Cases in which a credit institution is placed under special control in Vietnam

Cases in which a credit institution is placed under special control in Vietnam

1. What is special control?

According to Clause 34, Article 4 of the Law on Credit Institutions 2010 (amended in 2017), special control means placing a credit institution which faces insolvency possibilities under the direct control of the State Bank according to the provisions of Section 1, Chapter VIII of Law on Credit Institutions.

2. Cases in which a credit institution is placed under special control in Vietnam

- 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;

+ 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 Law on Credit Institutions 2010 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.

- When facing insolvency, the credit institution shall immediately submit a report to the State bank on the situation, measures that have been taken and will be taken, and proposals to the State bank.

(Article 145 of Law on Credit Institutions 2010, amended in 2017)

3. Decision to place a credit institution under special control in Vietnam

- The State bank shall consider placing a credit institution under special control in any of the situation specified in Clause 1 Article 145 of Law on Credit Institutions 2010 and establish a special control board to monitor the operation of such credit institution.

- 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.

- 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.

(Article 145a of Law on Credit Institutions 2010, amended in 2017)

4. Termination of special control in Vietnam

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 specified in Article 130 of this Law;

- 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.

(Article 145b of Law on Credit Institutions 2010, amended in 2017)

Diem My

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