In which cases might a credit institution be placed under special control? What are the contents of the decision to place a credit institution under special control in Vietnam?
In which cases might a credit institution be placed under special control in Vietnam?
Pursuant to the provisions of Article 145 of the 2010 Law on Credit Institutions in Vietnam (amended by Clause 27, Article 1 of the 2017 Law on amendments to some articles of the Law on Credit Institutions) stipulating the cases in which a credit institution is placed under special control:
Cases in which a credit institution is placed under special control
1. A credit institution might be placed under special control in any of the situation:
a) It has lost or is likely to lose solvency according to regulations of the State bank of Vietnam;
b) Its accrued loss exceeds 50% of charter capital and reserve funds according to the latest audited financial statement;
c) It fails to maintain the capital adequacy ratio specified in Point b Clause 1 Article 130 of this Law for 12 consecutive months or the capital adequacy ratio is below 4% for 06 consecutive months;
d) The credit institution is ranked low for 02 consecutive years according to the State bank of Vietnam.
2. When facing insolvency, the credit institution shall immediately submit a report to the State bank of Vietnam on the situation, measures that have been taken and will be taken, and proposals to the State bank of Vietnam.
According to the above provisions, a credit institution might be placed under special control in any of the situation:
- It has lost or is likely to lose solvency according to regulations of the State bank:
+ Risk of insolvency
+ Inability to pay
+ At risk of insolvency: having a capital adequacy ratio of tier 1 lower than 4% for a period of 6 consecutive months and having a ratio between total bad debt as prescribed by the State Bank, latent structured debt becomes bad debt, bad debt sold to VAMC has not been resolved compared to the total debt according to the regulations of the State Bank and bad debts sold to the Asset Management Company have not been resolved at 10% or more at the time after 6 consecutive months but the tier 1 capital adequacy ratio of the credit institution is lower than 4%.
+ Insolvency: inability to make payment of a debt obligation within 3 months from the date the debt obligation is due for payment.
- Its accrued loss exceeds 50% of charter capital and reserve funds according to the latest audited financial statement;
- It fails to maintain the capital adequacy ratio specified in Point b Clause 1 Article 130 of the 2010 Law on Credit Institutions in Vietnam for 12 consecutive months or the capital adequacy ratio is below 4% for 06 consecutive months;
- The credit institution is ranked low for 02 consecutive years according to the State bank.
In which cases might a credit institution be placed under special control? What are the contents of the decision to place a credit institution under special control in Vietnam?
What are the contents of the decision to place a credit institution under special control in Vietnam?
Pursuant to Article 145a of the 2010 Law on Credit Institutions in Vietnam (added by Clause 27, Article 1 of the 2017 Law on amendments to some articles of the Law on Credit Institutions) stipulating as follows:
Decision to place a credit institution under special control
1. The State bank shall consider placing a credit institution under special control in any of the situation specified in Clause 1 Article 145 of this Law and establish a special control board to monitor the operation of such credit institution.
2. The State bank shall specify:
a) The method and duration of special control; extension to special control duration; termination of special control; publishing of information about the special control;
b) Composition and operation of the special control board that is suitable for the special control method and situation of the credit institution.
3. From the day on which the credit institution is placed under special control, the principal and interest of refinancing loans granted by the State bank to such credit institution will be converted into special loans.
According to the above provisions, the decision to place a credit institution under special control, the State Bank shall specify:
- The method and duration of special control; extension to special control duration; termination of special control; publishing of information about the special control;
- Composition and operation of the special control board that is suitable for the special control method and situation of the credit institution.
When to terminate special control of credit institutions in Vietnam?
Pursuant to the provisions of Article 145b of the 2010 Law on Credit Institutions in Vietnam (amended by Clause 27, Article 1 of the 2017 Law on amendments to some articles of the Law on Credit Institutions) stipulating the termination of special control:
The State bank will consider terminating the special control in any of the following cases:
- The credit institution has overcome the situation that results in the special control and adheres to the safety ratios;
- During the special control, the credit institution is acquired by or consolidated into another credit institution, or is dissolved;
- The judge has appointed an official receiver or an enterprise responsible for management and liquidation of the assets of the credit institution to carry out bankruptcy procedures.
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