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NA: Ailing banks can file for bankruptcy
Wednesday,  Nov 22, 2017,00:01 (GMT+7)

NA: Ailing banks can file for bankruptcy

HANOI – The National Assembly (NA) has for the first time given banks the green light to file for bankruptcy if they become insolvent, said local media reports.

The NA on November 20 passed a law amending and supplementing a number of articles of the Law on Credit Institutions. The amended law contains a provision permitting insolvent banks to go bankrupt, something which the Government has long tried to shun for fears of a domino effect on the entire banking system.

This law will come into force on January 15 next year. However, banks which are under special surveillance and taking measures to solve their problems, or which were bought at zero Vietnam dong by the State Bank of Vietnam (SBV) can still carry out their already-approved plans.

SBV governor Le Minh Hung told the NA last Friday that any plans for coping with ailing banks must secure safety for the banking system, maintain public trust in the system, and guarantee the legitimate rights and interests of money depositors.

According to Vu Hong Thanh, chairman of the NA Economic Committee, some NA deputies proposed the law include a regulation requiring the Government to act as the buyer of last resort of debt-laden banks.

However, Thanh said, the law now requires compulsory transfers and some supporting measures. In essence, they are aimed to give poor-performing banks an opportunity to recover their operations.

There are cases in which ailing banks cannot be transferred because they are too weak to recover. Therefore, if the Government buys them as the last resort, the stakes would be high and this practice would run counter to market mechanisms, he said.

Some voiced concern over a regulation which allows the Government to decide the fate of ailing banks under special surveillance as the procedure is lengthy and complicated. The NA Standing Committee said in response that the Prime Minister and the central bank have long been responsible for dealing with a majority of banks under special surveillance.

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