Limiting the abuse of large shareholders’ rights
This morning (February 19), at the press conference announcing the decree of the State President announcing the Law on Credit Institutions recently adopted by the XV National Assembly at the 5th extraordinary session (January 18, 2024), Deputy Governor of the State Bank of Vietnam Doan Thai Son said that the Law has improved regulations on enhancing requirements for management and operation, limiting the abuse of large shareholders’ rights, management and operation rights to manipulate the activities of credit institutions.
Deputy Governor of the State Bank of Vietnam Doan Thai Son provides information at the press conference
According to the Law on Credit Institutions 2024, the limit on the ownership ratio of shareholders who are organizations, shareholder groups, and related individuals has been reduced. The Law also stipulates a 5-year road map to gradually reduce the credit limit, amends and supplements the provisions on the definition of related persons.
The Law supplements the responsibility for public disclosure of information on shareholders owning 1% or more of the charter capital of credit institutions, information about related persons of managers and operators of credit institutions…
“These are the provisions to enhance the capacity of management, operation, and transparency of the activities of credit institutions, foreign bank branches, to limit the situation of manipulation and control of activities of large shareholders and large shareholder groups in credit institutions,” said Mr. Son.
In addition, the Law on Credit Institutions 2024 has added provisions requiring commercial banks, foreign bank branches to develop anticipated solutions in cases of early intervention. The rescue plan must be developed and approved before July 1, 2025, or within 1 year from the date of issuance of the license.
The Deputy Governor emphasized the spirit of “from a distance, from early on”. When discovering that credit institutions are subject to early intervention, the State Bank will send a document to the credit institution. This document will clearly state the requirements and limitations for the credit institution, including the development and updating of plans to address any weaknesses that arise in the operations of the credit institution.
In the case that the credit institution successfully implements the plan to overcome and return to normal operation, the application of restrictions and requirements from the State Bank will also cease.
The Law also changes the approach to early intervention in line with international practices. At least every 2 years, commercial banks and foreign bank branches must update and adjust their remedial plans to ensure compliance with the operational realities of the credit institution.
Supplementing provisions on mass withdrawal
The new Law on Credit Institutions also supplements provisions on mass withdrawal, which clearly stipulates measures to be applied when a credit institution experiences mass withdrawal, including self-reliant measures of the bank and liquidity support measures, ensuring the safety of the system and protecting the interests of depositors.
Illustrative image: KT
Regarding special control and structural restructuring plans for credit institutions, the new law stipulates recovery plans, merger plans, consolidation plans, transfer of all shares, capital contributions, mandatory transfer plans, dissolution plans, and bankruptcy plans.
The Law on Credit Institutions stipulates measures to be applied when a credit institution experiences mass withdrawal, including self-reliant measures of the bank and liquidity support measures, ensuring the safety of the system…
The Law on Credit Institutions consists of 15 chapters, 210 articles, and takes effect from July 1, 2024. The Law supplements transitional provisions for amended and supplemented provisions in the law to limit the impact on the market when the law takes effect.
The detailed regulations on the Law on Credit Institutions 2024 are expected to include 2 decrees and 4 circulars.
