The State Bank of Vietnam (SBV) has proposed new regulations to place a special control over credit institutions in a draft circular to supersede Decision No. 215/1998/QD-NHNN of June 23, 1998.
Compared to Decision No. 215, the draft circular has a broader scope of application, governing credit institutions of all economic sectors, ranging from state-owned and joint-stock creditors to joint-venture and wholly foreign-invested ones, instead of just joint-stock credit institutions as at present.
Under the 24-article draft paper, a credit institution would be placed under a special control in any of the following three cases.
First, the creditor faces a potential risk of illiquidity, i.e., thrice within a month, it fails to ensure the balance between total assets and total liabilities accrued in seven days to come.
Second, it possibly falls into insolvency, having bad debts accounting for 10% or more of its total loan balance or equal to 100% or more of its total equity capital, unless reserve appropriation has been made at the rate of 100% of bad debts; having the accumulated losses exceeding 50% of the real value of its charter capital and funds; or failing to maintain the law-prescribed minimum capital safety ratio in one year or having this ratio reduced to less than 4% within six months.
Third, it commits serious violations of banking regulations.
The maximum duration of special control placed on a credit institution is two years after the effective date of the decision on the imposition of special control. However, this duration may be extended if, upon expiration of the special control duration, the reason for special control is not yet completely remedied.
According to the draft, credit institutions under special control would be banned from sharing dividends, applying for mortgage and transferring properties or shares unless they obtain permission from the SBV. These creditors would also be prohibited from reducing or refusing to perform obligations towards their clients.
However, creditors under special control may receive special loans provided by the SBV or other creditors to enable them to repay their clients in case of necessity.
Information on the imposition of a special control on a creditor as well as that on its actual situation would not be disclosed, except for special cases approved by the SBV Governor.-