Two recent changes to Vietnam's banking laws have been heavily criticized by foreign bankers. Circular No. 07/TT-NH1 dated December 27 1996 concerning bank cheques, which came into force on April 1 1997, imposes tight restrictions on the use of cheques within Vietnam.
Under the provisions of the Circular, cheques will be valid for only 15 days rather than six months as is the norm in the other Asean nations. In addition, cheques must be written in Vietnamese. English can be used only if the lettering is smaller than the Vietnamese letters.
The new regulations cover areas which are not normally addressed in most other jurisdictions, including the size of the cheque and where they must be printed. In addition, the regulations state that the first letter of the sum in words must be capitalized and there must be no blank spaces on the cheque. Individuals can purchase only one book of 10 cheques at a time. Companies are limited to purchasing three books of 10. Company cheques must be countersigned by the chief accountant, and if there is no such officer, the phrase 'there is no chief accountant' must be written in Vietnamese in the space provided for the accountant's signature.
Since Vietnam lacks an automated cheque clearing system, the new regulations allow cheques to be issued for payment only among branches of the same bank and among banks which are members of a local clearing centre.
In the second law, Decree No. 18/CP issued on February 24 1997, the Vietnamese government outlined the penalties for banks and bank customers which disregard the regulations. According to the Decree, violations of the new regulations could result in a fines ranging from US$700 to US$8,600.
The new Circular and Decree are certain to discourage the use of cheques and appear to be contrary to Vietnam's previous efforts to promote the use of banks. Banks are advising their customers to use cash rather than cheques, a move which is certain to perpetuate Vietnam's cash-based economy. Because the new regulations must be followed without exception, bankers fear that they will not be able to guarantee that cheques will be honoured even if sufficient funds are in the account.
Most banking analysts have criticized the move, suggesting the government should take steps to encourage the use of banks. Some have gone so far as to suggest that the government should advocate the use of 'smart cards' rather than cheques. However, considering the Vietnamese record with basic banking techniques, most observers suggest that this proposal is not practical.