Vietnam: Conditions to be satisfied by commercial banks holding shares of other credit institutions

Specifically, a commercial bank that holds another credit institution shares (including the shares held by the bank’s shareholders, other organizations, individuals under a trust agreement with the bank) shall satisfy the conditions and the limits specified in Article 19 of Circular No. 22/2019/TT-NHNN of the State Bank of Vietnam. To be specific:

Firstly, at the time of purchase of shares of another credit institution, the purchasing bank shall satisfy the following conditions:

- The actual value of charter capital is not smaller than the registered charter capital;

- The limits and prudential ratios specified in this Circular are complied with;

- Bad debts ratio is under 3%;

- There are procedures for assessment of risks of the purchase and holding of shares of other credit institutions;

- Every purchase of shares of the other credit institution is approved by Board of Directors, the Board of members;

- The bank has not incurred any administrative penalties for violations against regulations on banking over 01 year before the date of purchase;

- The chairperson and other members of the Board of Directors, the chairperson and other members of the Board of members, General Director (Director), the chief and other members of the Board of Controllers, major shareholders of the commercial bank, its subsidiaries and their related persons must not purchase voting shares of the said credit institution;

- The chairperson and other members of the Board of Directors, the chairperson and other members of the Board of members, General Director (Director), the chief and other members of the Board of Controllers, major shareholders of the commercial bank, its subsidiaries and their related persons must not entrust any other organization to purchase voting shares of the said credit institution.

Secondly, limits are as follows:

- A commercial bank may hold shares of up to 02 other credit institutions, except for the credit institutions that are subsidiaries of the bank;

- A commercial bank may hold an amount of shares of another credit institution that is worth less than 5% of its voting shares;

- A commercial bank must not nominate members of Board of Directors of the credit institutions whose shares are being held by the bank, except for the credit institutions that are subsidiaries of the bank or commercial banks that are supporting credit institutions appointed to participate in management of the credit institution under strict control;

- In the following cases, the limits specified in Point a and Point b of this Clause and the conditions specified in Clause 2 of this Article may be ignored:

+ The shares are purchased under the plan for restructuring of a credit institution put under strict control according to the Law on credit institutions (amended);

+ The shares purchase is requested by SBV as prescribed by law.

- In case a commercial bank sells another credit institution’s shares under a deferred payment plan, the bank may only transfer the ownership of the shares paid for.

View more at Circular No. 22/2019/TT-NHNN of the State Bank of Vietnam, effective from January 01, 2020.

Thu Ba

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