Trang Chủ
The government decides to cover the excess-over-limit deposits for depositors
In the process of finalizing and receiving opinions on the draft law amending and supplementing a number of articles of the Law on Credit Institutions (CIs), the National Assembly deputies, the experts and the public shows interest to the extent to which depositors will be protected once the CIs go bankrupt. Pursuant to the newly passed Law, the Government has the power to "decide to apply special measures to ensure the safety of the CIs' system, the order and safety of society when dealing with CIs that are put under special control and report to the National Assembly at its nearest session" (Point c, Clause 1, Article 146). Hence, the law regulates flexibly and empowers the Government to decide the coverage for the excessive deposits, the coverage limit, the source of funds to pay individual depositors, subject to the state resources in each period and impact of each bankruptcy case.
On October 26th, the State Bank of Vietnam (SBV) Governor Le Minh Hung said that the purpose of this regulation is to prevent the failure and stability of the CIs system, ensure the interests of depositors, avoid negative effects on the national currency security and social order and safety. The funds for reimbursementwill not be extracted from the state budget, in accordance with the resolution of the National Assembly, and may be obtained from other state resources.
5 restructuring options: giving CIs a chance to recover
According to Governor Le Minh Hung, bankruptcy is the last resort to deal with CIs that have been put under special control. This is reflected in the newly passed Law, with regulations designed to restructure CIs and bankruptcy is only once eligible no other feasible solution exists. The Law amending and supplementing a number of articles of the Law on CIs prescribes five options for restructuring, including: recovery; merger, acquisition and transfer of all shares; dissolution; compulsory transfer; and bankruptcy.
Remarkably, the Law stipulates the application of early intervention in CIs and foreign bank branches for early warning and overcoming operational problems, helping CIsto become more healthy to avoid being put under special control. Upon written request of the SBV, the CIs must implement prescribed measures, including one or a number of measures such as: narrowing the content and scope of activities, limiting big transactions; increasing charter capital and granted capital; holding more highly liquid assets; selling, transferring assets and implementing other measures to meet the requirements of ensuring safety in banking activities; limiting payment of dividends and profits; reducing operations and management costs; limiting the payment of remuneration, salaries and bonuses to managers and executives; enhancing risk management; reorganizing and cutting staff; and other measures under the law.
The CIs are considered to be put under special control in one of the following cases: already in or at risk of illiquidityor already in or at risk of insolvency as regulated by the SBV; accumulated losses of CIs are more than 50% of the chartered capital value and reserve funds stated in the most recently audited financial statements; being classified as weak in two consecutive years as regulated by the SBV; being unable to maintain the capital adequacy ratio as prescribed in Point b, Clause 1, Article 130 of this Law for 12 consecutive months or the capital adequacy ratio is lower than 4% in 6 consecutive months.
Regarding the recovery, the Law stipulates a number of supporting measures such as: the CIs being entitled to borrow special loans from the SBV and the DIV; to receive special deposits and loans with preferential interest rates ... The DIV would participate in assessing the deliberations of the plans for recovering people's credit funds (PCFs) or microfinancial institutions.
A new point is that the mandatory transfer is only applied to commercial banks but not to PCFs. According to the Standing Committee of the National Assembly, the cause is that commercial bank is the type of CIs receiving individual deposits, operating in the largest scale, and having the greatest impact on the safety of the CIs system compared to other types of CIs. For PCFs, the capital and assets are not too big; the scope of influence is small, usually in a certain area; Therefore other suitable resolution measures would be applied to restructure PCFs under special control.
Stipulating the bankruptcy of CIs
When CIs cannot be recovered, the SBV shall submit the cases to the Government for approving the plan of bankruptcy forCIs under special control pursuant to the provisions of this Law.
Within 30 days after the Government decided on the bankruptcy plan for the CIs under special control, the Special Control Board shall have to coordinate with the specially-controlled CIs and the DIV to build up the bankruptcy plan and submit to the SBV for consideration.
The bankruptcy plan must include at least the following contents: the assessment of the actual situation and the resolution of specially-controlled CI that is decided to gobankrupt; the assessment of the impact of the bankruptcy plan of the specially controlled CIs on the safety of the CIssystem; the compensationfor individual depositors; roadmap for the implementation and responsibility for the bankruptcy plan.
In case of PCFs bankruptcy, the Special Control Board must coordinate with the specially-controlled PCFs, the DIV and the Co-operative Bank of Vietnam to implement the plan.
Within 30 days after receiving the bankruptcy plan, the SBV is responsible for assessing the considerations of the plan and submitting to the Government for approval of the bankruptcy plan for the specially-controlled PCFs .
The law amending and supplementing a number of articles of the Law on CIs was passed by the National Assembly and created a legal basis to strengthen and refine the CIs system in the coming time. structure, the DIV is assigned with some additional functions and mandates to be more involved in the restructuring of the CIs withthe DIV's affordable resources, size, operation, to become an useful arm for the Government and the SBV and to contribute to the stability of the CIs system and to ensure the safe and healthy development of the banking system.
