The State Bank of Vietnam has announced that the Law on Credit Institutions 2024 (CIs) has introduced changes regarding the ratio of share ownership by a shareholder, a group of shareholders, and related parties. The law also modifies the way related parties are identified and addresses indirect share ownership. As a result, it is necessary to develop this draft circular for implementation by CIs in the coming time.
This draft circular stipulates that commercial banks (except for those under special control) with shareholders, groups of shareholders, and related parties owning shares that exceed the ratio specified in Article 55 of the Law on Credit Institutions No. 47/2010/QH12, which has been amended and supplemented with certain articles according to Law No. 17/2017/QH14 (abbreviated as “excess share ownership”), must develop and implement a roadmap to ensure compliance with the provisions of the Law on Credit Institutions No. 32/2024/QH15 (abbreviated as “compliance roadmap”).
This circular applies to shareholders, groups of shareholders, and related parties of those shareholders (abbreviated as “related shareholder groups”) who own shares exceeding the specified ratio, as well as commercial banks with such shareholders, groups of shareholders, and related parties (abbreviated as “commercial banks”).
Developing a Compliance Roadmap
The draft circular states that commercial banks shall coordinate with shareholders, groups of shareholders, and related parties who own shares exceeding the specified ratio to develop and implement a compliance roadmap that aligns with the restructuring plan approved by the competent authority of the shareholders and related parties.
Commercial banks are responsible for reviewing the list of shareholders, groups of shareholders, and related parties who own shares exceeding the specified ratio. The deadline for finalizing this data and determining the list is June 30, 2024 (*).
Commercial banks shall work together with shareholders, groups of shareholders, and related parties who own shares exceeding the ratio to establish a compliance roadmap in accordance with the Law on Credit Institutions.
The compliance roadmap of a commercial bank must include at least the following contents:
a) A list of shareholders, groups of shareholders, and related parties currently owning shares that exceed the specified ratio, including the following information:
– Name of the organization, business registration certificate number or equivalent legal document, date of issuance, place of issuance, business identification number, and address of the head office.
– Information on the number and ratio of shares owned in the chartered capital of the commercial bank (including shares held through authorization or entrustment by other organizations or individuals); the name of the organization or individual receiving the authorization or entrustment, and their relationship with the organization.
– Information about the representative of the contributed capital, as well as related parties of the shareholders and groups of shareholders.
b) Measures to be implemented (shareholder reducing their shareholding ratio in the commercial bank or other measures) and corresponding timelines to ensure compliance with the Law on Credit Institutions.
c) Commitment from the commercial bank to coordinate and urge the related shareholder groups owning shares that exceed the specified ratio to rectify the situation according to the established compliance roadmap.
The draft also states: Commercial banks shall submit the compliance roadmap directly or through postal services to the State Bank of Vietnam (via the Banking Inspection and Supervision Agency), shareholders, groups of shareholders, and related parties owning shares that exceed the specified ratio within 120 days from the effective date of this circular.
In case it is necessary to ensure the safe operation of the commercial bank, the Banking Inspection and Supervision Agency may request the commercial bank to revise and complete the compliance roadmap. Within 30 days from the date of receiving the request from the Banking Inspection and Supervision Agency, the commercial bank must revise and complete the compliance roadmap and submit it to the State Bank of Vietnam (via the Banking Inspection and Supervision Agency), shareholders, groups of shareholders, and related parties owning shares that exceed the specified ratio.
Implementing the Compliance Roadmap
According to the draft, commercial banks and related organizations and individuals mentioned in the compliance roadmap are responsible for implementing the roadmap as submitted to the State Bank of Vietnam.
During the implementation of the compliance roadmap, if necessary, commercial banks shall coordinate with related organizations and individuals to adjust the measures and implementation timeline while ensuring adherence to the overall timeline of the roadmap. Commercial banks shall submit the adjusted compliance roadmap directly or through postal services to the State Bank of Vietnam (via the Banking Inspection and Supervision Agency), shareholders, groups of shareholders, and related parties owning shares that exceed the specified ratio and are subject to the compliance roadmap.
Shareholders, groups of shareholders, and related parties at commercial banks who own shares exceeding the specified ratio must not increase the number of shares they hold in any form until they comply with the share ownership limit stipulated by the Law on Credit Institutions. The exception to this rule is when they receive bonus shares or dividends in the form of shares.
From the effective date of this circular, credit institutions shall not extend credit or provide new credit (in case credit has already been extended) to shareholders, groups of shareholders, and their related parties who own shares exceeding the specified limit.
Shareholders, groups of shareholders, and related parties who currently own shares exceeding the specified ratio are not entitled to receive cash dividends (if any) for the shares held above the limit until they comply with the share ownership limit stipulated by the Law on Credit Institutions.
In case commercial banks, shareholders, groups of shareholders, and related parties fail to comply with the compliance roadmap, the State Bank of Vietnam will consider and apply appropriate handling measures in accordance with the law, depending on the nature and severity of the case.
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