Vietnam: special control over underperforming credit institutions

Law No. 47/2010/QH12 on credit institutions has been amended pursuant to Law No. 17/2017/QH14 (“Amended Law”) passed by the National Assembly. The Amended Law came into effect on 15 January 2018.

The Amended Law provides grounds for special control by the State Bank of Vietnam (“SBV”) against underperforming credit institutions which:

• have failed to maintain liquidity requirements;
• have accumulated losses exceeding 50% of the charter capital and reserve funds as recorded in the latest audited financial statements;
• have failed to maintain the prudential limits; or
• are ranked “below average” by the SBV.

An independent auditing firm will be appointed to evaluate the financial and operation status of the underperforming credit institutions. Subject to the audited reports, the underperforming credit institution may be subject to one of the following restructuring plans:

• recovery;
• merger, consolidation, transfer of the entire capital to an acquirer;
• dissolution;
• mandatory transfer of the entire capital to an acquirer; or
• bankruptcy.

In the case of merger, consolidation, dissolution or bankruptcy, the special control by the SBV will be terminated.

The credit institution subject to the SBV’s special control may be granted special loans from the SBV or other organizations. The special loans shall take priority over other debts, including other secured debts. The organization and operations of the credit institution shall be subject to decisions of the SBV during the period of special control.