Circular No. 08/2010/TT-NHNN dated March 22, 2010 of the State Bank of Vietnam providing for special control over credit institutions

THE STATE BANK OF VIETNAM

Circular No. 08/2010/TT-NHNN of March 22, 2010, stipulating the special control of credit institutions

Pursuant to the 1997 Law on the State Bank of Vietnam and the 2003 Law Amending and Supplementing a Number of Articles of the Law on the State Bank of Vietnam;

Pursuant to the 1997 Law on Credit Institutions and the 2004 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 96/2008/ND-CP of August 26, 2008, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

The State Bank of Vietnam stipulates the special control of credit institutions as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular stipulates the special control of credit institutions established and operating under the Law on Credit Institutions, including:

- State-run credit institutions;

- Joint-stock credit institutions;

- Joint-venture credit institutions;

- Wholly foreign-owned credit institutions.

Article 2. Subjects of application

1. Credit institutions defined in Article 1 of this Circular.

2. Organizations and individuals involved in the special control of credit institutions.

Article 3. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Special control means that a credit institution is placed under direct control by the State Bank of Vietnam (below referred to as the State Bank) for it is in danger of becoming broke or insolvent.

2. Special Control Board means a body composed of members and set up under a decision of the State Bank Governor (below referred to as the Governor) for directly controlling a credit institution placed under special control.

3. Special loan means a loan provided by the State Bank or another credit institution or the Vietnam Deposit Insurance to a credit institution placed under special control in an urgent case for assuring the credit institution’s capacity to pay deposits to clients. Special loans shall be repaid before all other debts of the credit institution.

4. Special control period means a period from the time of issuance of a decision to place a credit institution under the state of special control to the time of issuance of a decision to terminate the special control of such credit institution.

5. Credit institution’s representative means a staff member of a credit institution placed under special control or an officer of the State Bank who is designated by the Governor to act on behalf of the credit institution to govern, control and administer the credit institution in case of vacancy of the titles of Board of Directors member, Control Board member and director general (director).

6. Organization and operation consolidation plan means a plan to consolidate the organization and operation of a credit institution placed under special control.

Article 4. Competence of the Governor

1. To decide on special control, special control period, extension of the special control period or termination of special control of a credit institution.

2. To decide on the formation of the Special Control Board and appoint officers to join this Board under this Circular.

3. To designate another credit institution to join in the special control of a credit institution and concurrently an officer of that credit institution to join the Special Control Board.

4. To designate a representative of a credit institution to join in governing, controlling and administering such credit institution in the case specified in Clause 9, Article 3 of this Circular.

5. To decide on the State Bank’s provision of a special loan to a credit institution under Clause 7, Article 3 of this Circular.

Article 5. Dossier-making principles

1. Dossiers shall be made in Vietnamese. Copies in Vietnamese and their English translations shall be certified by a competent agency under law.

2. A credit institution’s written requests concerning relevant matters specified in this Circular shall be signed by the Chairman of the Board of Directors (or a member of the Board of Directors or the Control Board or the director general if the Chairman title is vacant) or the credit institution’s representative defined in Clause 9, Article 3 of this Circular. The signer shall take responsibility for the accuracy and truthfulness of dossiers according to his/her competence.

3. Credit institutions’ dossiers shall be sent to the State Bank, the State Bank’s provincial-level branches in localities where credit institutions placed under special control are headquartered (below referred to as State Bank branches) directly or by post, fax or email (confirmed by phone calls). Original dossiers shall be subsequently submitted to the State Bank for examination and preservation.

Chapter II

SPECIFIC PROVISIONS

Section 1. SPECIAL CONTROL

Article 6. Conditions for placing a credit institution under special control

A credit institution may be placed under special control when it falls into any of the following cases:

1. It is in danger of becoming insolvent, manifested by three (3) consecutive failures to assure that the minimum ratio of total “credit” assets payable within 7 subsequent days to total “debit” assets payable within 7 subsequent days for each kind of currency or gold, is 1.

2. Its irrecoverable debts may render it insolvent, manifested by non-performing debts accounting for 10% or more of total outstanding loans or equal 100% or more of its own capital for 3 consecutive months.

3. Its accumulated losses are equal to over 50% of the total of its actual charter capital and funds.

Article 7. Special supervision of credit institutions

1. In the course of managing, inspecting, examining or supervising the operation or through examining reports of a credit institution, if seeing that such credit institution encounters a state of special control or seriously violates banking regulations or in other cases, resulting in the credit institution’s unsafe or unstable operation, the Governor may apply special supervision measures to such credit institution.

2. The State Bank may apply the following special supervision measures:

a/ Appointing its officer to personally supervise day-to-day operations of the credit institution.

b/ Directing the credit institution to take measures in accordance with current law to redress its poor, unsafe or unstable operation.

c/ Requesting the credit institution to regularly or extraordinarily report on the implementation of the State Bank’s instructions.

3. The Governor shall decide on the time of terminating the application of special supervision measures.

Article 8. Special control decision

1. The Governor shall consider and decide to place a credit institution under special control when it shows any of the signs specified in Article 6 of this Circular.

2. A decision to place a credit institution under special control contains:

a/ Name of the credit institution;

b/ Reason for special control;

c/ Full names and specific tasks of members of the Special Control Board;

d/ Special control period.

3. A special control decision shall be notified to the credit institution placed under special control, the State Bank branch and the Vietnam Deposit Insurance and in other specific cases as decided by the Governor.

4. A decision to place a credit institution under special control may not be publicly notified, except the case specified in Clause 3 of this Article.

Article 9. Organization and operation consolidation plan

An organization and operation consolidation plan must contain at least the following:

1. Name, address and website of the credit institution;

2. Names, addresses and telephone numbers of members of the Board of Directors, members of the Control Board, general director (director) or representative of the credit institution;

3. Summary of the organization and operation situation of the credit institution;

4. Reason for placing the credit institution under special control;

5. Measures to help the credit institution escape from the state of special control and a plan to implement these measures.

Article 10. Responsibilities and powers of a credit institution placed under special control

1. When falling into any of the cases specified in Article 6 of this Circular, to report in writing to the State Bank through the Banking Inspection and Supervision Agency (below referred to as the Inspection and Supervision Agency), indicating its actual financial conditions, causes, and remedies already taken or planned to be taken.

2. To establish an accurate, adequate and updated information channel ensuring smooth operation of the Special Control Board during the special control period.

3. The credit institution’s Board of Directors, Control Board and director general (director) or representative defined in Clause 9, Article 3 of this Circular shall:

a/ Work out an organization and operation consolidation plan and submit it to the Special Control Board for approval; and organize the implementation of this plan after it is approved by the Governor.

b/ Continue to govern, control and administer the operation and assure the safety of assets of the credit institution in accordance with law and the State Bank’s regulations, unless they are temporarily deprived of the right to govern, administer and control the credit institution.

c/ Regularly work at the credit institution for organizing the implementation of the organization and operation consolidation plan.

d/ Take responsibility for matters related to the organization and operation of the credit institution before, during and after the special control period.

e/ Strictly observe the Special Control Board’s requests related to the organization, governance, control and administration of the credit institution.

f/ Report on the situation and results of implementation of special control measures at the request of the Special Control Board.

g/ Save expenses for limiting financial losses.

h/ Arrange a working place and facilities for the Special Control Board.

4. During the special control period, pending the State Bank’s approval, a credit institution is prohibited from:

a/ Allowing the Chairman and members of the Board of Directors, the head and members of the Control Board or director general (director) to transfer their shares (for joint-stock credit institutions).

b/ Dividing dividends (if any).

c/ Hiding, dispersing, pledging, mortgaging, transferring, or conducting any transactions related to, assets, and relevant documents and dossiers.

d/ Refusing or narrowing the rights, obligations and responsibilities toward clients.

Section 2. THE SPECIAL CONTROL BOARD

Article 11. Organizational structure of the Special Control Board

1. The Special Control Board must be composed of at least 3 members, one of them shall act as the head.

2. The Special Control Board’s members are officers of concerned units of the State Bank or State Bank branch or officers of another credit institution designated by the Governor.

Article 12. Operation mechanism of the Special Control Board

1. The Special Control Board’s members shall work on a part-time basis at the credit institution placed under special control.

2. The Special Control Board may use the seal of a State Bank branch (for joint-stock credit institutions) or the State Bank (for state-run credit institutions, joint-venture credit institutions and wholly foreign-owned credit institutions) in documents and reports signed by its head.

3. The Special Control Board will finish its tasks when the Governor issues a decision to terminate the special control of a credit institution.

Article 13. Criteria for and conditions on a member of the Special Control Board

1. Being a staff member of the State Bank, a State Bank branch or another credit institution (when necessary).

2. Possessing a university or postgraduate degree in economics, law or a professional domain of which he/she will take charge when performing special control of the credit institution.

3. Having at least 3 years’ work experience in the banking sector.

4. Being other than the affiliated person of a member of the Board of Directors, member of the Control Board or the director general of the credit institution placed under special control.

5. In addition to the provisions of Clauses 1 thru 4 above, the Special Control Board’s head must be a departmental- or higher-level leader in a specialized department of the State Bank or a leader of a State Bank branch.

Article 14. Responsibilities and powers of the Special Control Board

1. Responsibilities and powers of the Special Control Board:

a/ Responsibilities:

(i) To take responsibility before law and the Governor for its decisions when performing special control of a credit institution;

(ii) Within 30 days from the date the Governor signs a decision specified in Article 8 of this Circular, to direct the credit institution’s Board of Directors, Control Board, director general (director) or representative defined in Clause 9, Article 3 of this Circular in working out an organization and operation consolidation plan and submitting it to the Governor for approval;

(iii) To direct and supervise a credit institution placed under special control in taking measures specified in the organization and operation consolidation plan;

(iv) To monthly assess and report the results of implementation of the organization and operation consolidation plan to the State Bank (through the Inspection and Supervision Agency) and a State Bank branch;

(v) To report to the State Bank on abnormal changes of a credit institution placed under special control and improper operations in the course of implementing the approved organization and operation consolidation plan;

(vi) To keep confidential the actual conditions of a credit institution placed under special control; to provide relevant information on this credit institution only when so requested in writing by a competent agency.

b/ Powers:

(i) To request the credit institution placed under special control to report on and provide documents and information related to the organization and operation of the credit institution;

(ii) To request the credit institution placed under special control to inventory all existing assets, or to conduct independent audit for assessing the actual financial conditions of the credit institution at the time it is placed under special control;

(iii) To request the credit institution placed under special control to invite debtors and creditors for determining the debt recovery and payment capacity;

(iv) To make dossiers requesting law enforcement bodies to handle persons who violate law or intentionally fail to pay debts to the credit institution;

(v) To suspend operations which fail to conform with the organization and operation plan or regulations on safety in banking operations during the special control period and immediately report such suspension to the Governor;

(vi) To suspend the right to govern, control and administer the credit institution of the Chairman and members of the Board of Directors, the head and members of the Control Board, director general (director) or deputy director general (deputy director) when seeing it necessary and immediately report such suspension to the Governor;

(vii) To request the Governor to suspend the right to govern, control and administer the credit institution of the Chairman and members of the Board of Directors, the head and members of the Control Board or director general (director);

(viii) To request the Board of Directors or director general (director) to immediately terminate the work of persons who violate law or fail to observe the organization and operation consolidation plan during the special control period;

(ix) To propose to the Governor the extension or termination of the special control of a credit institution;

(x) To propose to the Governor the provision of special loans to the credit institution;

(xi) To propose to the Governor measures to handle the credit institution placed under special control in accordance with current law;

(xii) To request the Governor to decide on arising problems not mentioned in the organization and operation consolidation plan during the special control period.

2. The head of the Special Control Board shall:

a/ Assign tasks to the Board’s members within the ambit of his/her tasks and powers as prescribed;

b/ Handle special control-related matters;

c/ Take responsibility before the Governor for administering the Special Control Board and for decisions related to the special control of the credit institution.

3. Members of the Special Control Board shall perform the tasks assigned by the head of the Board and take responsibility before the head for the performance of their tasks.

Section 3. SPECIAL CONTROL PERIOD, EXTENSION OF THE SPECIAL CONTROL PERIOD, TERMINATION OF SPECIAL CONTROL

Article 15. Special control period and extension of the special control period

1. The maximum special control period is 2 years from the effective date of the Governor’s decision to place a credit institution under special control.

2. When proposing the Governor to extend the period of special control of a credit institution under Item (ix), Point b, Clause 1, Article 14 of this Circular, the Special Control Board shall request in writing the Governor to extend the period of special control of the credit institution, or refuse such extension (clearly stating the reason).

3. Within 15 working days after receiving a request from the Special Control Board, the Inspection and Supervision Agency shall collect opinions of relevant units, summarize them and submit to the Governor for decision the extension of, or refusal to extend, the period of special control of a credit institution (clearly stating the reason).

Article 16. Termination of special control

1. The Governor shall decide to terminate the special control of a credit institution in any of the following cases:

a/ The special control period expires without extension.

b/ The credit institution has redressed the causes for being placed under special control and resumes its normal operation.

c/ The credit institution is incapable of redressing the causes for being placed under special control and falls into bankruptcy.

d/ The credit institution is reorganized under relevant current law before the expiration of the special control period.

2. When proposing the Governor to terminate the special control of a credit institution under Item (ix), Point b, Clause 1, Article 14 of this Circular, the Special Control Board shall request in writing the Governor to terminate the special control of the credit institution.

3. Within 30 working days after receiving the Special Control Board’s request mentioned in Clause 2 of this Article, the Inspection and Supervision Agency shall collect opinions of relevant units, summarize them and submit to the Governor for decision the termination of the special control of a credit institution.

Chapter III

RESPONSIBILITIES OF UNITS UNDER THE STATE BANK

Article 17. The Inspection and Supervision Agency

1. To examine, detect and promptly report to the Governor when a credit institution is in danger of falling into any of the cases specified in Article 6 of this Circular.

2. To appoint its officer to join the Special Control Board at the request of the Governor.

3. To act as the focal point in receiving reports and requests from credit institutions, State Bank branches and the Special Control Board, collect opinions of relevant units, summarize them and submit to the Governor for decision matters related to special control of credit institutions under this Circular.

4. To manage and preserve dossiers based on their confidentiality, which are related to special control of credit institutions.

Article 18. The Department of Legal Affairs

1. To appoint its officer to join the Special Control Board at the request of the Governor.

2. Within 15 working days after receiving a written request from the Inspection and Supervision Agency, to send its written opinions on legal affairs during the special control of a credit institution to the Inspection and Supervision Agency.

Article 19. The Finance-Accounting Department

Within 15 working days after receiving a written request from the Inspection and Supervision Agency, to give its written opinions on matters related to the accounting and refund of special loans of a credit institution placed under special control.

Article 20. Relevant units under the State Bank

Relevant units under the State Bank shall join the Special Control Board and handle relevant matters at the request of the Governor.

Article 21. State Bank branches

1. To examine, detect and promptly report to the Governor when a credit institution is in danger of falling into any of the cases specified in Article 6 of this Circular.

2. To propose the handling of matters related to special control, extension of the special control period or termination of the special control of a credit institution at the request of the credit institution and the Special Control Board under this Circular.

3. To appoint its officer to join the Special Control Board at the request of the Governor.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 22. Effect

1. This Circular takes effect on May 6, 2010.

2. The State Bank Governor’s Decision No. 215/1998/QD-NHNN of June 23, 1998, promulgating the Regulation on special control of Vietnamese joint-stock credit institutions; Decision No. 1071/2002/QD-NHNN of October 2, 2002, amending and supplementing a number of articles and clauses of the Regulation on special control of Vietnamese joint-stock credit institutions promulgated together with Decision No. 215/1998/QD-NHNN of June 23, 1998; and Decision No. 646/2002/QD-NHNN of June 21, 2002, amending Article 14 of Decision No. 215/1998/QD-NHNN of June 23, 1998, cease to be effective.

Article 23. Organization of implementation

The Chief of the Office, the Chief of the Inspection and Supervision Agency and heads of units under the State Bank, directors of State Bank branches, chairmen and members of Boards of Directors, heads and members of Control Boards, and directors general of credit institutions shall implement this Circular.-

For the State Bank Governor
Deputy Governor
TRAN MINH TUAN