The State Bank of Vietnam
is seeking opinions on a Draft Circular on regulations for the construction and implementation of a compliance roadmap for capital contributions and share purchases by credit institutions and their subsidiaries.
Ensuring compliance with the provisions of the Law on Credit Institutions 2024
The State Bank of Vietnam stated that Paragraph 5, Article 210 of the Law on Credit Institutions 2024 stipulates the transfer provisions:
“5. Credit institutions have capital contributions, share purchases of enterprises, other credit institutions as specified in Point b, Paragraph 5, Article 137 of this Act, their subsidiaries have capital contributions, share purchases as specified in Point 5, Article 137 of this Law before the effective date of this Law, shareholders and related persons at commercial banks own shares exceeding the provisions in Article 55 of the Law on Credit Institutions 47/2010/QH12 as amended and supplemented by certain articles according to Law 17/2017/QH14 must develop and implement a roadmap to ensure compliance with the provisions of this Law as stipulated by the Governor of the State Bank.”
Thus, the issuance of the draft Circular is consistent with the content assigned by the Law on Credit Institutions to the Governor of the State Bank in Paragraph 5, Article 210.
In addition, Paragraph 5, Article 137 of the Law on Credit Institutions 2024 stipulates the Limitations on capital contributions and share purchases:
“5. Credit institutions, their subsidiaries shall not contribute capital, purchase shares of the following enterprises, credit institutions: a) Enterprises, other credit institutions that are shareholders, members contributing capital to that credit institution; b) Enterprises, other credit institutions that are related parties of large shareholders, members contributing capital to that credit institution.”
Credit institutions comply with capital contribution and share purchase limits
According to Paragraph 5, Article 210 of the Law on Credit Institutions 2024, the State Bank of Vietnam needs to develop and issue new regulations guiding credit institutions with capital contributions, share purchases of enterprises, other credit institutions as specified in Point b, Paragraph 5, Article 137 of this Law, their subsidiaries with capital contributions, share purchases as specified in Point 5, Article 137 of this Law before the effective date of this Law must develop and implement a roadmap to ensure compliance with the provisions of this Law as stipulated by the Governor of the State Bank.
In practice, there may arise cases where credit institutions, their subsidiaries have capital contributions, share purchases as specified in Paragraph 5, Article 137 of the Law on Credit Institutions 2024. Therefore, the issuance of the Circular is necessary for credit institutions to have legal basis for implementation in practice.
Compliance roadmap
The draft Circular includes 11 articles. Some notable points in the draft Circular are: Article 3 on compliance roadmap deadlines: The compliance roadmap ensures that no later than July 1, 2025, credit institutions, their subsidiaries comply with the provisions.
Articles 4, 5, 6 develop the roadmap for: Credit institutions to comply with the limitations on capital contributions, share purchases specified in Point b, Paragraph 5, Article 137 of the Law on Credit Institutions; for the subsidiaries of credit institutions to comply with the limitations on capital contributions, share purchases specified in Point a, Paragraph 5, Article 137 of the Law on Credit Institutions; for the subsidiaries of credit institutions to comply with the limitations on capital contributions, share purchases specified in Point b, Paragraph 5, Article 137 of the Law on Credit Institutions.
Credit institutions send the compliance roadmap specified in Paragraph 3 of this Article to the State Bank of Vietnam (through the Inspectorate, Banking Supervision), their subsidiaries, large shareholders, and related members within 90 days from the effective date of this Circular.
If necessary, the Inspectorate, Banking Supervision requires credit institutions to amend, improve the compliance roadmap. Within 15 days from the date of receiving the request from the Inspectorate, Banking Supervision, credit institutions must amend, improve, and send the compliance roadmap to the State Bank of Vietnam (through the Inspectorate, Banking Supervision), their subsidiaries, large shareholders, and related members.
For the implementation of the compliance roadmap in Article 7, the draft stipulates: Credit institutions and related organizations or individuals are responsible for implementing the roadmap according to the compliance roadmap content sent to the State Bank of Vietnam as specified in this Circular and relevant legal provisions.
During the implementation of the compliance roadmap, credit institutions and their subsidiaries are not allowed to increase capital contribution, increase the number of shares held in related enterprises, credit organizations in the compliance roadmap (except in the case of receiving bonus shares or shares as dividends).
The Inspectorate, Banking Supervision monitors the implementation of the compliance roadmap by credit institutions.
In case the subsidiary of a credit institution fails to comply with the compliance roadmap, the credit institution must reduce the capital contribution ratio, reduce the share ownership ratio in the subsidiary, or take other measures to ensure compliance with the provisions in Paragraph 5, Article 137 of the Law on Credit Institutions.
In cases where credit institutions, their subsidiaries fail to comply with the compliance roadmap, depending on the nature and extent, the State Bank of Vietnam considers and applies measures according to the regulations of the law.
When the deadline for the compliance roadmap ends and credit institutions, their subsidiaries fail to comply with the provisions in Paragraph 5, Article 137 of the Law on Credit Institutions, credit institutions, their subsidiaries must suspend new capital contributions, share purchases until compliance is ensured.
