Vietnam Law & Legal Forum Magazine is your gateway to the law of Vietnam

Official Gazette

Wednesday, October 18, 2017

Excessive ownership of capital in banks to be banned

Updated: 10:48’ - 22/08/2014

The State Bank of Vietnam has recently proposed a draft circular to tackle the problem of excessive ownership holdings in domestic banks, aiming to prevent any possible manipulation of banking operations for self-seeking purposes.

Accordingly, all banks, except those with restructuring plans approved by the Prime Minister and the central bank, would be requested to put an end to the situation of excessive ownership no later than March 31 next year.

Beyond that deadline, shareholders with excessive holding rates at a bank and their affiliated or allied shareholders would be forced to transfer the excessive stakes to the State Bank or a credit institution appointed by the central bank and might loose voting rights and the ability to take a seat on the bank’s supervision board.

In addition, credit institutions would be required to refrain from granting new credit to shareholders that hold stakes in excess of the acceptable limits either individually or via family ties and from conducting transactions with these partners.

Under the 2010 Law on Credit Institutions, excessive ownership is defined as cases in which an individual shareholder holds more than five percent, an individual and his affiliated persons, often family members, together own more than 20 percent, or an institutional shareholder holds more than 15 percent of the total shares of a credit institution.

However, three years since the law came into force, major shareholders in many banks still ignore the regulation but have faced no penalties. Five banks were found to have individual shareholders with more than five percent holdings, another five have institutional shareholders owning shares in excess of 15 percent, while eight have shareholders and their affiliated persons controlling combined stakes exceeding the 20-percent cap.-

 


VNL_KH1 

Send Us Your Comments:

See also:

Video

Vietnam Law & Legal Forum