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Regulations on reorganization of credit institutions drafted
The State Bank of Vietnam has recently unveiled a draft circular proposing five principles in merger and consolidation of credit institutions.
Lawful rights and interests of clients and creditors must be guaranteed during the merger and consolidation process__Photo: VNA

The State Bank of Vietnam (SBV) has recently unveiled a draft circular proposing five principles in merger and consolidation of credit institutions.

Firstly, the merger and consolidation of credit institutions must comply with stakeholders’ agreements and ensure the normal operation of the credit institutions.

Secondly, lawful rights and interests of clients and creditors must be guaranteed during the merger and consolidation process, which must also comply with law.

Thirdly, information must be kept confidential to ensure the stable operation of the credit institutions engaged in the merger and consolidation before the merger and consolidation projects are approved. The merger and consolidation must also adhere to the principles of prudence, honesty, accuracy and comprehensive understanding in term of dossiers and documents.

Fourthly, the dissipation of assets in any form must be strictly prohibited. The transfer and sale of assets during the merger and consolidation process must ensure publicity, transparency, and compliance with law and stakeholders’ agreements. The safety of assets must be guaranteed and the rights of the credit institutions and related organizations and individuals should not be compromised.

Fifthly, the establishment and operation licenses of to-be-consolidated credit institutions would be invalidated when the consolidating credit institutions commence their operations. For to-be-merged credit institutions, their establishment and operation licenses would be invalidated when the SBV modifies or supplements the establishment and operation licenses of the merging credit institutions.

Also required by the draft circular, credit institutions engaged in merger and consolidation must not fall into cases of prohibited economic concentration, unless they are not prohibited from practicing economic concentration in accordance with the competition law. Credit institutions must also have merger and consolidation projects approved by competent authorities. After the merger or consolidation, merged or consolidated credit institutions must comply with the regulations on prudential limits and ratios, capital contribution ratios, share ownership and banking operation conditions.- (VLLF)

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