The State Bank of Vietnam (SBV) is seeking opinions on a draft Circular regulating special control over credit institutions. The new Circular inherits some provisions of Circular 11 dated August 2, 2019, of the SBV Governor regulating special control over credit institutions (Circular 11).
Over time, some of the provisions in Circular 11 are no longer consistent with the Law on Credit Institutions 2024 and need to be replaced by a new circular.
In particular, Article 8 of the draft new Circular stipulates a reduction in the charter capital of a commercial bank subject to mandatory transfer.
Specifically, the SBV decides to “fully reduce the charter capital of a commercial bank subject to mandatory transfer to reduce the accumulated losses” in the Decision on mandatory transfer in accordance with the provisions of Article 183 of the Law on Credit Institutions.
This is to comply with the provisions of Article 183 of the Law on Credit Institutions 2024, which clearly stipulates the time when the SBV decides to reduce the charter capital of a commercial bank under special control is the time when the SBV issues a decision on mandatory transfer.
Meanwhile, Circular 11 stipulates that the SBV decides the actual value of the charter capital and reserve funds of a commercial bank under special control.
In case the actual value of the charter capital and reserve funds according to the determination results of an independent audit organization, plus the consolidated business results of a commercial bank under special control are negative, the SBV decides to reduce the charter capital of the commercial bank under special control to 0 VND in the Decision on mandatory transfer to reduce accumulated losses. This capital level replaces the charter capital level in the Certificate of Establishment and Operation that the SBV has granted to the commercial bank subject to special control.
The new draft circular also increases the authority and responsibility of the Special Control Board.
The Special Control Board advises and proposes to the SBV Governor (through the bank inspection and supervision agency) to recommend that the Government implement special measures in cases to ensure the safety of the credit institution system and social order and safety when handling credit institutions under special control (as prescribed in Clause 4, Article 162).
The Special Control Board advises and proposes to the SBV Governor (through the bank inspection and supervision agency) to request that the owners, contributing members, and shareholders of the credit institution under special control report on the use of shares and contributed capital; not transfer shares or contributed capital; and not use shares or contributed capital as collateral.
The draft circular removes the provisions on cases where a credit institution loses or risks losing its ability to pay; loses or risks losing its ability to make payments. The reason is that Article 162 of the Law on Credit Institutions 2024 on applying special control to credit institutions does not stipulate losing or risking losing its ability to pay; losing or risking losing its ability to make payments as signs of special control like the Law on Credit Institutions 2010.
This Circular is expected to take effect from July 1, 2024, and replace Circular No. 11/2019/TT-NHNN.
Currently, the SBV is accelerating the mandatory transfer process for 3 banks that have been acquired for “0 VND” which are Construction Bank (CBBank), Ocean Bank (OceanBank), Petroleum Bank (GPBank); banks under special control are DongA Bank (DongA Bank) and SCB which have just come under special control.
