HA NOI (VNS)— The State Bank of Viet Nam (SBV) on Thursday 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 M&As 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 aimed 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, reorganizing 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 Wednesday 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.
The committee will help the Prime Minister direct the implementation of measures to restructure the local banking industry in accordance with the restructuring scheme.
The central bank is the standing body for the committee. — VNS