Vietnam: Solutions when the actual value of charter capital falls below legal capital

According to Article 7 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam (SBV), solutions for handling when the actual value of charter capital falls below legal capital are as follows:

1. When the actual value of charter capital falls below legal capital, the non-bank credit institution shall:

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

- Within 30 days after the actual value of charter capital falls below the legal capital, send a written document on a response plan and commitment to executing the plan directly or by post to SBV (Bank Supervision and Inspection Agency). Such plan and commitment must include but not limited to:

(i) The actual value of charter capital prescribed in Article 6 of this Circular;

(ii) The reasons why it falls below legal capital;

(iii) Measures for ensuring the actual value of charter capital is equal to or greater than the legal capital and maintaining prudential ratios;

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

2. Whenever the charter capital of a non-bank credit institution falls below the legal capital, SBV shall:

- Carry out an assessment, inspection or request the non-bank credit institution to undergo independent audit for determination of actual value of charter capital in the response plan reported by the non-bank credit institution according to Clause 1 of this Article;

- Request changes or completion of the corrective measures to be implemented by the non-bank credit institution when the actual value of charter capital falls below the legal capital stated in the plan prescribed in clause 1 of this Article where necessary;

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

- SBV shall, depending on level of the decrease in actual value of charter capital compared to the legal capital, decide on the following corrective measures applicable to each non-bank credit institution:

(i) The measures specified in Clause 2 of Article 59 of the Law on the State Bank shall be applied when the actual value of charter capital is below 80% of legal capital;

(ii) Apply restructuring measures prescribed by law; revoke the license if the non-bank credit institution’s charter 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 of this Article.

More details at the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam, effective from February 14, 2021.

Thuy Tram

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