HÀ NỘI — The Governor of State Bank of Việt Nam on Tuesday signed regulations on boosting restructuring of the system and settlement of non-performing loans (NPLs), and making the banking system safe.

Under the Directive 02/CT-NHNN, Governor Lê Minh Hưng has asked relevant agencies to continuously encourage and create favourable conditions for credit institutions to ensure merger and acquisitions (M&A), besides calling for qualified investors to take part in the restructuring to rescue ailing credit institutions.

The directive also mentions a tight control on licencing the establishment of people’s credit funds and expanding the network of commercial banks. The construction and implementation of new licencing criteria for some type of credit institutions towards closer conformity with the actual conditions of domestic and international commitments will be also applied this year.

The directive also requires a focus on implementing the restructuring of commercial banks, which were acquired compulsorily by the central bank, according to approved plans.

The directive states that credit institutions, which either do not meet safety standards, have no feasible restructuring plans or could not implement the approved restructuring plans will be obliged to apply the State’s intervention measures such as M&As or others in line with the market mechanism on the precautionary principle to ensure the interests of depositors and maintain the stability and safety of the banking system.

According to the directive, the restructuring of State-owned commercial banks is aimed at maintaining their role as the main force to ensure the stability of the nation’s monetary market and the safety of the banking system. Measures to enhance the financial status of the State-owned banks will be also deployed after being ratified by Prime Minister Nguyễn Xuân Phúc.

The transparency in the operations of credit institutions will also focus on the implementation of drastic measures to handle violations related to large shareholders’ ownership, cross-ownership and cross-investments in joint stock commercial banks.

Under the directive, the governor also requires credit institutions to take measures to settle the existing NPLs besides preventing and minimising newly arising bad debts. The institutions must closely control the credit growth and lending quality with adequate and accurate appraisal on lending to risky industries such as real estate, BOT and BT projects.

The management agencies will take strict action against cases that violate legal regulations on debt classification and provision for risky loans. Management agencies will not issue licences to such cases for opening new branches, transaction offices, automatic teller machines or representative offices, and will limit the payment of dividends and profits for its shareholders.

Measures to trade bad debts according to market mechanisms will be also taken to make trading transparent and allowing foreign investors to take part.

Under the directive, the governor also requires relevant agencies to submit proposals to the Government with an aim to streamline the legal framework to support the restructuring of credit institutions. — VNS