Under-performing banks may have to file for bankruptcy if they cannot
meet new conditions set out by the central bank under a recently issued
circular that is effective on April 27.
Circular
No07/2013/TT-NHNN requires that certain banks restructure through merger
or acquisition with other credit institutions.
Under the
new policy, the central bank could put a weak bank’s operations under
its direct control. This would depend on the bank’s financial situation,
risk level and legal violations.
Under the new rule, the
central bank will also require the owners of such credit institutions to
increase legal capital while the central bank will either create a
restructuring plan for the bank or require the bank to merge with or be
bought by other credit institutions.
Under this plan,
other credit institutions could buy shares of banks or contribute
capital under the central bank’s control so that safe capital ratios
would be ensured.
The central bank said it would interfere
in a bank’s operations if the bank’s accumulated losses exceed its real
value of legal capital.
This information will also be published on the credit institution’s websites, in the media or at a shareholders’ convention.
The SBV governor will decide the length of time that a credit institution is under the central bank’s special control.
The time can be extended if the credit institution demonstrates that it
can return to normal status, or if it needs more time to prepare for
merger or acquisition.
If the bank ultimately cannot meet any of these conditions, then it will have to file for bankruptcy.
Along with Circular 07, the prime minister has formed a steering
committee for the “Restructuring the credit institution system from
2011-15” project, with the participation of various ministries, sectors
and management authorities of Hanoi and HCM City .
This is considered a preparatory step to the bank’s measures to reform and resolve bad debts.-VNA