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 (Internet image)

1. What is special control?

In Article 145 of the Law on Credit Institutions 2010 amended in 2017, 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 the Law on Credit Institutions 2010 amended in 2017 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.

Note: 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.

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

Article 145a of the Law on Credit Institutions 2010 amended in 2017 stipulates the decision to place a credit institution under special control as follows;

- The State bank shall consider placing a credit institution under special control in any of the situation specified in Clause 1 Article 145 of the Law on Credit Institutions 2010 amended in 2017 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.

3. Termination of special control in Vietnam

Pursuant to Article 145b of the Law on Credit Institutions 2010 amended in 2017, 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 the Law on Credit Institutions 2010 amended in 2017;

- 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.

4. Power to decide restructuring of a credit institution under special control in Vietnam

Article 146 of the Law on Credit Institutions 2010 amended in 2017 stipulates the power to decide restructuring of a credit institution under special control as follows:

- The Government has the power to:

+ Decide the guidelines for restructuring according to the plan for dissolution, mandatory transfer or bankruptcy of the credit institution placed under special control;

+ Approve the plan for mandatory transfer or bankruptcy of the credit institution placed under special control;

+ Implement special measures to ensure safety of the system of credit institutions, social safety and order after settling the credit institution placed under special control and submit a report to the National Assembly at the nearest meeting.

- The Prime Minister has the power to:

+ Decide the guidelines for restructuring according to the plan for recovery, merger, amalgamation, transfer of 100% of shares/stakes of commercial banks, cooperative banks and financial companies placed under special control;

+ Approve plans for recovery, merger, amalgamation, transfer of 100% of shares/stakes of commercial banks, cooperative banks and financial companies placed under special control;

+ Decide grant of special loans by the State bank with the interest rate up to 0% to credit institutions placed under special control.

- The State bank has the power to:

+ Decide the guidelines for restructuring according to the plan for recovery, merger, amalgamation, transfer of 100% of stakes of people's credit funds and microfinance institutions;

+ Decide plans for recovery, merger, amalgamation, transfer of 100% of stakes of people's credit funds and microfinance institutions, except for the cases in which special loans are granted according to Point c Clause 2 of Article 146 of the Law on Credit Institutions 2010 amended in 2017;

+ Decide long-term purchase of bonds of the credit institution by Deposit Insurance of Vietnam.

Ngoc Nhi

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