The amended Law on Credit Institutions took effect from January 15, 2018, creating an important legal foundation for implementing the solutions of the Scheme to restructure the system of credit institutions in conjunction with handling bad debts.
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The Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions (Law on Credit Institutions) has added several provisions aimed at enhancing the governance and administration capacity of credit institutions, limiting, and preventing the abuse of governance and administration powers to serve related interests, specifically:
- Addressing the inadequacies of the related person regulations in the Law on Credit Institutions 2010 (mainly identifying related persons based on quantitative factors), the amended Law on Credit Institutions 2017 has expanded the scope of related persons based on the risk level of relationships between these individuals and the activities of credit institutions. The amended Law on Credit Institutions 2017 stipulates that related persons include both legal entities and individuals with potentially risky relationships for the activities of credit institutions, foreign bank branches, determined according to the internal regulations of the credit institution, foreign bank branch, or based on written requests from the State Bank of Vietnam (SBV) through inspection and supervision activities for specific cases.
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- To limit and prevent violations by managers and administrators in the governance and administration of credit institutions, the amended Law on Credit Institutions 2017 added further cases where individuals are not allowed to assume positions (point h, clause 1, Article 33). These are individuals responsible as per the inspection conclusions leading to the credit institution, foreign bank branch being administratively sanctioned in the monetary, banking field at the highest fine framework for certain violations affecting banking operation safety, such as violations related to licensing, governance, administration, shares, stocks, capital contribution, share purchase, credit granting, corporate bond purchase, safety assurance ratio.
- The amended Law on Credit Institutions 2017 has supplemented the regulation (clause 4, Article 34) that does not allow the Chairman of the Board of Directors, Chairman of the Members' Council, General Director (Director) of a credit institution to concurrently be the Chairman of the Board of Directors, member of the Board of Directors, Chairman of the Members' Council, member of the Members' Council, Chairman of the company, General Director, Deputy General Director, and equivalent positions of another enterprise. This aims to limit and prevent the abuse of concurrent governance, administration powers at the credit institution and another enterprise to carry out non-market-based investment, credit granting activities, creating significant risks for the operations of the credit institution.
- The amended Law on Credit Institutions 2017 has revised and supplemented the provisions on standards and conditions for the titles of Board of Directors/Board of Members' members, General Director (Director) of credit institutions (clause 1 and clause 4, Article 50) towards mandatory administration and management experience. Specifically: Besides other conditions, Board of Members' members, Board of Directors' members must have at least 3 years as a manager, administrator of a credit institution, or at least 5 years as a manager, administrator of a company operating in finance, banking, accounting, auditing sectors, or another company with minimum owner’s equity equal to the statutory capital level for the corresponding credit institution type, or at least 5 years of direct work at a financial, banking, accounting, auditing operation department; similarly, besides other conditions, the General Director of a credit institution must have at least 5 years as an administrator of a credit institution or at least 5 years as a General Director (Director), Deputy General Director (Deputy Director) of a company with minimum owner’s equity equal to the statutory capital level for the corresponding credit institution type and at least 5 years of direct work in the financial, banking, accounting, auditing sector or at least 10 years of direct work in the financial, banking, accounting, auditing sector.
- The amended Law on Credit Institutions 2017 has revised and supplemented regulations (clause 2, Article 75) requiring the expected personnel list of managers, administrators, supervisors of people's credit funds, cooperative banks to be approved by SBV to ensure the capacity of the managers, administrators, supervisors of people's credit funds, cooperative banks.
Source: Kiem Sat
