been given in the bliography and references to ALL sources be they printed, electronic or personal (2) that unless this master’s thesis has been confirmed as confidential, I agree to an entire electronic copy or sections of the master’s thesis to being placed on the eLearning Portal, if deemed appropriate, to allow future students the opportunity to see examples of past master’s thesis I understand that if displayed on the e-Learning Portal it would be made available for no longer than five years and those students would be able to print off copies or download The authorship would remain anonymous (3) I agree to my master’s thesis being submitted to a plagiarism detection service, where it will be stored in a database and compared against work submitted from this or any other School or from other institutions using the service In the event of the service detecting a high degree of similarity between content within the service this will be reported back to my supervisor and second marker, who may decide to undertake further investigation that may ultimately lead to disciplinary actions, should instances of plagiarism be detected (4) I have read the Thesis Guidelines of Master Program on Finance, Bank, Insurance (Viet Nam and the South East Asia) for Cohort 6, period 2014–2015 and I declare that ethical issues have been considered, evaluated and appropriately addressed in this research SIGNED*: _ DATE: Practice of Real Estate Mortgage in Vietinbank Hoang Linh ACKNOWLEDGEMENT I am using this opportuniy to express my gratitude to everyone who supported me doing this master’s thesis I am thankful for their aspiring guidance, invaluably constructive criticism and friendly advice during the project work I am sincerely grateful to them for sharing their truthful and illuminating views on a number of issues related to the thesis First and foremost, I have to thank my advisor, Assoc Prof Nguyen Vu Hoang Without his assistance and dedicate involvement in everstep throughout the process, this thesis would have never been accomplish I would like to thank you very much for your support and understanding over these past six months Secondly, I would like to thank all the lectures, tutors and staffs of International School – Vietnam National University Hanoi and University de Nantes who are always enthusiastic for helping me to gain knowledge and experience during the studying Thirdly, I would like to show gratitude to the leaders and partners of Vietinbank for their help and supports during my studying The impact of their work on my own study is obvious throughout this thesis Most importantly, none of this could have happened without my family This thesis stands as a testament to your unconditional love and encouragement Thank you! Practice of Real Estate Mortgage in Vietinbank Hoang Linh ABSTRACT Currently, the economic context is stabilizing, the state's policy also has support for enterprises to solve problems, promote the development of enterprises Consequently, demand for credit is also certain developments However, the problem of bad debts at banks has not yet definitively settle, causing banks want to grow fast, but even though, they have to ensure the safety of the banking system Therefore, making security asset of borrowers become neccessary, and real estate mortgage is the most preferred Consequently, the thesis “Practice of Real Estate Mortgage in Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)” has been chosen to help Vietinbank overcome the obstacles and prevent itself from risks The thesis was to clarify the role of lending with mortgages by assets in general and real estate in particular, expressed the importance of the real estate mortgage in banks’ lending actities By making comparison and poiting out the differences from the other countries’ legal framework, the thesis defined progressive outlook that should be applied in legal framework of Vietnam Along with current situation of lending activities with real estate mortgage, the thesis shown the achievements, limitations and causes of Vietinbank’s internal regulations, thus, lead to problems need to be focused on the research Finally, after analyzing the collected data, based on the result and Vietinbank’s orientated development, the thesis point out the solutions for changes in legal framework of Vietnam and completion of Vietinbank’s internal regulations Practice of Real Estate Mortgage in Vietinbank TABLE OF CONTENT Hoang Linh Practice of Real Estate Mortgage in Vietinbank Hoang Linh LIST OF ABBREVIATIONS SM Security Measures ST Security Transactions RE RE AV Added Value MC Mortgage Contract CC Credit Contract VIETINBANK Vietnam Joint Stock CB for Industry and Trade SBV State Bank of Vietnam CB Commercial Banks LUR Land Use Right TPC The People’s Court EO Economic Organization NPO Notarization Practice Organization CO Credit Organization NRE Natural Resources and Environment SA Security Assets Practice of Real Estate Mortgage in Vietinbank Hoang Linh LIST OF CHARTS Chart 1: The Organization System of VIETINBANK 28 Chart 2: Structure and Executive Apparatus of Headquarters 29 Chart 3: Structure of The Executive Apparatus of The Exchange, Branch 30 Chart 4: Results of Operations from 2010 to The End of 2014 30 Practice of Real Estate Mortgage in Vietinbank Hoang Linh INTRODUCTION Security for loans is the measures applied by commercial banks in order toprevent risks, creat the legal and economuc basis for recovering loans In the current context of Vietnam’s economic integration and development, security measures are becomingly popular and play an important role within the secured transaction participants Among those measures and kinds of asset, real estate mortgage is the most preferred Real estate is a valued property and always has been the concern of the State in managing this particular object Besides the features of a normal property, real estate has particular characteristics that other assets not have, namely: irremovability, limit, high value and long - time use Consequently, this kind of asset is favourably chosen by the banks to prevent the risk from lending Although there is a legal framework for security transactions, it can not be denied that there are still many existing difficulties limit the banks' ability to protect themselves from risks during the progress of applying security transactions in common and real estate mortgage in particular, such as: unrecovery situation of the economy from the recession; legal framework lacking of practice and ineed of continuous improvement; unawareness of the laws and regulations' applicants…Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) is not an exception Founded in 1988, Joint stock commercial Bank for Investment and Development of Vietnam now also known as Vietinbank Over the past century quarter, after the implementation of equitization according to the guidelines of the State, so far, Vietinbank has become one of the leading state-owned banks; played the key role in the economy, implemented the policy effectively the party line, policies and laws of the State in life Up to 31 December 2014, Vietinbank has total asset of 661,131 billion dongs, equity capital of 55,013 billion dongs; charter capital is 37,234 billion dongs; total liabilities of 444,261 billion dongs; bad dept ratio of 1.00%; staff member of nearly 20,000 people; headquarter located in Hanoi; 01 exchange office; 151 domestic branches, two branches opened in the Federal Republic of Germany and the People's Democratic Republic of Laos; 03 representative offices (two domestic and one abroad); over 1,000 exchange offices/savings office With its important role in the banking system of Vietnam, Vietinbank is a specified object which is suitable to be chosen for doing research, finding out and giving solutions Practice of Real Estate Mortgage in Vietinbank Hoang Linh for the existing difficulties in security transactions in order to ensure the rights and legitimate interests of the banks Hence, I decided to choose the topic “Practice of Real Estate Mortgage in Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)” Research Objective: The thesis was to clarify the role of lending with mortgages by assets in general and real estate in particular, expressed the importance of the real estate mortgage in banks’ lending actities By making comparison and poiting out the differences from the other countries’ legal framework, the thesis defined progressive outlook that should be applied in legal framework of Vietnam Along with current situation of lending activities with real estate mortgage, the thesis shown the achievements, limitations and causes of Vietinbank’s internal regulations, thus, lead to the solutions for changes in legal framework of Vietnam and completion of Vietinbank’s internal regulations Purpose of Study: The study purpose of the thesis is that the provisions of laws and regulations relating to security measures in common and real estate mortgage in particular in Vietinbank; therefore, making conclusions, scientific evaluations about legal aspects of this matter The thesis initially systematizes theories and practice relating to real estate mortgage in general, those of Vietinbank and Vietinbank’s internal rules in private The results of making research will, to some extent, contribute to the quality enhancement of security measures in common and real estate mortgage in particular in not only Vietinbank, bu also another commercial banks in banking system of Vietnam Scope of Research: The scope of the thesis are identified in cluding hereby major issues: - What is the differences between Vietnam and the other countries over the legal framework of the security measures in common and the real estates mortgage in particular? Making comparison and pointing out the progressive outlook that should be applied in legal framework of Vietnam - Why real estate mortgage is the most favourable measure chosen by the banks in Vietnam to protect themselves from risks? Practice of Real Estate Mortgage in Vietinbank - Hoang Linh Analyse the internal regulations over the security measures of Vietinbank, including real estate mortgage So that, findind out what are the reasons leading to difficulties during the progress of applying security transactions in Vietinbank? - How Vietinbank can complete the internal regulations over the security measures effectively and adequately? Research Methods: In the framework of a master thesis, its methodology is based on dialectical materialism Research methedology of the thesis are synthesis, comparisons and statistic Those methedologies are used in doing researchs and making solutions to the issues given in the thesis The thesis get information from different literatures: statistic books; laws and regulations from another countries; statistic books from Vietinbank and other banks; journals; periodicals; newspaper; newsletter; reports and documents from banks; etc Structure of the thesis: Besides the introduction, conclusion, appendices and references, the thesis structure include chapters Chapter 1: Overview of the security measures institution and real estate mortgage to ensure implementation of credit contract in commercial banks in Vietnam Chapter 2: Practical implementation of the provisions of the law on real estate mortgage to ensure implementation credit contract at Vietnam Joinstock Commercial Bank for Industry and Trade Chapter 3: Some recommendations to improve efficiency of mortgage property to ensure credit contract in Vietnam Joinstock Commercial Bank for Industry and Trade Practice of Real Estate Mortgage in Vietinbank Hoang Linh Chapter OVERVIEW OF REAL ESTATE MORTGAGE TO ENSURE IMPLEMENTATION OF CREDIT CONTRACT IN COMMERCIAL BANKS IN VIETNAM 1.1 The Overview of Real Estate Mortgage 1.1.1 Real Estate: - According to international legal systems: RE is a valued property and always has been the concern of the State in managing this particular object Most countries consider RE as land and related assets, inseparable from the land, determined by the geographical location of the land However, each country has different notions about property "associated" with the land is considered as RE Japanese Civil Code (2004), Civil Code of North Vietnam and the former Saigon regulates "crops have not been harvested, fruit trees have not been pluck are RE, soared from plants are considered as personal property" Thailand Civil and Commerce Code (2005) stipulates: "RC is land and things attached to the land, including the property rights associated with the land" Russian Civil Code (1994) has its own approach, on the one hand listed in the traditional way; on the other hand, given the general term for the property: "Property is RE whose right to such property must be registered under the provisions of this Law, is the parcel of land, the underground, independent work underwater and all things attached to land in the water, but if they can not be moved without causing serious damage to their use, including housing, construction, accommodations, and room not to houses, trees and perennial plants, apartment buildings, now as a unified block assets" Australian Land Law (2000) including ground and below ground components, including the air space above ground, including water, bottom part of the water and air space above the water, all the public construction and investment projects associated with the ground, above and below ground, or affect adjacent to use that land Under English Land Registration in 2002, the ownership of land is not absolute, people just get ownership of RE on land; In theory, only the right to lease the land from the 10 Practice of Real Estate Mortgage in Vietinbank Hoang Linh regulation of prices of organizations and individuals for goods and services they produce or supply to the market; and the definition of “RE Valuation” in RE Business Law is activities of consulting and valuation of a specific property at a specified time and used in property business subject to State’s regulation Particularly, valuation is implemented by agencies and organizations which have valuation functions Apart from above regulations, there is not any legal normative document of State which specifies the valuation of the estate asset in general and of RE in particular in credit institutions to ensure the implementation of credit contracts Therefore, in fact banks must self- develop their policies and documents so that the subordinate units could have the base to carry out It depends on the credit policy and risk appetite of each bank in particular moment, there are different rules for the estate asset valuation The majority of banks still implement the estate asset valuation by themselves However, this is not a legal document but a set of documents issued by credit institutions Beside the positive side, the valuation carried by banks, sometimes, does not guarantee the objectivity due to subjectivity of people who have competence in valuation, lending decisions in banks For example, in some cases banks undervalue actual value of the Estate Asset causing the disadvantages to borrowers in accessing to loans; conversely, there are cases in which because of wanting to lend customers more money, banks set a higher valuation than real value of the collateral leading to the underlying risks in the process of customer debt recovery The regulations on assets valuation are issued by the bank itself; therefore, when discovering the violation, banks can only handle by imposing labor disciplinary sanctions but cannot recommend the competent authorities to apply necessary and strong enough sanctions to deter and prevent violations from recurring Thus, to remedy existing problems, it is recommended that the State authorized agencies should study and build legal normative documents to regulate the behaviors related to the Estate valuation in general and RE in particular in banking activities, following the direction which specifies that estate asset valuation ensures the independence from the valuation procedure, the bank’s lending decision In some necessary cases, the Estate valuation has to be implemented on the basis of price reference carried out by authorities which have price appraisals competence In addition, the law should also have unified regulations, specifically on the method, manner and order and procedures of valuation; consequently, creating a legal 56 Practice of Real Estate Mortgage in Vietinbank Hoang Linh framework for bank’s implementation In case of violations, this is a basis for considering, handling with persons who commit the violation and ensuring the rule of law 3.1.3 Subject, Notarization, Authentication and Registration: Firstly, the subject of mortgage contracts: Today, CB sign mortgage contracts to use the land use rights and land-attached assets of households as estate asset in a relatively large volume However, Land Law 2013 just gives the concept of "Households using land" (Clause 29, Article 3); additionally, the provisions of the current law have not defined the concept of "Household" yet It also has not specified the criteria and basis for determining the members of the household in civil legal relationships This shortcoming can lead to many different interpretations, even the agencies and persons having competence in the field of law implementation (judges, public notaries etc.) They also face with difficulties when determining the household members To deal with this problem, when receiving household’s asset as collateral, banks often depend on the customer's declaration certified by the Commune People’s Committees, the security agencies or the land information provided by the land use right registration offices But this confirmation is often inconsistent Therefore, it causes a lot of difficulties to banks in determining the members of the household to sign mortgage contracts in accordance with the law This inadequacy has existed for a long time and made significantly impacts on the participation of civil relations of the households and their members who suffer many constraints not from the law but from the banks To ensure the safety in transactions and mortgage loans at the banks, all members of family are required to sign mortgage contracts or documents determining that they have not had the rights or obligations relating to RE Although the above measures have been applied to limit the risks, in fact, there are still a great number of cases in which household’s members not sign mortgage contracts, resulting in disputes The courts have adjudicated that mortgage contracts of land use right, land use right and assets attached to land are disabled Therefore, to protect the rights of the contracting parties of legal relations relating to the assets of households, it is necessary for competent authorities to examine and consider the amendments of regulations of the 2005 Civil Code in direction that the households are not considered as the subject of civil legal relations Instead, other institutions need to be adjusted to suit their legal nature, such as adjusting households by rules of co-ownership, representatives 57 Practice of Real Estate Mortgage in Vietinbank Hoang Linh and other relevant institutions Accordingly, the co-owners, users of property must be named on the certificates of ownership or uses of the property to create a legal basis for the parties to have foundation to their rights and obligations relating to property Secondly, notarizing and certifying mortgage contract of RE: Clause of Article 423 of the Civil Code 2005 stipulates that: "In the event that the contract is made in writing, notarized, authenticated, registered or permitted, the modification of contract must also follow that form." According to regulations at Article 17 of Decree No.: 04/2013/NĐ-CP of 7th January 2013 of the Government detailing and guiding a number of articles of the Law on Notary, from the 25th February 2013 (the effective date of the Decree) the competence of notary of RE mortgage contracts in industrial parks, economic zones, high-tech parks belongs to notarization practice organization (replacing regulations on certification of contracts of management board of industrial, economic and high-tech zones before) In addition, in point a, clause of Article 130 of the Land Law stipulates: mortgage contracts of land use right must be notarized by notary public; the mortgage contracts in land use right of households and individuals are selected forms of notary and authentication in state or communal levels However, after Law on Notary was enacted and had effective enforcement, the Ministry of Justice enacted Circular No.: 03/2008/TT-BTP of 25th August 2008 stipulating the Commune People’s Committees has incompetent rights of notarization and authentication of contracts, transactions and the gradual transfer of the contract or transaction for notarization practice organizations (Article 8) Accordingly, these legal documents have not pointed out regulations to cases of notarization or authentication of written amendments and supplementation of mortgage contracts that were recognized by Industrial Zone Management Board, the economic zone, high-tech parks or authenticated by Commune People's Committees before This situation caused difficulties for banks to notarize written amendments and supplementation of mortgage contracts because most of notarization practice organizations refuse to notarize these documents and ask banks to delete the registered mortgage and resign new mortgage contracts Commune People’s Committees that provide certification refuse authenticated contract because of incompetency In present, according to cause 3, article 167, Land Law in 2013, there is regulation that Commune People’s Committees have competency to 58 Practice of Real Estate Mortgage in Vietinbank Hoang Linh authenticate mortgage contract of land use rights, land use rights and land-attached assets but there is no guiding documents about this issue Therefore, to solve issues above and ensure consistency of the law, competent State agencies are asked to provide detailed guiding documents about competence and procedures of authentication for all types of written amendments and supplementation of estate asset mortgage towards the fact that mortgage contracts are signed, identified and authenticated by Industrial Zone Management Board, the economic zone, high-tech parks or authenticated by Commune People's Committees before 01/07/2014 The people who request notarization and authentication can choose notarial form in notarization practice of competent organizations or Commune People’s Committees Also, there are detailed guidelines for these regulations of Land Law in 2013 towards the fact that Commune People's Committees can notarize mortgage contract of land use rights, land use rights and land-attached assets Thirdly, regarding registration of mortgage: Paragraph of Article of Decree No.11/2012 / ND-CP of the Government dated 22/02/2012 stipulates: "The guaranteeing party is that uses its own assets and land use rights, uses its reputation or commitments secured party in order to ensure the implementation of civil obligations of its own or of others, including the pledger, mortgagor, depositor or guarantors and local social - political organizations in case of unsecured loans." However, s after 2013 Land Law took effect, some localities refused the registration of mortgages for mortgage contract of land use right, land use right and assets attached to land concluded between the bank and the mortgagor that is the third party (not the borrower) to secure the loan repayment obligations of borrowers or guarantee the performance of guarantee commitment of the third party Related to this, in recent years there have been many problems obstructing the activities of CBs So, in order to have proper awareness to address this problem, it is recommended that competent authorities should issue documents to clearly explain the asset mortgage assets of the third party (including land use right, land use right and assets attached on land) to ensure the implementation of credit contracts or the performance of guarantee commitments of the third party and guide the registration of the mortgage so that this kind of secured transactions can be made, registered in accordance with laws 59 Practice of Real Estate Mortgage in Vietinbank Hoang Linh In addition, to address practical problems, it is proposed to supplement the provisions on procedures for recovering deleted secured transactions or procedures for deregistrating secured transactions for the case in which secured transactions are carried out legally and settled in the form of agreement The mortgagor uses its rights to sell or sell in auction or enforce the decisions of the Court after finish with secured assets and deregistring secured assets But then the court canceled the contract of asset sales or auction contract due to legal violations Specific recommendations are: the law should stipulate that when the court declares invalidity of such contracts of assets sales, it also needs to allow the mortgagee to be entitled to request the competent State agencies to restore registration of secured transaction that was previously deleted; simultaneously, there should be specific provisions on competence, procedure recovery of the registration of secured transactions or cancel the deregistration of secured transactions as the basis for credit institutions to perform 3.1.4 Handling: In order for bad debts handling of credit unions to be efficient as proposed in the Scheme of handling bad debts of the system of credit unions approved by the Prime Minister, attempts to basically handle bad debts by the end of 2015, competent authorities should reconsider and complete legal regulations on secured assets handling as follows: - To specify standing rules and create favorable conditions for credit unions to handle secured assets, it is necessary to issue particular regulations: grant for credit unions more power in handling secured assets as follows: when borrower violates credit contract, lender has rights to handle secured assets (for handling measure, price, date and so on) as specified in guaranteed contract (as long as the contract complies with statutory form and content) without renegotiating with owner of secured assets on mentioned issues There must be clear explanation about land user’s refusing to sell land use right; the right to use land and assets attached to land as credit unions handle mortgage assets is not the case of “land under dispute” Hence, transferring secured assets which are land use right, the right to use land and assets attached to land are not regarded as violation to Point b, Clause 1, Article 188 of 2004 Land Law, which has currently applied by competent State authorities - To establish legal foundation for receiver to exercise the right of seizing secured assets, and to carry out the handling procedure fast and smoothly, there must be a guideline 60 Practice of Real Estate Mortgage in Vietinbank Hoang Linh document to specify the Article 63 of Decree 163/2006/NĐ-CP dated on September 29th 2006 by the Government as follows: (i) clearly define particular measurements that guarantee receiver’s right of seizing secured assets to debt collection (ii) define the responsibilities, rights of local People’s Committee at commune level and local police where secured assets seizure is carried out and what measures are to taken as well as the order of the procedure to maintain security and for people who handle assets to exercise the right of seizing the assets In cases where coercion is necessary for example unlocking to force the owner of secured assets to handover the assets to receiver who have right ot use coercion? What type of coercion to use in particular and who will organize it? Therefore, it should be defined as: if the owner of secured assets does not hand over the assets, the receiver has the right to make a written request to the local Chairman of the People’s Committee at commune level; the Chairman of the People’s committee at commune, ward and town level takes the responsibility of considering and approving the coercion: “Forcing the owner of secured assets to handover the assets to receiver” as well as requests the police of same level to carry out the seizure procedure secured assets and hand it to the receiver - With regard to disputes relating to secured assets at court and organizing the implementation of judgment, recently debut and the proposal of implementing for secured assets usually takes long time with the complexity of procedures, which increases costs for parties during the process It is necessary to have written instructions, which explains specific regulations about legal proceedings, enforcement procedure relating to the participation and absence from of those participating in proceedings, relevant people in conducting the proceedings and other relevant ones to create legal corridor for those participating civil transactions to protect their rights and legal benefits in the eye of the law before giving proposals for The Supreme people’s Court, The Supreme People’s Procuracy of Vietnam, Ministry of Justice and other functional ministries and branches It also essential that the limitation of those in proceedings, implementing and civil conducting proceeding agencies take advantage of gap in the law with stay for proceedings Time for organizing proceedings is in contrast with the regulations and then loses the belief of people - Meanwhile, it is required that above organs usually organize training course to impart knowledge for staff bodies and gradual improve the quality as 61 cases and Practice of Real Estate Mortgage in Vietinbank Hoang Linh implementing civil execution Besides, to handle effectively the “bad debt” of credit unions for long term, it is required that the Government, the National Assembly and staff at centre level consider, amend and supplement the Civil procedure code and relevant legal documents as follows: implement the shortcut procedure for civil proceedings to handle credit contract disputes; specifically; the court may let lenders safeguard the right demanding the Civil executing agency secured assets at once enough below conditions: (i) base on the obvious evidence that cites credit contract and guaranteed contract need legally; and (ii) borrower cannot afford to pay debt as the commitment with credit union This way is not dependent on the borrower’s will or the mortgage (they can be at court and not agree or cannot be at court, civil executing agency at the time on execution), providing that the secured assets is implemented right with law abiding-procedure, ensuring objectivity, openness, transparency (such as the appraisal procedure, announcement and sell-by auction implemented in public) 3.2 Internal Regulations of VIETINBANK: Firstly: Annually, VIETINBANK assigns Branches in the whole system to ensure growth the quota settings in all aspects; whist assigns Branches to implement the account outstanding quota and higher profits next year than previous one It is the fact that while economy is facing with difficulties, most enterprises not work well, employees lost their job on the rapidly increasing impetus and so on Facing with that pressure, banking staff have recently worked with high intensity of pressure; their mission is to appraise customer and secured asset in this case, and appraise in other case and so on Due to the pressure of time and seizing an opportunity, competitiveness with other banks or due to personal purposes making banking staff lessen stages in appraisal procedure and RE appraisal, this, in some cases, has caused severe consequences for forensic –characterized impacts of credit contract, mortgage contract and has created risks for the Bank As a result, the author petitions the VIETINBANK’s executive board for governing its internal regulations to set up appraisal division separately from other ones for professional manner and limitation of potential risks If necessary, a regulation can be adopted by Branches, Transaction Office to hire functional organ or organization for RE appraisal as the foundation the value of mortgage-backed security 62 Practice of Real Estate Mortgage in Vietinbank Hoang Linh Secondly: For model contract of mortgaged RE, nowadays , VIETINBANK has adopted one set of model contracts including model contract of mortgage contract relating to RE such as: mortgage contract the land use rights (including the land use rights and assets attached to land or assets attached to land only), mortgage contract for housing and so on Accordingly, there is unitization in whole system The Branch manager has right to active adjust some of regulations to ensure development along with real situation of secured assets but cannot the key regulations amendment of contract However, there are inappropriate points in practical, specifically: - The model contracts are made to ensure the benefits of VIETINBANK in any circumstance As a result, the content is usually very long and enclosed with contents available in use when receiving secured assets at the same time or ones with large scale In some situations, single RE like the case of land use rights or an residential building, there are inappropriate contents and annoy customers In other words, with the contents are quite complex, staff’s work is overloaded leading to filling with certain designated information of ensure asset without deleting inappropriate information and supplementing important information Hence, some of contracts are disadvantageous for bank or cannot ensure its rights and legal benefits In particular, it happened the case banking staff made mistake and use error of contract, which made unfortunate consequences for the bank Besides that, some cases with the disagreement of notarized organs for written model of mortgage contract of VIETINBANK and requirement of editing on their demand cause difficulties for implementing of Branches - For obligations presented in model contracts of mortgage, the contents are included: entirely adequate, punctual loan payment obligations (including seed money, earnings, late charge) of borrower for generated bank from credit contract that customer signed a loan with original bank, before, at the same time or after time to sign this contract Practically, many secured assets of the third party guarantee some of loans and its value is normally lower than obligations Hence, during the process of handling secured assets, borrower wants to pay the equivalent amount of money with the value of secured assets to redeem, which is difficult to give if the borrower has not paid account outstanding Based on above fact, it is expected to petition VIETINBANK for measures increasing the activeness of Branches when implementing model contracts of guaranteed ones but still maintain synchronism, consistency and risk reduction Simultaneously, there 63 Practice of Real Estate Mortgage in Vietinbank Hoang Linh should be specific regulations allowing the mortgagor as the third side to pay an amount required redeeming secured assets as aforementioned, in order to accelerate asset handling process For lending without secured assets but implementing guaranteed method supplemented secured assets with mortgaged RE: this is the case the bank lets customer borrow without secured assets However, during the performance of credit contract, two sides agree to implement supplementing secured assets for purpose of limitation of risks in the process of implementing credit contract According to VIETINBANK’s regulations, Branches have rights to receive high valued RE with lack of inadequate legal documents These Branches also supervise the written documents that value of secured assets valued dong and guarantee for whole debt obligation of borrower However, it is required to handle as radically as normal secured assets This regulation influences the process of debt collection due to the inefficiency of debt collection, ceased RE and bank’s debut The court is obliged to verify and implement legal prosecution process so the case is prolonged However, mortgaged RE contract is declared to be null and avoid as because signing the contract has not complied with the legal requirements Therefore, to resolve this case in a more efficient and law-abiding , it is expected to petition VIETINBANK for regulations as follows: assign the Branch manager have self-management and self- responsibility in the eye of the law whether or not petition the court’s (get the debut back partially ) aforementioned mortgaged RE contracts Simultaneously, it is advisable that the Branches have limitation of receiving assets, which have not been guaranteed adequately based on the law as extra-secured assets Thirdly: For solutions to improve quality in receiving the secured assets in general and mortgaged RE in particular so as to ensure implementing credit contract in VIETINBANK In addiction to making a policy document system regulating business activities of the bank in accordance with provisions of law and specific situations of VIETINBANK, as any organization, VIETINBANK also should usually pay attention to recruitment, training and develop human resource in order to build a fully qualified, experienced staff who can undertake areas of bank’s operations For lending operation, to implement task of appraising borrowers, projects,secured assets, to conduct legal documents for guaranteed contracts and handling secured assets, bank staff need to have a broad specialized knowledge, understandings, practical experience about fields relating to 64 Practice of Real Estate Mortgage in Vietinbank Hoang Linh assets, contracts, and particularly knowledge about law of assets, contracts, secured transactions, secured assets handling as well as bank staff need to be ethical and highly responsible in profession Recently, to enhance lending quality in the whole system, VIETINBANK has opened some training courses aiming to train and retrain to improve professional qualifications, professional competence and popularize law, working experience for staff throughout the system with some special subjects such as appraisal of client capability and investment projects, appraisal and valuation of secured assets; profession of supervising, monitoring, managing customers and secured assets; negotiating skills into a contract; debt handling skills and so on These are very useful opportunities for staff in the whole system to meet, to share practical experiences, to update new regulations of law and enhance their professional qualifications, profession, working capabilities to better serve business activities of VIETINBANK However, in some recent years, due to negative impact of the economy along with the idea getting rich quickly with illegal forms of a group of workers who are bank staff (including VIETINBANK), there is a series of negative cases whose causes related partly to code of ethics of bank officials There is a part of staff with high professional qualification, extensive legal knowledge but they used these strengths to take advantage of gap in law to pass inspection systems, internal control of banks for violations of law, which causes sizeable economic damage for banks Currently, internal inspection and control system of VIETINBANK is organized in the form of Internal Inspection and Control department (at headquarters) and Internal Inspection and Control departments all around the country (outside the branch) and subject to the management and direction of the Internal Inspection and Control department at the Headquarters Regarding human resource management: decentralization of VIETINBANK follows this principle: Board of Directors decides the recruitment, appointment, dismissal, demotion, discipline to leaders of Internal Inspection and Control department at Headquarters, other employees are under the management and decision of the General Director Regarding profession, depending on each case it may fall under the competence of the Supervision Committee of Management Board or Executive Board (General Director) With such provisions, in fact internal inspection and control system is not really independent because it is under control of both Management Board and Executive Board; 65 Practice of Real Estate Mortgage in Vietinbank Hoang Linh even operations of internal inspection and control system in some cases are still be governed from the Branch or the local authorities when officials in this Department are local people or have relatives who work in branches under inspection and control So, through this study, some recommendations to leaders of VIETINBANK are as the following: - Promote political, ideological, moral education and lifestyle for officials and employees of the entire system Mount administration, labor discipline with labor efficiency, rights and responsibility of officials and employees Create friendly working environment with clear and transparent mechanism of rewards and discipline to help officials and employee build their scientific and effective working style, have ethics, healthy lifestyle, fully devote to the development of VIETINBANK - Continue to strengthened both manpower and material resources and organize structure of internal inspection and controls system that is completely independent in profession to improve its working quality The operations should follow this direction of allowing the control board to manage all issues of personnel management, profession and operations of internal inspection and control system, arrange staff at in regional inspection and control departments on the principles that they are not local people and not have relatives in the branches where they are tasked to examine, control; periodically from one to two years make the rotation of officials in the region to ensure objectivity and avoid favoritism and localism There should be good and appropriate mechanism and policies of treatment for officials and staff of internal inspection and control departments so that they will feel comfortable at work and get rid of external negative impacts Conclusion of Chapter Vietnam is entering into a new phase of development with the process of industrialization and modernization and international integration Accordingly, the civil and economic relations have made significant changes and quickly required the appropriate adjustment of the law In this context, the provisions of the current laws have revealed many shortcomings and needed to be amended, supplemented or replaced Accordingly, the levels and sectors and each business should also enact suitable regulations and policies 66 Practice of Real Estate Mortgage in Vietinbank Hoang Linh to adjust all aspects of activities and operations in line with the development of society, in accordance with the legal provisions in order to gradually strengthen and complete internal regulations of each company to meet the needs of social development, ensure business efficiency, minimize possible risks Therefore, it is very necessary to research internal regulations of VIETINBANK on RE mortgage and evaluate the implementation of the provisions of the laws on RE mortgage to secure the performance of credit contracts at VIETINBANK The research has shown limitations and shortcomings in the implementation of the provisions of the law on RE mortgages in VIETINBANK and limitations and inadequacies from legal provisions as well as difficulties and shortcomings of state agency and competent people The above assessments and recommendations to the competent authorities at the central level to build and perfect the system of legal documents and VIETINBANK to improve its internal documents and policies related to property mortgage in general and RE mortgage in particular The author hopes to make a small contribution to minimize the difficulties and shortcomings and problems arising from RE mortgage to ensure the implementation of credit contracts in VIETINBANK and other banks in the banking system It helps limit risks from the RE mortgage to ensure the performance of credit contracts in credit institutions, guarantee sustainable, effective and sate operations of credit institutions 67 Practice of Real Estate Mortgage in Vietinbank Hoang Linh GENERAL CONCLUSION Secured measure of property mortgage is the most popular measure used by CB to ensure the performance of credit contracts In which RE takes higher proportion than that of all mortgaged properties This measure is considered by CB as one of the revenues to recover money from borrowers when the original recovery of principal from production operations and business of the borrower for any reason fail to make payment To adjust this legal relations, the State has issued a quite complete set of legal documents, contributing to limit risks and improve operational efficiency of the banks loan; meeting the needs of capital for productive activities, trade, and business of organizations, individuals and households However, with regular and continuous growth of economic and social relations, in the country and the needs of international integration; through the application of the laws, the provisions of the laws on collateral has revealed shortcomings, inadequacies and problems in perception and application of the laws There are some problems related to the asset mortgage that are not documented in legal provisions, so the legal basis is not available for the CB to work as lenders, the mortgagee with legal rights and benefits during the process of lending and accepting asset mortgage This makes banks expose to risks when the secured transaction that has been signed with the guarantor is declared to be invalid by the court or in many cases the ability to exercise the rights of banks can not be implemented in practice or prolonged due to legal obstacles in the process of settling Therefore, it is necessary to continue research to perfect the provisions of laws relating to RE mortgage to ensure the performance of credit contracts and internal regulations of VIETINBANK (the biggest CB in Vietnam) On the basis of research methods and the scope of research, thesis has basically completed the task of understanding the basic theoretical issues about secured measures, examining the mortgage of property to ensure performance of credit contracts at CB and issues related to the order and procedures for concluding RE mortgage documents, mortgage registration and settlement of RE to ensure the performance of credit contracts Also, the thesis evaluates the practical implementation of the provisions of the laws on RE mortgages to ensure performance of credit contracts at VIETINBANK From that, the thesis has introduced recommendations to perfect legal system and internal regulations of VIETINBANK on RE mortgage and contribute to improve efficiency of law application on RE in CB in general and in VIETINBANK in particular 68 Practice of Real Estate Mortgage in Vietinbank Hoang Linh REFERENCE National Assembly of Socialist Republic of Vietnam, 1992, 2013 Constitution Government of Socialist Republic of Vietnam, 1993, 1998, 2001, 2003, 2013 Law on Land Government of Socialist Republic of Vietnam, 1992, 2005, 2014 Law on Housing Gorvernment of Socialist Republic of Vietnam, 1995, 2005 Civil Code Gorvernment of Socialist Republic of Vietnam, 2004, 2011 Civil Procedure Code Gorvernment of Socialist Republic of Vietnam, 2010 Law on Credit Institution Gorvernment of Socialist Republic of Vietnam, 2006 Law on Notarization Gorvernment of Socialist Republic of Vietnam, 2008 Law on Promulgation of Legal Normative Documents Gorvernment of Socialist Republic of Vietnam, 2014 Circular No 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CONTRACT AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE 2.1 Overview of Vietnam Joint Stock Commercial Bank for Industry and Trade VIETINBANK was established from the Industrial Credit... Mortgage in Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) ” Research Objective: The thesis was to clarify the role of lending with mortgages by assets in general and real estate. .. Industry and Trade Practice of Real Estate Mortgage in Vietinbank Hoang Linh Chapter OVERVIEW OF REAL ESTATE MORTGAGE TO ENSURE IMPLEMENTATION OF CREDIT CONTRACT IN COMMERCIAL BANKS IN VIETNAM