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SBV amends prudent regulations in operations of credit institutions
The Governor of the State Bank of Vietnam (SBV) issued Decision No. 34/2008/QD-NHNN on December 5, 2008 to amend Decision No. 457/2005/QD-NHNN dated April 19, 2005 and Decision No. 03/2007/QD-NHNN dated January 19, 2007 on prudent regulations in operations of credit institutions. This new decision aims at making the SBV regulations closer to international standards and practices, thereby facilitating credit institutions to achieve stable, safe and healthy growth.
Following are the amended regulations :
1. Capital contribution and share purchase
In cases where those credit institutions which make capital contribution and purchase shares in excess of the regulated proportion should obtain pre-approval of SBV in writing and meet the following conditions : (i) the credit institution has fulfilled other prudent regulations with non-performing loans (NPLs) ratio bellow 3% and profitability in 3 consecutive years; and (ii) the credit institution makes capital contribution to and purchase shares from credit institutions to provide financial support to any credit institution in face of financial problems and on the brink of insolvency, thus posing a danger to the safety of the whole credit system. In addition, the new decision stipulates the total limit of capital contribution and share purchase of a credit institution and its subsidiaries with independent legal status and accounting, and its subsidiaries in the same enterprise, investment funds, investment projects and other credit institutions shall not exceed 11% of their charter capital.
2. Limit of lending and guarantee of commercial banks to their leasing subsidiaries
The new decision eases the limit of lending and guarantee of credit institution to its leasing subsidiary . Accordingly, the credit institution may provide unsecured credit to its leasing subsidiary not in excess of 5% of its own capital while ensuring its total lending and guarantee to a single subsidiary (not in excess of 10% of the credit institution’s own capital ) and to a group of subsidiaries (not in excess of 20% of the credit institution’s own capital ).
The new decision will take effect 15 days after its publication in the Official Gazette. Any provisions of Decision No. 03/2007/QD-NHNN and Decision No. 457/2005/QD-NHNN, which are not in compliance with the new Decision will cease to exit.
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