Vietnam: Ministry of Finance Cracks Down on Insurers Coercing Customers for Loans
To avoid insurance companies collaborating with banks to coerce customers into purchasing insurance policies in exchange for loans, the Ministry of Finance has instructed the Insurance Supervisory Administration (ISA) to increase its scrutiny of insurance companies.
As part of this directive, the ISA will step up its inspections and have personnel available round-the-clock to take complaints from customers who have been compelled to buy insurance policies through banks. There have been complaints from customers since last year alleging that bank employees have informed them that they will only be eligible for loans if they acquire insurance policies valued at 3%-4% of the loan amount.
The Ministry of Finance has instructed ISA to collaborate with State Bank of Vietnam inspectors to prevent such activities. Additionally, the ministry has requested ISA to provide a report on the insurance market in Vietnam, which should cover the number of companies and their operations, as well as their adherence to regulations, particularly in relation to investing in high-risk assets.
There have been accounts of numerous bank employees exploiting the situation caused by stricter credit policies to coerce customers into using bancassurance services.
In 2022, bank loans surpassed deposits for the first time in a decade, resulting in a shortage of liquidity and competition among banks for deposit interest rates.
According to Yuanta Securities Company, several banks have hit their loan-to-deposit ratio ceiling, which has forced them to rely on the interbank market and foreign financial institutions for liquidity.
Mobilization showed improvement in the last two months of the previous year due to high deposit interest rates. However, experts predict that the challenges will persist this year.