Vietnam: What to do when actual value of charter capital/assigned capital fall below legal capital

According to Circular No. 22/2019/TT-NHNN of the State Bank of Vietnam, when the actual value of charter capital/assigned capital fall below legal capital, the bank or FBB shall:

- Develop and implement a plan to make sure the actual value of charter capital/assigned capital is not smaller than legal capital;

- Within 30 days after the actual value of charter capital/assigned capital falls below the legal capital, send a response plan to SBV in accordance with Point a and Point b Clause 6 Article 4 of this Circular. Such a plan shall specify:

+ The actual value of charter capital/assigned capital according to Article 6 of this Circular;

+ The reason it falls below legal capital;

+ Measures for maintaining the actual value of charter capital/assigned capital equal to or above the legal capital and maintaining prudential ratios;

- Organize implementation of the corrective measures at the request of SBV (if any).

Besides, Circular No. 22/2019/TT-NHNN also stipulates that whenever the charter capital/assigned capital of a bank or FBB falls below the legal capital, SBV shall:

- Carry out an assessment, inspection or request the bank or FBB to undergo independent audit for determination of actual value of charter capital/assigned capital in the response plan.

- Request changes or completion of the corrective measures to be implemented by the bank or FBB where necessary;

- Supervise and inspect the implementation of the response plan, including the corrective measures requested by SBV;

- SBV shall, in consideration of the decrease in actual value of charter capital/assigned capital, decide on the following corrective measures:

+ The measures specified in Clause 2 Article 59 of the Law on the State bank when the actual value of charter capital/assigned capital is below 80% of legal capital;

+ Apply restructuring measures prescribed by law; revoke the license if the bank’s or FBB’s charter capital/assigned capital is below 50% of legal capital or is below legal capital for 6 consecutive months despite implementation of the measures mentioned in Clause 1 Article 7 of Circular No. 22/2019/TT-NHNN.

SBV branches may apply the measures mentioned in Clause 2 Article 7 of Circular No. 22/2019/TT-NHNN to FBBs that are subjects of microprudential supervision, including:

- The measures mentioned in Points a, b, c Clause 2 of this Article;

- The measures mentioned in Point d(i) Clause 2 of this Article if assigned by the Governor of SBV;

- The measures mentioned in Clause 2 of this Article beyond the power of SBV branches if authorized by the Governor of SBV.

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

Thu Ba

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