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The State Bank of Vietnam is drafting a new circular due to changes in the Law on Credit Institutions regarding the ownership ratio of a shareholder, a group of shareholders, and related parties, as well as changes in the determination of related parties and indirect ownership. The new circular is necessary to address challenges and obstacles faced in implementing the previous circular, Circular No. 06/2015/TT-NHNN, which outlined the timeline, order, and procedures for cases of shareholding exceeding the prescribed limit as per Article 55 of the Law on Credit Institutions 2010 and its amendments.
According to the draft circular, commercial banks must coordinate with shareholders and related parties who own shares exceeding the prescribed ratio to develop and implement a compliance roadmap that aligns with the restructuring plan approved by the competent authority. This ensures adherence to the provisions of the Law on Credit Institutions.
Banks will be required to review the list of shareholders and related parties who own shares exceeding the ratio. The deadline for finalizing the data and determining the list is set as June 30, 2024.
The compliance roadmap for commercial banks must include a list of shareholders and related parties, with complete information, legal documents, and the number of shares; the measures to be implemented (such as a reduction in shareholding by the shareholder in the commercial bank or other measures); and a timeline for execution to comply with the Law on Credit Institutions. It should also include a commitment from the commercial bank to coordinate and monitor the implementation of the above roadmap by the shareholder and related parties.
Banks and related organizations and individuals involved in the compliance roadmap are responsible for executing the agreed-upon plan. If necessary, banks can coordinate with these entities to adjust the measures and timeline during the implementation process, provided that the overall timeline for compliance is adhered to.
Shareholders and related parties at commercial banks who own shares exceeding the prescribed ratio are not permitted to increase the number of shares they hold in any form until they comply with the shareholding limits stipulated in the Law on Credit Institutions. Exceptions to this include receiving bonus shares or dividends in the form of shares, as per the circular.
Furthermore, from the effective date of this circular, credit institutions shall not extend credit or new credit (in cases where credit has already been extended) to shareholders or groups of related shareholders who own shares exceeding the prescribed limit or to related parties of such shareholders.
Additionally, shareholders or groups of related shareholders who own shares exceeding the ratio shall not receive cash dividends (if any) for the number of shares held in excess of the limit until they comply with the shareholding limits stipulated in the Law on Credit Institutions.
In cases where commercial banks, shareholders, or related parties do not 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.
The Law on Credit Institutions 2024 has introduced changes to the limits on shareholding by an individual shareholder, a group of shareholders, and related parties, as well as modifications in the determination of related parties and indirect ownership.
Specifically, according to the provisions of the Law on Credit Institutions 2024, which came into effect on July 1, 2024, an individual shareholder is not permitted to own more than 5% of the charter capital of a credit institution. A group of shareholders is limited to owning no more than 10% of the charter capital, and shareholders and their related parties cannot own more than 15% of the charter capital.
To prevent disruptions and negative impacts on the banking system, the Law on Credit Institutions 2024 includes a transitional provision. Specifically, from July 1, 2024 (the effective date of the Law), shareholders, groups of shareholders, and related parties who exceed the prescribed shareholding ratio are allowed to maintain their shares but cannot increase their holdings until they comply with the provisions on the shareholding ratio stipulated in the Law. An exception to this is the receipt of dividends in the form of shares.
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