Econ
Acquiring banks for 0 VND included into Law
In addition to being taken over, distressed banks with no chance for recovery may go bankrupt.
Banks with negative chartered capital are under compulsory purchase
According to Director General of Legal Department of the State Bank of Vietnam (SBV) Doan Thai Son, one of the important contents in the revised Draft Law on Amending and supplementing a number of articles of the law on credit institutions is the compulsory purchase of credit institutions, which is placed under special control.
As such, conditions for compulsory purchase are: credit institutions without any effective recovery plan, or with an approved recovery plan but unable to do it; unable to change legal status (merging, transferring the whole shares, or capital to new investors), negative chartered capital; or other credit institution or investor suggest to receive credit institution under compulsory purchase.
Compulsory purchase is: designate other credit institution or investor to receive the credit institution in subject. The agency with responsibility to approve the take-over plan is State Bank of Vietnam (SBV), which then submit the plan to the government for approval.
In reality, the fact that SBV has acquired 03 banks with 0 VND is compulsory purchase. Despite the law on credit institution regulates SBV has the authorization to directly buy shares, but the acquiring 03 banks with 0 VND of SBV still caused controversy. Therefore, this time the draft law is revised to be more clearly and in detailed.
Moreover, recently, SBV has requested commercial banks such as VietinBank and Vietcombank to support weak credit institutions but without specific instruction, in turn causing concern of these banks over the burden of responsibility and bad debt.
As a result, this time, the revised draft law has included the rights of credit institution to receive credit institutions under compulsory purchase. Accordingly, they will own 100% registered capital of credit institution under compulsory purchase but will not be required to carry out the consolidated financial statement of credit institution under compulsory purchase. They are also allowed to exclude the credit institution in subject when calculating the capital adequacy ratio.
Besides, the capital contributed will not be partially taken out to establish contingency for investment and exempted from limits on capital contribution, purchasing shares of credit institution in subject. Credit institutions receive the counterpart under compulsory purchase has the right to sell, issue stock of designated credit institution for appropriate foreign investors.
Opening ways for bank’s bankruptcy
The revised Draft Law on Amending and supplementing a number of articles of the law on credit institutions also includes many regulations on special control.
At present, due to the lack of legal frameworks, SBV does not have legal base to deal with credit institutions under special control in case shareholders are against it or do not cooperate, deliberately delay time to deal with financial responsibilities.
Therefore, the revised draft law has included regulation on which circumstances credit institutions will be put on special control, specifying authorization to deal with these credit institutions in subject. Moreover, the revised draft law also specifies the authorization of the government, the prime minister and SBV in deal with and restructure credit institution under special control. As such, the government will decide on the plan and approve the bankruptcy method, as well as the compulsory purchase as proposed by the SBV. The prime minister will decide on the recovery plan and legal procedures with commercial banks and credit institution under special control.
SBV will have the authorization to approve the recovery plan and legal procedures with micro- credit institution.
According to Director General of Legal Department of the State Bank of Vietnam (SBV) Doan Thai Son, one of the important contents in the revised Draft Law on Amending and supplementing a number of articles of the law on credit institutions is the compulsory purchase of credit institutions, which is placed under special control.
As such, conditions for compulsory purchase are: credit institutions without any effective recovery plan, or with an approved recovery plan but unable to do it; unable to change legal status (merging, transferring the whole shares, or capital to new investors), negative chartered capital; or other credit institution or investor suggest to receive credit institution under compulsory purchase.
Compulsory purchase is: designate other credit institution or investor to receive the credit institution in subject. The agency with responsibility to approve the take-over plan is State Bank of Vietnam (SBV), which then submit the plan to the government for approval.
In reality, the fact that SBV has acquired 03 banks with 0 VND is compulsory purchase. Despite the law on credit institution regulates SBV has the authorization to directly buy shares, but the acquiring 03 banks with 0 VND of SBV still caused controversy. Therefore, this time the draft law is revised to be more clearly and in detailed.
Moreover, recently, SBV has requested commercial banks such as VietinBank and Vietcombank to support weak credit institutions but without specific instruction, in turn causing concern of these banks over the burden of responsibility and bad debt.
As a result, this time, the revised draft law has included the rights of credit institution to receive credit institutions under compulsory purchase. Accordingly, they will own 100% registered capital of credit institution under compulsory purchase but will not be required to carry out the consolidated financial statement of credit institution under compulsory purchase. They are also allowed to exclude the credit institution in subject when calculating the capital adequacy ratio.
Besides, the capital contributed will not be partially taken out to establish contingency for investment and exempted from limits on capital contribution, purchasing shares of credit institution in subject. Credit institutions receive the counterpart under compulsory purchase has the right to sell, issue stock of designated credit institution for appropriate foreign investors.
Opening ways for bank’s bankruptcy
The revised Draft Law on Amending and supplementing a number of articles of the law on credit institutions also includes many regulations on special control.
At present, due to the lack of legal frameworks, SBV does not have legal base to deal with credit institutions under special control in case shareholders are against it or do not cooperate, deliberately delay time to deal with financial responsibilities.
Therefore, the revised draft law has included regulation on which circumstances credit institutions will be put on special control, specifying authorization to deal with these credit institutions in subject. Moreover, the revised draft law also specifies the authorization of the government, the prime minister and SBV in deal with and restructure credit institution under special control. As such, the government will decide on the plan and approve the bankruptcy method, as well as the compulsory purchase as proposed by the SBV. The prime minister will decide on the recovery plan and legal procedures with commercial banks and credit institution under special control.
SBV will have the authorization to approve the recovery plan and legal procedures with micro- credit institution.
