Trang Chủ
On 20thNovember 2017, the 14th session of the National Assembly passed the Law No.17/2017/QH14 on the amendments and supplements to some articles of the Law on Credit Institutions. On 14thDecember 2017, the President signed the Order No.14/2017/L-CTN announcing the Law on amendments and supplements to some articles of the Law on Credit Institutions (2017 Law), which will be effective on 15thJanuary 2018. 2017 Law is an important legal document to complete the legal framework for the resolution, recovery of problem credit institutions (CIs), providing appropriate measures based on market mechanism and prudential principles; in order to protect legitimate rights of depositors, ensure the stability and safety of the financial system, early detect and effectively prevent the emergence of new weak CIs. 2017 Law also provides regulations to thoroughly solve the cross-holding, virtual capital in the operation of CIs. These changes are as follows:
To complete the legal framework for the resolution and recovery of problem CIs, the 2017 Law amends and supplements some articles, including:
Firstly, a supplement of Article 130a regulates the early intervention to control the weak CI that has not been placed under special control yet. formation, the State Bank of Vietnam (SBV) will apply the early intervention mechanism, including the applicable cases, the corrective actions and the early intervention procedure from detectionto termination of early intervention for CIs, foreign bank's branches having problems in order to restrict potentialweak CIs and foreign banks' branches.
Secondly, the amendments and supplementstoSection 1 Chapter VIII on special control aims to address the concerns in the practical control process of the SBV over CIs in recent time, such as: adding cases thatthe SBV considers CIsunder special control; amending and supplementingsomeprovisions on special control authorization to clearly define the authority of the Government, the Prime Minister and the SBV in deciding the restructuring plan of CIs placed under special control; Amending and supplementing regulations on termination of special control, powers and duties of the SBV, the Special control board, the executive and supervisory bodies of the CI under special control; amending and supplementingprovisions on special loans to specify the cases, the priority of repayment of special loans; supplementingregulations on management, administration and operation of CIs placed under special control.
Thirdly, Section 1a, 1b, 1c, 1d, 1d and 1eare added after Section 1 of Chapter VIII regulatorycontents related to the situation assessment, development and implementation of restructuring plans for CIs under special control. The specific restructuring plan for each CI placed under special control will be selected in accordance with the actual situation of each CI and to comply with the coreprinciple of keeping the stability and safety of CIs system, ensure social order and safety, consolidate depositors' confidence in the banking system, protectlegitimate rights and interests of depositors.
To contribute to the transparency of capital sources andhandle crossholding, 2017 Law amended and supplemented some contents as follow:
Firstly, supplements ofCIs'responsibilities (Clause 4, Article 39) to inform the SBV ofinformation related to the benefits of the managers,operators of the CI within 07 working days from the date of receipt of the information.
Secondly, amendments and supplementsof regulations stipulating shareholders’ responsibility for the legitimacy of capital contribution, buying and transferring of shares at CIs; not allow the use of credit extended by the CI or foreign bank's branch to buy or receive shares from the CI; not allowingcapital contributionor shares purchases in the name of other individuals or legal entities in any forms.
Thirdly, amendments and supplements to the restrictionthata major shareholder orrelated person at a CIis not allowed to ownat least 5% of charter capital at another CI.
Fourthly, amendments and provisionsof provisions on non-granting of credit, restrictions on credit extension and credit limit in Articles 126, 127 and 128 of the Law on Credit Institutions, specifically (i ) Purchases of and investments in corporate bonds are considered to be credit extension activities in order to comply with prohibitions on credit extension, credit restriction in Articles 126, 127 of the Law on Credit institutions 2010; (ii) the purchases, investments in corporate bonds issued by the clients and their related persons are considered to be credit extension activities in order to comply with the provisions on credit limits in clause 1 and 2 of Article 128 of the Law on Credit Institutions 2010 ; (iii) CIs are not allowed to extend credit for the purpose of contributing capital or buying shares of another CI.
Toenhance the management capacity of CIs' managers and executives, the 2017 Law amended and supplemented the following provisions:
Firstly, to address the considerations of the provisions on related persons of the 2010 Law on CIs(primarily determine related persons by quantitative factors), the 2017 Law expanded the scope of related persons based on the risk level of the relationship between these people and the activities of CIs. structure, the 2017 Law stipulates that the related persons include legal entities and individuals that pose risk to the operations of CIs and foreign banks' branches, defined according to internal regulations of CIs or foreign banks' branch or specified in writing on a case-by -case basis by the SBV through inspection or supervision.
Secondly, to supplementacase banned from holding posts, thereby, the person responsible for the violations against regulations on some activities in monetary and banking sector that results in a fine in the maximum bracket according to inspection conclusion shall be banned from holding posts. This regulation aims to prevent law violations and improve the management capacity of CIs.
Thirdly, to amend and supplement the cases banned from concurrently holding posts:the Chairman of the Board of directors, the Board of members, the General Director (Director) of the CI must not concurrently hold the position of the Chairman of the Board of directors, Chairman of the Board of members, member of the Board of members, company's president, General Director, Deputy General Director and equivalent positions of another enterprise in order to limit the abuse of concurrent rights administering and managing at CIs and other enterprises to carry out investment activities and credit extensionnot based on market basis, posing great risks to the operation of CIs.
Fourthly, to amend and supplement regulations on criteria and conditions for members of the Board of Directors / Board of Members, General Director (Director) of CIs; To amend and supplement the provisions on approval of the lists of nominees for the posts of managers, executives, controllers of people's credit funds and cooperative banks. This regulation aims to enhance the management capacity of managers, executives of CIs.
Before and after the 2017 Law was passed by the National Assembly, the SBV took the initiative in drafting plans to ensure the implementation of this Law when it goes into effect.
On 10thJanuary 2018, at the Conference on the implementation of banking tasks in 2018, the SBV introduced basic contents of the Law No. 17/2017/QH14 as well as guidance on the implementation of the Law in the system of SBV branches in provinces and cities and the system of CIs and foreign banks’branches in the coming time.
According to the SBV, its functional departments have already developed and advised the Governor of the SBV to sign three (03) circulars to guide the implementation of the Law on the amendment and supplement of Law on CIs, namely: Circular No. 24/2017/TT-NHNN dated 29th December 2017 of the SBV regulating the order and procedures for revocation of licenses and liquidation of assets of CIs and branches of foreign banks; The order and procedures for revocation of licenses of representative offices of foreign financial institutions and other foreign organizations engaged in banking activities; Circular No. 25/2017/TT-NHNN dated 29th December 2017 of the SBV regulating the dossiers, orders and procedures for approving changes of non-bank credit institutions; Circular No. 19/2017/TT-NHNN dated 28th December 2017 amending and supplementing a number of articles of Circular No. 36/2014/TT-NHNN dated 20th November 2014 of the SBV stipulating safety limits and ratios for transactions performed byCIs, branches of foreign banks.
In addition, for the guidance of the Law No.17/ 2017/QH14, in 2018, the SBV shall develop, promulgate or submit documents guiding the Law No. 17/2017/QH14. Besides, the SBV is also actively conducting areview to promptly amend and repeal legal documents that are inconsistent with the provisions of the Law No.17/2017/QH14 to ensure the synchronization. In the short term, in 2018, some guiding documents of the Law (circulars of the SBV) will be completed by functional departments and submitted to the Governor for approval.
