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No more banks to be bought at zero dong

Tu Hoang
Friday,  Apr 14,2017,15:26 (GMT+7)
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No more banks to be bought at zero dong

Tu Hoang

HANOI - The State Bank of Vietnam (SBV) will have to abandon the practice of buying ailing banks at zero dong.

This is a consensus achieved at a meeting on Wednesday when the Government discussed the draft law on the restructuring of credit institutions and the settlement of bad debt.

Chapter 2 of the law provides for detection and treatment of credit institutions under special surveillance. The options include rehabilitation, handling of legal persons (merger, consolidation, sale of all chartered capital, dissolution, and bankruptcy) and compulsory transfer of a credit institution subject to special surveillance.

One of the issues deliberated at the meeting was compulsory bank purchase. In this option, shareholders of a credit institution under special control must transfer all their shares to another credit institution or SBV. However, this measure should not be imposed since it may violate the interests of shareholders and citizens.

The SBV explained that in principle mandatory transfer is the last resort to deal with those banks whose rehabilitation, dissolution or bankruptcy are impossible.

After the discussion, Government members agreed with the SBV’s proposal that there should be regulations on this measure.

Thus, along with the other treatment options outlined in the draft law, it was agreed that from now on, the issue of SBV buying banks at zero dong would never be brought up again. Weak banks will be put under special control without being acquired at zero dong, before financial measures and eventually compulsory purchase are activated.

The draft also states that those banks that have been sold at zero dong will be dealt with according to the options provided by the law.

Another controversial issue is the provisions on immunity for those involved in the process of restructuring credit institutions under special control. Such rules might lead to abuses of power and irresponsibility.

The SBV said the handling of credit institutions under special control is difficult and complicated. In fact, personnel in charge have faced multiple difficulties and legal risks, which directly affect efficiency.

It is therefore necessary to grant these people immunity. Moreover, foreign experts highly appreciate such provision because it is in line with international practices.

To prevent abuses, those participating in the restructuring of banks are not responsible for results if the goal is not met due to objective reasons. In case of violation, it shall still be handled according to the current regulations.

Concluding this content, Prime Minister Nguyen Xuan Phuc described the completion of regulations on this issue as necessary and urgent. Any delay will affect the process of socio-economic management.

The Prime Minister agreed with the plan for drawing up two documents for submission to the National Assembly, including a draft resolution on bad debt settlement and a draft law amending multiple laws (the Law on Credit Institutions and related laws). He asked the SBV to urgently complete these two documents for the Government to submit them to the NA at the same time.

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