MONTHLY LEGAL UPDATE – 06/2019: LEGAL UPDATE RELATING TO FINANCE AND CREDIT

 

1. LEGAL DOCUMENTS ISSUED IN 05/2019

1.1. Decree No. 43/2019/ND-CP amending and supplementing a number of articles of the Decree No. 26/2014/ND-CP issued on April 7th, 2014 of the Government on organizational structure and operation of banking inspection and supervision authorities

v  Name of legal document: Decree No. 43/2019/ND-CP issued on 17/05/2019 by the Government amending and supplementing a number of articles of the Decree No. 26/2014/ND-CP issued on April 7th, 2014 of the Government on organizational structure and operation of banking inspection and supervision authorities

v  Effective date: 17/05/2019.

Some contents should be noted: 

·           Firstly, amending the regulation on the power to issue inspection decision and re-inspection decisions.

Specifically, Clause 6 Article 1 of Decree No. 43/2019/TT-NHNN stipulates as follows: “Article 1. Amending and supplementing a number of articles of Decree No. 26/2014/ND-CP dated April 7th, 2014 of the Government on organizational structure and operation of banking inspection and supervision authorities

6. Amending Article 18 (Decree No. 26/2014/ND-CP)

“1. The Chief Inspector, the Director General of the Department of Banking Inspection and Supervision and the Chief Inspector of provincial banking inspection and supervision authority shall issue the inspection and decision on inspection and establishment of the inspectorate. When necessary, the Governor of the State Bank or the Director of the branch of the State Bank shall issue the decision on inspection and establishment of the inspectorate.

2. The Chief Inspector shall decide to re-inspect the case that has been concluded by the Chief Inspector of the provincial banking inspection and supervision authority, but violations of law are suspected; the case that has been concluded by the President of the People’s Committee of province, but violations of law are suspected as assigned by the Governor of the State Bank.””

·           Secondly, amending and supplementing the regulation on contents of banking supervision.

Specifically, Clause 7 Article 1 of Decree No. 43/2019/TT-NHNN stipulates as follows: “Article 1. Amending and supplementing a number of articles of Decree No. 26/2014/ND-CP dated April 7th, 2014 of the Government on organizational structure and operation of banking inspection and supervision authorities

7. Amending and supplementing Point b, Point c Clause 1 Article 23 (Decree No. 26/2014/ND-CP) as follows:

“b) Consider and monitor the compliance with regulations on banking safety and other relevant laws; the implementation of conclusions, proposals and decisions on handling of inspections; the implementation of proposals and warnings on banking supervision and remedial measures when being subject to early intervention in accordance with Clause 25, Article 1 of the Law amending and supplementing a number of articles of the Law on Credit Institutions[1];

c) Regularly analyzing and assessing the financial, operational, management, operating and risk situation of credit institutions, foreign bank branches, systemic risks; ranking credit institutions, foreign bank branches annually according to the safety level;””

·           Thirdly, amending and supplementing the regulation on licensing activities in banking inspection and supervision.

Specifically, Clause 9 Article 1 of Decree No. 43/2019/TT-NHNN stipulates as follows: “Article 1. Amending and supplementing a number of articles of Decree No. 26/2014/ND-CP dated April 7th, 2014 of the Government on organizational structure and operation of banking inspection and supervision authorities

9. Amending and supplementing Clause 1 Article 30 (Decree No. 26/2014/ND-CP) as follows:

“1. The Central Banking Inspection and Supervision Authority shall consult with or assist the Governor of the State Bank; provincial banking inspection and supervision authority shall consult with or assist the Director of the branch of the State Bank (in case the Director of the branch of the State Bank is authorized by the Governor of the State Bank) in:

a) issuing, adjusting, adding, revoking the license for establishment and operation of credit institutions, license for establishment of foreign banks’ branches, license for establishment of representative offices of foreign credit institutions or other foreign organizations involved in banking activities and other licenses for operation of banks;

b) issuing and revoking the license for provision of credit information services by institutions;

c) issuing and revoking registration certificates for microfinance projects and programs;

d) approving the trading, full division, partial division, consolidation, acquisition, conversion of legal forms, or dissolution of a credit institution or foreign bank’s branch; approving provisional lists of elected or appointed members of the Board of Members, Board of Directors, Board of Controllers and Director General (Director) of credit institutions, except for the personnel of commercial banks 100% of charter capital of which is held by the State, personnel that is appointed or introduced by the owner of state capital at Joint Stock Commercial Bank over 50% of charter capital of which is held by the State; approving the person expected to be appointed to the Director General (Director) of the foreign bank's branch; approving the establishment, termination and dissolution of domestic branch, representative office, service provider, foreign branch, representative office and other forms of foreign commercial presence of a credit institution; approving the establishment, acquisition of subsidiary or associate company of a credit institution; approving the capital contribution or purchase of shares by a credit institution; approving other issues concerning management, organizational structure, finance and operations in accordance with law that must be granted approval or permission by the State;

dd) resolving issues concerning organizational structure and management of credit institutions and foreign banks’ branches to ensure credit institutions and foreign banks’ branches operate in a safe and sound manner and in accordance with regulations of law;

e) Implementing some contents on rights and responsibilities of the representative office of the owner of State capital in credit institutions, financial institutions and enterprises managed by the State Bank in accordance with the provisions of laws and assignments of the Governor of the State Bank;

g) formulating, organizing and monitoring the implementation of the scheme or policy for reorganizing, reinforcing, restructuring and special controlling credit institutions and foreign banks’ branches.””

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[1] “Article 1. Amendments to some Articles of the Law on credit institutions

…

25. Clause 130a below is added after Article 130:

 “Article 130a. Early intervention in credit institutions and branches of foreign banks

1. In any of the following cases, the State bank will consider making early intervention in a credit institution that has not been placed under special control according to Article 145 of this Law:

a) The credit institution fails to maintain the solvency ratio specified in Point a Clause 1 Article 130 of this Law for 03 consecutive months;

b) The credit institution fails to maintain the capital adequacy ratio specified in Point b Clause 1 Article 130 of this Law for 06 consecutive months;

c) The credit institution is ranked below average according to the State bank.

2. The State bank will consider making early intervention in a foreign bank’s branch in any of the cases specified in Point a, b, c Clause 1 of this Article.

3. Within 30 days from the day on which the written decision on early intervention is received from the State bank, the credit institution or foreign bank’s branch shall submit a report to the State bank on the situation specified in Clause 1 of this Article and a remedial plan, and implement it. The State bank will request the credit institution or foreign bank’s branch to revise the remedial plan where necessary.

The time limit for implementing the remedial plan is 01 year from the issuance date of the decision on early intervention.

4. The remedial plan shall contain one or some of the following measures:

a) Reduction of operating scope, avoid high-value transactions;

b) Increase in charter capital or provided capital; increase assets with high liquidity; sale or transfer of assets and other measures for assurance of banking safety;

c) Reduce dividends and distribution of profit;

d) Cut operating costs, administrative costs; reduce payment of salaries and bonuses to managers and executives;

dd) Intensify risk management; reorganize the management, make redundancies;

e) Other measures prescribed by law.

5. If the credit institution or foreign bank’s branch fails to prepare a remedial plan in accordance with Clause 3 of this Article or fails to remedy the situation within the time limit specified in Clause 1 of this Article, the State bank, depending on the risk level, will request the credit institution or foreign bank’s branch to take one or some of the measures specified in Clause 4 of this Article.

6. The State bank shall issue a decision to stop the early intervention after the credit institution or foreign bank’s branch successfully remedies the situation mentioned in Clause 1 of this Article or when the credit institution is placed under special control.

7. The State bank shall elaborate this Article.””