Banks may suspend credit extension when subject to mass withdrawal in Vietnam from July 1, 2024

Banks may suspend credit extension when subject to mass withdrawal in Vietnam from July 1, 2024 

According to the Law, mass withdrawal refers to the case where a credit institution is subject to a mass deposit withdrawal carried out by depositors, leading to potential insolvency or insolvency according to regulations of the Governor of the State Bank of Vietnam. 

When a credit institution (bank) is subject to a mass withdrawal, it shall submit a report to the State Bank of Vietnam and:

- Avoid paying dividends in cash; suspend or limit credit extension operations and other operations using the funds of the credit institution; adopt other solutions to meet clients' deposit payment requests;

- Adopt solutions in the rectification scheme in case of mass withdrawal prescribed in Article 143 of the Law on Credit Institutions 2024; update and adjust the scheme if necessary. 

In case a bank subject to an early intervention suffers from a mass withdrawal, it shall submit a report on the mass withdrawal to the State Bank of Vietnam, review and re-assess the situation to develop and adjust the rectification scheme according to Article 158 and Article 160 of the Law on Credit Institution 2024. The bank shall carry out the developed and adjusted rectification scheme.

Additionally, banks subject to mass withdrawal shall may apply the following support measures: 

- Sell security instruments to the State Bank of Vietnam based on the open market operations with a 0% interest rate; 

- Carry out foreign currency transactions with the State Bank of Vietnam to ensure liquidity according to the regulations of the Governor of the State Bank of Vietnam;

- Commercial banks, cooperative banks, people’s credit funds, and microfinance institutions may take out special loans from the State Bank of Vietnam or deposit insurance organizations according to deposit insurance laws or from other credit institutions.

The Law on Credit Institutions 2024 comes into force as of July 1, 2024 and replaces the Law on Credit Institutions 2010 (amended in 2017). 

Clause 3 Article 200 and Clause 15 Article 210 of the Law on Credit Institutions 2024 come into force as of January 1, 2025. 

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