The State Bank of Vietnam (SBV) has recently issued Circular
No07/2013/TT-NHNN on special control over credit institutions in a move
to better manage the banking system.
Under the new regulation which
will take effect on April 27, the State Bank governor will consider
imposing special control over a credit institution facing insolvency or
bankruptcy or those that seriously violate the law.
If placed under
special control, owners of credit institution will be required to
increase the institution’s charter capital to higher than its registered
capital and ensure central bank regulations are adhered to.
If
they are unable to increase charter capital to the required level, the
credit institution will be forced to submit to a central bank
restructuring plan.
The central bank also has the authority to force them carry out MAs in this instance.
In the case the institution fails to complete any of the above, the
central bank can look for capital contributions from other credit
institutions.
The SBV will also publicise the names of credit institutions under special control.
Chief inspector of the SBV’s Banking Supervisory Agency Nguyen Huu
Nghia has recently said that the SBV aims to cut the number of small and
weak credit institutions in a move to form larger and more competitive
commercial banks.
The central bank this year will continue to
implement solutions to make local banks more financially healthy,
including tackling non-performing loans and raising charter capital;
restructuring activities and management; handling weak credit
institutions; restructuring financial and financial leasing companies;
and creating conditions for voluntary mergers.
By 2014, banks
should basically meet their real charter capital level and standards for
prudent banking operations in accordance with the law, and undertake
voluntary mergers, consolidations and acquisitions.
The
consolidating, reorganising and restructuring of credit institutions
will be conducted at the lowest cost possible to avoid further failures.
To make the restructuring of the banking system more effective,
the Prime Minister also signed a decision on March 13 to set up an
inter-sectoral steering committee for the restructuring of the credit
institution system during the 2011-15 period.
The committee,
consisting of 14 members, will be chaired by Deputy PM Vu Van Ninh with
the Governor of the central bank as standing vice chairman.-VNA