A draft circular guiding the merger and consolidation of credit institutions has been recently released by its drafters, the State Bank of Vietnam (SBV), for public opinion.
The 21-article draft paper targets all credit institutions founded and operating in Vietnam, including state-run, joint-stock, cooperative, joint-venture and 100% foreign-owned credit institutions.
The draft paper provides for two cases of merger or consolidation, i.e. voluntary and designated merger or consolidation.
In case of voluntary merger or consolidation, credit institutions may decide to enter into merger or consolidation agreements at their own will in order to achieve their development objectives.
When a credit institution fails to ensure the law-prescribed legal capital level, shows poor performance or is placed under special control but unable to carry out voluntary merger or consolidation, posing a risk of unsafety to the entire system, the State Bank Governor would require it to merge or consolidate with another credit institution. In this case, the State Bank Governor would submit a merger or consolidation plan to the Prime Minister for decision on a case-by-case basis.
Under the draft paper, all cases of merger or consolidation must go through a two-step approval.
In order to obtain the State Bank Governor’s in-principle approval, concerned credit institutions must seek permissions from their managing agencies, provincial-level People’s Committees of localities where they are headquartered and the competition management agency, in case the merger or consolidation would lead to an increase in their total market share up to 30-50 per cent.
These permits would be included in an application dossier to be sent to the SBV’s branch in the locality where the to-be-merged credit institution, in case of merger, or the credit institution representing to-be-consolidated credit institutions, in case of consolidation, is headquartered for approval and subsequent submission to the SBV for consideration and
decision.
After obtaining the SBV’s in-principle approval, concerned credit institutions would complete all necessary procedures for merger or consolidation and adjust the merger or consolidation plan, when necessary, and compile a dossier of application for official approval and submit it to the SBV’s branch which has received their dossier of request for in-principle approval for the latter to propose the SBV to decide on an official approval.-