Illustrative image
The State Bank of Vietnam has just announced the Draft Circular regulating the case of commercial banks with shareholders, shareholders, and related parties owning shares exceeding the ratio prescribed in the Law on Credit Institutions amended in 2024.
According to the Draft Circular, commercial banks will have to coordinate with shareholders, shareholders, and related parties who own shares exceeding the prescribed ratio to build and implement a roadmap for compliance in line with the restructuring plan or the approved plan of the competent authority of the shareholders and related parties to ensure compliance with the provisions of the Law on Credit Institutions.
Notably, the Draft stipulates that shareholders or groups of related shareholders who currently own shares exceeding the prescribed ratio shall not receive cash dividends (if any) for the shares held in excess of the limit until compliance with the share ownership limit is ensured.
At the same time, from the effective date of this Circular, credit institutions shall not extend or newly extend credit (in case credit has been extended) to shareholders or groups of related shareholders who are currently owning shares in excess of the prescribed limit or related parties of such shareholders.
The Draft requires banks and related organizations and individuals to implement the compliance roadmap that has been submitted to the State Bank of Vietnam. During the implementation of the compliance roadmap, if necessary, the bank shall coordinate with related organizations and individuals to adjust the applied measures and implementation roadmap but must ensure the deadline for the roadmap.
Shareholders, shareholders, and related parties at commercial banks that own shares exceeding the prescribed ratio shall not increase the number of shares held in the bank in any form until compliance with the share ownership limit is ensured, except in the case of receiving bonus shares or stock dividends, according to the Circular.
In case commercial banks, shareholders, shareholders, and related parties do not comply with the compliance roadmap, depending on the nature and severity of the case, the State Bank of Vietnam will consider and apply handling measures in accordance with the provisions of law.
The Law on Credit Institutions 2024 has made changes to the limit on share ownership of a shareholder, a group of shareholders, and related parties, changing the way of determining related parties and indirect share ownership.
Specifically, according to the provisions of the Law on Credit Institutions 2024, which took effect from July 1, 2024, an individual shareholder shall not own more than 5% of the charter capital of a credit institution; an organizational shareholder shall not own more than 10% of the charter capital; and a group of shareholders and their related parties shall not own more than 15% of the charter capital.
To avoid disruptions and negative impacts on the banking system, the Law on Credit Institutions 2024 provides for a transitional provision. Specifically, from July 1, 2024 (the effective date of this Law), shareholders, groups of shareholders, and related parties that exceed the prescribed share ownership ratio are allowed to continue holding their shares but shall not increase their shareholding until they comply with the provisions on the share ownership ratio prescribed by this Law, except in the case of receiving stock dividends.
Compliance Roadmap for Contribution Limits and Purchase of Shares in Credit Organizations
The State Bank of Vietnam has announced that credit institutions must comply with regulations on capital contribution limits and share purchases by no later than July 1, 2025.
Credit organizations must adhere to capital contribution and share purchases limits from 1/7/2025.
The State Bank of Vietnam (SBV) is currently drafting a Circular to regulate the establishment and implementation of a roadmap for compliance with capital contribution and share purchase limits of credit institutions and their subsidiaries.
Central bank proposes ban on credit institutions from running any form of promotion when receiving deposits
State Bank of Vietnam (SBV) proposes a strict ban on credit institutions implementing promotions of any kind (by money, interest rates and others) not in accordance with the provisions of the law when receiving deposits.
Why Do Many Banks Hold Extraordinary General Meetings?
Many commercial banks have announced that they will be holding extraordinary general meetings to address and approve new matters as per legal requirements.
