Thông tư 07/2013/TT-NHNN

CIRCULAR

PROVISIONS ON SPECIAL CONTROL FOR CREDIT INSTITUTIONS

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Cooperatives No. 18/2003/QH11 dated November 26, 2003;

Pursuant to Enterprise Law No. 60/2005/QH11 dated November 29, 2005;

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

At the proposal of the Chief Inspector and banking supervision;

Governor of the State Bank of Vietnam issues the Circular providing for the special control over credit institutions,

Chapter 1.

GENERAL PROVISION

Article 1. Scope of regulation

This Circular provides for the special control over credit institutions established and operating under the Law on Credit Institutions.

Article 2. Subjects of application

1. Credit Institutions

2. Organizations and individuals related to the special control over credit institutions.

Article 3. Explanation of terms

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

1. Special control is that a credit institution is put under the direct control of the State Bank of Vietnam (hereinafter referred to as the State Bank) due to the risk of unaffordability and insolvency or serious violations of the law leading to the risk of unsafe operation.

2. Time limit for special control is the period from when the State Bank has decided to put the credit institutions under the state of special control until the decision to terminate the special control over credit institutions.

3. Representative of credit institutions is the official of credit institutions, the Deposit Insurance of Vietnam and the State Bank and is appointed by Governor of the State Bank on behalf of credit institutions to handle issues related to special control for credit institutions in case the credit institutions are short of authorized personnel responsible for this problem.

Chapter 2.

GENERAL PROVISION

SECTION 1. SPECIAL CONTROL

Article 4. Forms of special control

1. Based on the financial situation, the level of risk and violation of the laws of the credit institution, the State Bank shall consider and decide to put the credit institutions under the state of special control in the form of special monitoring specific or comprehensive control specified in Clause 2 and 3 of this Article.

2. Special monitoring is a special form of control done through the State Bank applying measures to monitor the daily activities of credit institutions.

3. Comprehensive control is a special form of control done through the State Bank applying direct and comprehensive control measures of daily activities of the credit institutions.

Article 5. Competence of the State Bank in special control

1. Based on the results of the inspection and supervision of the State Bank and at the request of the banking inspection and supervision agency, the State Bank branches in central-affiliated provinces and cities where the credit institutions have located their head offices (State Bank Branch) or special control Board, the Governor of the State Bank has the competence:

a) To make a decision on putting the credit institution under the state of special control;

b) To make a decision on the time limit, extension of the time limit and termination of special control and content of special monitoring and comprehensive control;

c) To make a decision on establishment of special control board; send official to participate in special control Board; make proposal to the agencies and organizations concerned to send official to participate in special control Board;

d) To appoint representatives of credit institutions as prescribed in Clause 3, Article 3 of this Circular;

e) To handle the problems proposed by the special control Board as prescribed at Point d, Clause 2, Article 148 of the Law on Credit Institutions;

g) To request the owners of the credit institutions which are under special control to increase their charter capital to ensure that the real value of charter capital is not lower than the level of legal capital, ensuring the safe operation ratios as prescribed by law for a specified time limit; or request the owner of the credit institution under special control to develop and submit the restructuring plan to the State Bank for approval and implementation or require the merger, consolidation, acquisition with other credit institutions in case the credit institutions under special control incapable or unable to increase their charter capital as requested and during the time limit determined by the State Bank;

h) To directly perform or appoint other credit institutions to participate in capital contribution and share purchase of the credit institutions under special control in case these credit institutions do not perform the requirement specified at point e, Clause 1 of this Article or when the State Bank determines the accumulated loss of the credit institution has exceeded the real value of the charter capital and the reserve funds of credit institutions under special control stated in the last audited financial statements and the termination of the operation of credit institutions under special control may cause the unsafe for the system of credit institutions as specified in Clause 3, Article 149 of the Law on credit Institutions;

i) To make a decision on publication of information on special control specified in Article 7 of this Circular.;

2. The Governor of the State Bank shall authorize the State Bank branches to decide on issues specified in Clause 1 of this Article (except for Point g) for people's credit funds.

Article 6. Notification of decision on special control

The decision on special control is notified to:

1. Executive Board or member Board of credit institutions under special control

2. Governor of the State Bank in case the credit institutions under special control are people’s credit funds;

3. State Bank branches;

4. Deposit Insurance of Vietnam;

5. Cooperative banks in case the credit institutions under special control are people’s credit funds;

6. Ministry of Finance in case the credit institutions under special control are listing companies; the credit institutions under special control have affiliated companies or the companies controlling activities in the area of securities and insurance;

7. Provincial-level People’s Committee where the credit institutions’ head offices are located; District and communal-level People’s Committee ( for people’s credit funds);

8. Other relevant agencies and organizations that are decided by the Governor of the State Bank.

Article 7. Publication of information on special control

1. Information on special control for credit institutions to be published includes information on the measures to strengthen and regulate credit institutions under special control and approved by the competent authority and other necessary information.

2. Information on special control for credit institutions published through one or a number of following forms:

a) Posting on the central or local newspaper where the credit institutions’ head offices are located for at least 03 consecutive issues;

b) Press conference;

c) Posting on the website of the credit institutions under special control or of the State Bank;

d) To be published at the General Meeting of Shareholders.

3. The Governor of the State Bank shall make a decision on the time, content and form of publication of information on the special control over credit institutions in each particular case in order to create favorable conditions for the implementation of the solutions to treat weaknesses of the credit institutions under special control, except in case the credit institutions under special control are people's credit funds decided by the directors of the State Bank branches.

Article 8. Plans to strengthen the organization and operation

1. The plans to strengthen the organization and operation of the credit institutions under special control (referred to as the Plan) made by the Executive Board of the credit institutions under special control as required by the special control Board.

2. In case this Plan does not meet requirements to handle difficulties and weaknesses of the credit institutions under special control, the Governor of the State Bank shall hire consultation agency and some banking specialists to make the Plan. The credit institutions under special control shall pay all expenses related to the consultation and specialist hiring.

3. The Plan must include the minimum contents as follows:

a) Name, address, website (if any) of the credit institution;

b) Name, address, telephone number of the members of executive Board (for credit institutions established or organized in the form of joint stock companies), the member Board (for credit institutions established or organized in the form of a limited liability company), members of the control Board, General Directors (Directors) of the credit institutions or their representatives (if any);

c) Summarizing the current situation of administration, finance and operation of credit institutions, in which there must contain at least the following content:

(i) Structure of organization, administration, operation and ownership of the credit institutions.

(ii) Financial state and operation of credit institutions in which clearly stating difficulties and weaknesses, risks, violations of the law (if any) and causes.

d) Causes by which the credit institutions are put under special control;

e) Measures to solve problems and plan to implement some or all of the following measures:

(i) Enhancing solvency;

(ii) Mobilizing outside capital sources;

(iii) Reducing cost;

(iv) Consolidating and overcoming weaknesses, financial loss from the equity;

(v) Selling ​​assets or the entire credit institutions under special control to other credit institutions, potential investors; merger or consolidation with other credit institutions;

(vi) Making payment of customers’ deposits; or transferring all of the customers’ deposits to one or a number of other credit institutions for payments and implementation of other necessary measures to deal with debt, liquidate assets and revoke license for establishment and operation of these credit institutions as prescribed by law;

(vii) Raising capacity of administration, operation, system of control and internal audit;

(viii) Reorganizing business activities

(ix) Other measures.

SECTION 2. SPECIAL CONTROL BOARD

Article 9. Components of special control board

1. The Governor of the State Bank shall decide on the components, number and structure of the special control Board in accordance with the form of special control specified in Article 4 of this Circular.

2. The member of the special control Board is official of the State Bank, Deposit Insurance of Vietnam, banking specialists and officials of credit institutions appointed by the State Bank.

3. The head of special control Board must be one of the following subjects:

a) Leadership at department level or equivalent or higher title in the specialized units of the State Bank;

b) Leadership at department level or equivalent or higher title of the banking inspection and supervision agency;

c) Leadership of State Bank branches

4. Officials participating in the special control Board must not be person concerned of the members of Executive Board, member of the member Board, control Board, General Director (Director) and major shareholders of the credit institutions under special control.

Article 10. Duties and powers of the special control Board.

1. The special control Board has the following duties:

a) Directing the Executive Board, member Board, control Board, General Director (Director) or the credit institution’s representative specified in Clause 3, Article 3 of this Circular to make the Plan.

b) Directing, inspecting and monitoring the implementation of special monitoring, comprehensive control and solutions stated in the approved Plan.

c) Periodically or in case of necessity, making report to the Governor of the State Bank (through the banking inspection and supervision agency) and Directors of State Bank branches on administration, operation and finance of the credit institutions under special control; the result, difficulties and obstacles in the implementation of the Plan and proposing measures to ensure the operation safety of the credit institutions under special control and complying with the approved Plan.

d) Inspecting, monitoring and controlling activities, financial condition, administration, human resources, technology of the credit institution under special control;

e) Making timely report to the Governor of the State Bank, Directors of State Bank branches on unusual events, potential risks, unsafe hazard and violation of law of the credit institutions upon detection.

g) Directing and supervising the credit institutions under special control in the increase in charter capital; making and implementing plan on restructuring, merger, acquisition as required by the State Bank in accordance with Clause 2, Article 149 of the Law on credit Institutions and Point e, Clause 1, Article 5 of this Circular;

h) Preparing and submitting the State Bank (via banking inspection and supervision agency) to approve the Plan of the State Bank directly or appoint other credit institutions to make capital contribution and share purchase of the credit institution under special control under the provisions of Article 149 of the Law on credit Institutions and Point g, Clause 1, Article 5 of this Circular;

i) Providing information on credit institutions under special control when there is written request from the competent state agencies in accordance with the law;

k) Proposing the Governor of the State Bank to decide upon contents specified at Point e, g, Clause 1, Article 5 of this Circular.

l) Other duties assigned by the Governor of the State Bank;

2. The special control Board has the following powers::

a) The powers specified in Clause 2 of Article 148 of the Law on Credit Institutions;

b) Requiring the credit institutions under special control to inventory all existing assets or hire independent auditing organizations, specialized agencies to assess the financial conditions, valuate assets and determine enterprise value valuation of the credit institutions under special control and monitor the implementation of these requirements;

c) Requiring the credit institutions under special control to invite the debtors and creditors to come for comparison of debt with the credit institutions under special control to determine the possibility of debt collection and repayment and monitor this.

d) Requiring units and individuals of the credit institutions to provide, explain, report promptly and accurately all relevant information, documents and dossiers.

e) Preparing dossier to request the competent state agencies to handle the subjects having acts of violation of law or failing to pay debts to the credit institutions intentionally.

g) Approving before the credit institution performs:

(i) Profit distribution;

(ii) Transactions specified in the Decision on special control;

(iii) Change of accounting policy, financial product and customer policy;

(iv) Other transactions and behaviors in order to prevent and stop the hiding, dispersing, pledge, mortgage, transfer of property capable of causing damage to the credit institutions.

h) Requesting the State Bank to make a decision on issues which arises during the time limit for special control and has not been stated in the Plan;

i) Using the seal of the State Bank during the course of implementing assigned duties.

ki) Other powers as prescribed by law.

Article 11. Responsibilities of the Head of special control Board

1. Leading and organizing implementation of duties and powers of the special control Board specified in Article 10 of this Circular.

2. Assigning duties to the members of special control Board.

3. Taking responsibility for operating the special control Board and managing, monitoring the implementation of the duties of the special control Board’s member.

Article 12. Responsibilities of the special control Board’s member.

1. Performing duties as assigned by the Head of the special control Board.

2. Promptly detecting and reporting the head of the special control Board on unusual issues, potential risks, hazard of unsafe operation, violation of law of the credit institution under special control while proposing remedial measures.

3. Taking responsibilities before the Head of special control Board and the law for the implementation of assigned duties.

SECTION 3. TIME LIMIT FOR SPECIAL CONTROL, EXTENSION AND TERMINATION OF TIME LIMIT FOR SPECIAL CONTROL

Article 13. Time limit for special control

1. The time limit for special control is stipulated in Decision on special control.

2. Decision on extension of special control and Decision on termination of special control over the credit institutions are notified to the agencies and organizations specified in Article 6 of this Circular.

Article 14. Extension of time limit for special control

1. The extension of time limit for special control is applicable to the credit institutions under special control with the prospect of restoration of normal operation or the credit institutions needing more time to conduct procedures for merger, consolidation and acquisition as prescribed by law. The credit institutions which are not extended the time limit for special control upon the expiration of time limit for special control shall be terminated their special control.

2. Based on the state of the credit institutions, within thirty (30) days before the expiration of the time limit for special control, the special control Board must send written request to the Governor of the State Bank (through the banking inspection and supervision agency) to make a decision on extension of the time limit for special control over the credit institutions which are not the people's credit funds or Directors of the State Bank branches shall decide to extend the time limit for special control over the people's credit funds.

3. When receiving the written request of the special control Board:

a) The banking inspection and supervision agency shall gather opinions of the units concerned, review and submit them to the Governor of the State Bank for consideration to make a decision on extension of the time limit for special control over the credit institutions which are not the people's credit funds prior to the expiration of the time limit for special control;

b) Directors of State Bank branches shall decide on the extension of the time limit for special control over the people's credit funds prior to the expiration of the time limit for special control;

Article 15. Termination of special control

1. The credit institutions are terminated their special control in cases specified in Clause 1, Article 152 of the Law on credit institutions.

2. When the credit institutions are terminated their special control due to the failure of restoration of solvency, the State Bank shall send document to the Court with respect to the termination of application of measures to restore the solvency and require those credit institutions to prepare application to request the Court to conduct procedures for settlement of request to declare bankruptcy under the bankruptcy law.

3. The special control Board shall send written request to the Governor of the State Bank (through the banking inspection and supervision agency) or Directors of the State Bank branches (for the people’s credit funds);

a) The banking inspection and supervision agency shall gather opinions of the units concerned, review and submit them to the Governor of the State Bank for consideration to make a decision on termination of the time limit for special control over the credit institutions which are not the people's credit funds;

b) Directors of the State Bank branches shall decide on termination of special control over the people’s credit funds.

4. Decision on termination of special control over the credits institutions is notified to the agencies and organizations specified in Article 6 of this Circular.

Chapter 3.

RESPONSIBILITIES OF UNIT CONCERNED

Article 16. Responsibilities of the banking inspection and supervision agency

1. Based on the result of management, inspection and monitoring, the banking inspection and supervision agency shall:

a) Inspect, monitor, detect and make a report to the Governor of State Bank when the credit institutions are at risk of unaffordability and insolvency or seriously violate the law leading to the risk of unsafe operation.

b) Propose the Governor of State Bank to decide on the special control, form, contents and time limit over the credit institutions which are not the people’s credit funds;

c) Propose the head and members of the special control Board for the credit institutions which are not the people’s credit funds for submission to the Governor of State Bank for decision.

d) Propose the State Bank branches to put the people’s credit funds under the special control.

2. Advising the Governor of State Bank in directing the implementation of special control over the credit institutions.

3. Act as a hub to receive reports on proposal and recommendation of the credit institutions which are not the people’s credit funds, Deposit Insurance of Vietnam, State Bank branches, special control Board, gather opinions of the units concerned, review and submit these reports to the Governor of State Bank to make a decision on issues related to the special control over the credit institutions which are not the people’s credit funds as specified in this Circular.

4. Supervise operation of the special control Board for the credit institutions which are not the people’s credit funds.

5. Implementing the provisions at Point a, clause 3 of Article 14 and Point a, Clause 3, Article 15 of this Circular.

6. Taking responsibility for management and keeping dossier related to the special control over the credit institutions which are not the people’s credit funds as prescribed by law.

Article 17. Responsibilities of units concerned at the State Bank.

1. Based on the functions and duties assigned and direction of the Governor of the State Bank, the units concerned at the State Bank shall participate in special control over the credit institutions and contribute opinions to the issues of the credit institutions under special control at the request of the Inspection and banking inspection and supervision agency within seven (07) days from the date of receipt of the written request of the banking inspection and supervision agency.

2. The office of the State Bank shall publish information on special control as specified in Article 7 of this Circular.

Article 18. Responsibilities of the State Bank branches

1. For credit institutions which are not the people’s credit funds:

a) Inspecting, monitoring, detecting and making a report to the Governor of State Bank ( through the Inspection and banking inspection and supervision agency) when the credit institutions are at risk of unaffordability and insolvency or seriously violate the law leading to the risk of unsafe operation.

b) Proposing the Governor of State Bank (through the Inspection and banking inspection and supervision agency) to handle the issues related to the special control; consolidating, reorganizing, restructuring and extending and terminating the time limit for special control over the credit institutions under the special control at the request of the credit institutions, the special control Board and provisions in this Circular.

c) Sending officials to participate in the special control Board at the request of the Governor of State Bank.

d) Coordinating with the banking inspection and supervision agency, the special control Board and the state management agencies in the area where the credit institutions’ head offices are located during the course of special control over the credit institutions.

2. For the people’s credit funds:

a) Inspecting, monitoring, detecting and making a report to the Governor of State Bank when the people’s credit funds are at risk of falling into one of the cases specified in Clause 3, Article 146 of the Law on Credit Institutions;

b) Handling issues relating to the special control; consolidating, reorganizing, restructuring and extending and terminating the time limit for special control over the people’s credit funds, the special control Board and provisions in this Circular.

c) Making a decision on putting the people’s credit funds under the special control and establishing the special control Board for the people’s credit funds as prescribed by this Circular.

d) Managing and keeping dossier relating to the special control over the credit institutions as prescribed by law, periodically or in case of necessity making a report to the Governor of State Bank on the result, difficulties, obstacles and proposing measures to carry out special control over the peoples’ credit funds.

e) Acting as a hub to coordinate with the local State management agencies where the credit institutions’ head offices are located in order to handle issues related to the special control over the peoples’ credit funds.

g) Publishing information on special control specified in Article 17 of this Circular.

Article 19. Responsibilities of Deposit Insurance of Vietnam

For the cases where the credit institutions under special control participate in deposit insurance, the Deposit Insurance of Vietnam shall:

1. Send officials to participate in the special control Board as required by the State Bank.

2. Within a maximum of seven (07) days after receiving the written request of the banking inspection and supervision agency, the State Bank branches, the special control Board, Deposit Insurance of Vietnam shall have opinions in writing with respect to the special control over the credit institutions.

Article 20. Responsibilities of the credit institutions

1. When there is a risk of falling into the situation of unaffordability and insolvency, the executive Boards (member Boards) or General Directors (Directors) of the credit institution must make a report immediately to the Governor of the State Bank ( through the banking inspection and supervision agency) and Directors of the State Bank branches.

2. The executive Boards (member Boards), the control Boards, General Directors and officials of the credit institutions under the special control shall:

a) Seriously complying with the decisions and directions of the State Bank

b) Proposing and making Plan of the credit institutions for submission to the special control Board for approval and implementing the approved Plan.

c) Administering, controlling and operating all activities and ensuring the safety of assets of the credit institutions in accordance with the Charter and regulations of the law except for the case of suspension, temporary suspension of the right of administration, operation and control specified at Point b, Clause 2, Article 148 of the Law on credit institutions;

d) Complying with requirements and directions of the special control Board specified at Points a, b, c and e, Clause 2, Article 148 of the Law on credit institutions;

e) Taking responsibility for the accuracy of the information, documents and dossiers provided to the special control Board.

Chapter 4.

IMPLEMENTATION PROVISION

Article 21. Effect

1. This Circular takes effect on April 27, 2013.

2. Circular No. 08/2010/TT-NHNN dated March 22, 2010 of the Governor of State Bank of Vietnam stipulating the special control over the credit institutions and Decision No. 92/2001/QĐ-NHNN dated February 08, 2001 of the Governor of State Bank of Vietnam on issuing the Regulation on special control over the people’s credit funds shall be invalid from the effective date of this Circular.

Article 22. Implementation organization

Chief of Office, Chief Inspector and banking supervision, heads of units of the State Bank of Vietnam, Directors of State Bank branches central-affiliated provinces and cities, the Chairman and members of the executive Board, General Director of the Deposit Insurance of Vietnam, Chairman of the member Board, head and members of the control Board, General Directors (Directors) of the credit institutions are liable to execute this Circular.