Shadow banking activities in Vietnam - legal provisions, the current situation and recommendations for securing the system safety

Abstract

Shadow banking is understood as transactions of banking features conducted by financial institutions which have not been regulated by  normal banking regulations. Shadow banking contains big risks, which was considered as a cause of  the global financial crisis in the years of 2007 - 2008. Shadow banking has existed in Vietnam in the form of activities of commercial banks, securities companies or other activities such as those of pawnshops, tontine or “mutual loan club” or “common fund plan” and those of ‘black’ financial companies. Generally, the law of Vietnam has established a framework for controlling shadow banking, however, for further securing the system safety, it is of necessity to enhance the effectiveness of applying the law and to reform the mechanisms for inspecting and supervsing the financial system in general and each group of shadow banking activities in particular.