Assisting measures applicable to credit institutions subject to early intervention in Vietnam as of July 1, 2024

Assisting measures applicable to credit institutions subject to early intervention in Vietnam as of July 1, 2024 (Internet image)

Regarding this matter, LawNet would like to answer as follows: 

On January 18, 2024, the National Assembly passed the Law on Credit Institutions (amended), effective from July 1, 2024.

1. What are the cases of early intervention in credit institutions in Vietnam?

According to Clause 1, Article 156 of the Law on Credit Institutions 2024, in any of the following cases, the State Bank will consider deciding to make early intervention in a credit institution or foreign bank's branch in Vietnam:

- The accumulated losses incurred by the credit institution or foreign bank's branch exceeds 15% of its charter capital, provided capital and reserve funds written in the latest financial statement which has been audited or according to audit and inspection conclusions of the competent authority and the credit institution or foreign bank's branch commits violations against law regulations on capital adequacy ratio specified at Point b, Clause 1, Article 138 of the Law on Credit Institutions 2024;

- The credit institution or foreign bank's branch is ranked below average under regulations of the Governor of the State Bank;

- The credit institution or foreign bank's branch fails to achieve the minimum solvency ratio specified in Point a Clause 1 Article 138 of the Law on Credit Institutions 2024 for 30 consecutive days;

- The credit institution or foreign bank's branch fails to achieve the minimum capital adequacy ratio specified in Point b Clause 1 Article 138 of the Law on Credit Institutions 2024 for 06 consecutive months;

- A bank run occurs and the credit institution or foreign bank's branch sends a report to the State Bank.

2. Assisting measures applicable to credit institutions subject to early intervention in Vietnam as of July 1, 2024

Pursuant to Article 159 of the Law on Credit Institutions 2024, assisting measures applicable to credit institutions subject to early intervention in Vietnam are as follows:

- During the implementation of the remedial plan, a credit institution subject to early intervention may adopt the following assisting measures after obtaining the State Bank’s written approval. To be specific:

+ Applying roadmap for compliance with one or several limits and ratios specified in Articles 136 and 138 of the Law on Credit Institutions 2024;

+ When implementing the solution for increasing the credit institution’s charter capital under the remedial plan, shareholders and capital contributors may hold shares and stakes that exceed the limits on holdings of shares/stakes specified in Articles 63 and 77 of the Law on Credit Institutions 2024. Each shareholder and capital contributor shall have a roadmap to reduce holdings of shares/stakes for compliance with the limits.

- During the implementation of the remedial plan, if the credit institution subject to early intervention incurs accumulated losses exceeding 50% of its charter capital and reserve funds stated in the latest financial statement which has been audited or under the inspection and audit conclusions of the competent state authority, in addition to the measures specified in Clause 1 of Article 159 of the Law on Credit Institutions 2024, the credit institution may apply one or some the following assisting measures after obtaining the State Bank’s written approval. To be specific:

+ In case where the mandatory loss provision exceeds the difference between annual revenues and expenditures, excluding provisional loss provision, the provision shall be equal to the difference between annual revenues and expenditures;

+ In case where the credit institution has forgivable interest, the credit institution may allocate the forgivable interest according to its financial capacity on the principle that the total allocation of forgivable interest and the mandatory loss provision are equal to the difference between annual revenues and expenditures.

The time limit for allocation of forgivable interest shall not exceed 05 years from the date of approval by the State Bank. The time limit only applies to receivables incurred up to the time the State Bank makes the written request specified in Clause 2, Article 156 of the Law on Credit Institutions 2024.

When necessary, the Government shall provide for cases where the time limit for allocation of forgivable interest is exceeding 5 years but not exceeding 10 years;

+ The people’s credit fund may borrow loans from the fund for maintenance of prudence for the system of people's credit funds with preferential interest rates in accordance with the State Bank Governor’s regulations;

+ The people’s credit fund may receive the cooperative bank’s assistance in sending staff to participate in management and administration; and IT support;

+ Adopting other measures within the jurisdiction of the State Bank.

Nguyen Ngoc Que Anh

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