The core business of a bank (a Bank) is to take monies (Deposits) deposited by its customers (Depositors) and to lend such monies to its borrowers. Therefore, legally, it is important to determine who owns the Deposits. Unfortunately, Vietnamese banking law is not clear whether after the Depositors make a Deposit with the Bank, the Bank or the Deposit owns the Deposit.
The case for the Bank
The most logical conclusion is that:
· the Bank is the owner of the Deposit;
· the Depositor is not the owner of the Deposit, but the Depositor has a contractual right to request the Bank to return the Deposit to the Depositor in accordance with the terms of the Deposit; and
· the borrower will own the Deposit after it borrows the same from the Bank.
This view is supported by various provisions of the Civil Code 2015. Article 463 of the Civil Code 2015 defines an asset borrowing contract (hợp đồng vay tài sản) to mean “an agreement between parties to which a lender delivers assets to a borrower; the borrower has to repay the lender assets of the same type with the correct quantity, quality and pay interests if so agreed or so provided by law”. Under a deposit contract, the Bank will receive the Deposit from Depositor and repay the principal.
A deposit contract could be considered as an “asset borrowing contract” in respect of the Deposit. Under Article 464 of the Civil Code 2015, the Bank should become the owner of the Deposit from the receipt of the Deposit from the Depositor. And like in a loan, the Depositor will own a contractual right to claim an amount of money from the Bank. This view is consistent with the provisions of operation and bankruptcy of a Bank.
Regarding operation of a Bank, Deposits is recognised as source of funds which can be used by the Bank for lending business. Under Article 4 of Decree 93/2017, the operating funds (vốn hoạt động) of a Bank include, among other sources, deposits from organizations and individuals. Under Article 6.1 of Decree 93/2017, a Bank is entitled to use the operating funds to do business in accordance with the Law on Credit Institutions, which includes lending activities. If the Bank lends its Deposits to a borrower, then the Borrower in turn should have ownership over such Deposits so that the Borrower can use the monies for its own activities. If the Bank did not have ownership over the Deposit then the Bank could not pass such ownership to its borrowers.
Regarding a Bank’s bankruptcy, Deposits is treated as a part of assets of the Bank upon bankruptcy, rather than asset of other persons. Under Article 101 of the Law on Bankruptcy 2014 regarding the order of distribution of assets of a bankrupt credit institution, deposit amounts (khoản tiền gửi) are repaid from the assets of the credit institution with higher ranking than other unsecured creditors. Since deposit amounts are repaid from the assets of the credit institution, they should not be treated as assets of the Depositors.
The case for Depositors
Article 6.4 of Decision 1160/2004 regarding savings deposit regulations provides that the owner of a saving deposit (tiền gửi tiết kiệm) is the person named on the saving deposit certificate. Decision 1160/2004 applies to Deposits by individual Depositors. This specific provision could be used as a basis for individual Depositors to claim that they are owner of the Deposits. However, this provision is inconsistent with other provisions of Decision 1160/2004. For example,
· Article 20 of Decision 1160/2004 only provides the transfer of ownership over the deposit certificate (but not the Deposit); and
· Article 21 of Decision 1160/2004 only provides for pledge (cầm cố) over the deposit certificate (not the Deposit).
If the Depositor were owners of the Deposits then these provisions should refer to Deposits instead of deposit certificates. Decision 1160/2004 is an implementing regulations of the old Law on Credit Institutions 1997 which has been repealed. Therefore, the validity of Decision 1160/2004 is also questionable.
This post is contributed in parts by Nguyen Hoang Duy, an associate of Venture North Law Limited.