Accredit institution should not invest more than 11% of its registered capital in any single enterprise, ruled by the State Bank of Vietnam on December 5 in Decision No. 34/2008/QD-NHNN, revising a number of articles of the Regulation on operation safety ratios of credit institutions, issued together with Decision No. 457/2005/QD-NHNN.
The Decision also limits the total capital contribution of a single credit institution and its affiliates in a single enterprise, investment fund, investment project or another credit institution to no more than 11% of the charter capital of the latter.
Total capital contribution by a credit institution in all related enterprises, investment funds, investment projects or credit institutions must not exceed 40% of the credit institution’s charter capital and reserve funds. Any excess of this 40% limit is subject to prior approval of the State Bank and the requirement that credit institutions should formulate policies on maintenance of non-performing loans below 3% of total outstanding loans and have profitably operated for the last three years.
Financial institutions are also prohibited from extending credit without mortgage or collateral or from providing concessional loans to enterprises in which the institutions hold a controlling stake.
Total loans provided to and capital underwritten by a credit institution for an enterprise in which the credit institution holds a controlling stake must not exceed 20% of the credit institution’s equity. Unsecured loans (without mortgage or collateral) and guarantees provided by a credit institution to an affiliated financial leasing company are further restricted and must not exceed 5% of the credit institution’s equity.-