In which cases are credit institutions subject to special control under the Law on Credit Institutions 2024?
In which cases are credit institutions subject to special control according to the Law on Credit Institutions 2024?
According to the provisions of Clause 1, Article 162 of the Law on Credit Institutions 2024, the State Bank of Vietnam shall consider and decide to place a credit institution under special control in the following cases:
- The credit institution under early intervention has no remedial plan submitted to the State Bank of Vietnam or does not adjust the remedial plan as requested in writing by the State Bank of Vietnam;
- During the implementation period of the remedial plan, the credit institution under early intervention is unable to execute the remedial plan;
- At the end of the implementation period of the remedial plan, the credit institution has not remedied the situation leading to early intervention;
- Facing a mass withdrawal of funds and posing a risk to the safety of the entire credit institution system;
- The capital adequacy ratio of the credit institution is below 4% for six consecutive months;
- The credit institution is dissolved and unable to fully pay off its debts during asset liquidation.
In addition, the following regulations apply from the day the credit institution is placed under special control:
- From the day the credit institution is placed under special control, the owner, capital contributing members, and shareholders of the specially controlled credit institution must report the use of their shares and capital contributions; they are not allowed to transfer shares and capital contributions; they are not allowed to use shares and capital contributions as collateral unless required by a competent state authority.
- From the day the credit institution is placed under special control, the principal and interest from its refinancing loan at the State Bank of Vietnam are converted into the principal and interest of a special loan and continue to be managed under the refinancing loan mechanism; the principal and interest from the people's credit fund loan at the cooperative bank are converted into the principal and interest of a special loan and continue to be managed under the cooperative bank's lending mechanism to the people's credit fund.
Credit institutions subject to special control according to the Law on Credit Institutions 2024
How does the Law on Credit Institutions 2024 specifically regulate early intervention measures?
According to the provisions of Article 156 of the Law on Credit Institutions 2024, early intervention measures for credit institutions and foreign bank branches are outlined as follows:
Firstly, the State Bank of Vietnam considers and decides to implement early intervention measures for credit institutions and foreign bank branches when they fall into one or more of the following cases:
- The cumulative losses of the credit institution or foreign bank branch exceed 15% of their charter capital, allocated capital, and reserve funds as recorded in the most recent audited financial statements or as per the inspection, audit results of a competent state authority and violate the minimum capital adequacy ratio stipulated in Point b, Clause 1, Article 138 of the Law on Credit Institutions 2024;
- Ranked below average according to the regulations of the Governor of the State Bank of Vietnam;
- Violating the liquidity ratio stipulated in Point a, Clause 1, Article 138 of the Law on Credit Institutions 2024 for 30 consecutive days;
- Violating the minimum capital adequacy ratio stipulated in Point b, Clause 1, Article 138 of the Law on Credit Institutions 2024 for six consecutive months;
- Facing a mass withdrawal of funds and reporting it to the State Bank of Vietnam.
Next, the State Bank of Vietnam issues a document requiring the credit institution or foreign bank branch falling into one or more of the above cases to implement the following primary contents:
- One or several requirements, restrictive measures stipulated in Article 157 of the Law on Credit Institutions 2024 and the implementation timeframe;
- Require the credit institution to update and immediately implement a remedial plan as stipulated in Article 143 of the Law on Credit Institutions 2024 or develop a remedial plan as stipulated in Article 158 of the Law on Credit Institutions 2024, the completion timeframe, and the timeframe for the cooperative bank to comment on the people's credit fund's remedial plan as stipulated in Clause 2, Article 158 of the Law on Credit Institutions 2024;
- Require the foreign bank branch to update and immediately implement a remedial plan as stipulated in Article 143 of the Law on Credit Institutions 2024 or develop a remedial plan as stipulated in Article 158 of the Law on Credit Institutions 2024, the completion timeframe, and the approval timeframe for the remedial plan.
Credit institutions and foreign bank branches are responsible for immediately implementing the requirements, restrictive measures stated in the State Bank of Vietnam's document.
In case credit institutions or foreign bank branches do not implement these requirements and restrictive measures, the State Bank of Vietnam shall impose additional one or several restrictive measures stipulated in Clause 2, Article 157 of the Law on Credit Institutions 2024.
If necessary, the State Bank of Vietnam shall require credit institutions or foreign bank branches to hire an independent auditing organization to audit financial statements and assess the financial status as a basis for developing a remedial plan.
When does the new Law on Credit Institutions 2024 take effect?
According to Article 209 of the Law on Credit Institutions 2024, this Law officially issued, will come into effect on July 01, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024 which will take effect from January 01, 2025.
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