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Special loan with 0% interest rate from Deposit Insurance of Vietnam and supporting credit institutions
At this revision, the Law on Credit Institutions sets the following objectives: Amend and supplement regulations on risk prevention, further strengthen the self-inspection, internal control, and self-responsibility of credit instituations; amend and supplement tools to ensure the safety of the system of credit institutions; strengthen the inspection and supervision measures of the SBV, and at the same time involve the Government Inspector to manage and control credit activities, combat manipulation, group interests, and cross-ownership; have regulations to promptly handle when credit institutions face liquidity risks as well as special measures to deal with mass withdrawals of depositors and have an effective mechanism to restructure credit institutions under special control ...
Notably, one of the new points in this draft revised Law on Credit Institutions is the addition of the provision that credit institutions subject to mass withdrawals may apply one or several support measures under Article No.148.
Specifically, support measures can be named as follows: Credit institutions will not be subject to penalties for violations of the lack of required reserves and failure to comply with the prescribed safety ratio during the period of mass withdrawal.
In addition, credit institutions subject to massive withdrawals may be entitled to special loans from the SBV, DIV, Vietnam Cooperative Bank and other credit institutions in accordance with this law.
In which, financial companies are entitled to a special loan with 0% interest rate from DIV from the professional reserve fund; Credit institutions that are specially controlled are people's credit funds and microfinance institutions entitled to special loans with 0% interest rate from the DIV from the professional reserve fund. DIV is entitled to reduce the professional reserve fund to handle the uncollectible special loan amount.
The SBV will consider and decide to implement separate liquidity support measures for credit institutions subject to mass withdrawals, including: Purchase of valuable papers of credit institutions on open market operations; performing foreign currency transactions with credit institutions; refinancing with credit institutions.
The SBV is allowed to use the risk provision to deal with the uncollectible receivables arising from the handling measures when the credit institutions suffer from mass withdrawals.
Particularly, a special loan for credit institutions to deal with problems with customers withdrawing money in bulk, the draft law stipulates that the interest rate that the SBV lends is 0% per year.
According to the draft, credit institutions providing special loans may apply specific support measures such as refinancing loans with 0% interest rate, the term corresponding to the special loan term of other credit institutions, a 50% discount of compulsory reserve ratio; do not have to comply with the rate of purchase and investment of Government bonds guaranteed by the Government; special loans are applied a risk factor of 0% when calculating capital adequacy ratio and are classified as qualified debt…
In case it is necessary to ensure system safety and stabilize social order and safety, the SBV may assign a special loan with 0% interest rate.
In addition, special lending credit institutions are allowed to issue long-term bonds for DIV; be entitled to receive long-term deposits from DIV with preferential interest rates as decided by the SBV.
Strengthening the State management, handling "early and remotely" weak credit institutions
Another notable content in the draft is the early intervention process, supplementing the authority of the SBV at the early intervention stage.
Accordingly, the SBV is entitled to limit the decision-making power in business activities of managers and executives or to suspend managers and operators of credit institutions that commit illegal acts, depending on the seriousness of the violations. manager, operator.
This, in order to strengthen the State control and management over the management and administration of credit institutions - according to the Government's report.
The draft law also stipulates a number of measures currently being applied at the special control stage to the early intervention stage, allowing handling "early and remotely" when the weakness of the credit institution is not yet serious.
Corresponding to the amendments and supplements in the early intervention section, the draft law amends and supplements regulations on special control cases, adjusting the treatment plan at the special control stage, including the option of forced transfer of the specially controlled commercial bank and the option of bankruptcy.
The draft law also amends and supplements regulations on overall assessment of the situation of specially controlled credit institutions, thereby hiring an independent auditing organization to audit the financial statements of commercial banks. If it is not possible to hire an independent auditing organization, the State Audit of Vietnam shall audit the financial statements of the commercial bank at the request of the SBV.
Reduce capital ownership ratio
Regarding liquidity support, according to SBV Governor Nguyen Thi Hong, to handle financial crises that threaten to cause system insecurity, some countries' laws have these mechanisms in place.
The Government's draft law report cited the experience of some countries. For example, in Switzerland there is a regulation that the Swiss Central Bank performs the role of lender of last resort. With this function, the Central Bank provides emergency liquidity support to one or more domestic banks if these banks are no longer able to finance their operations in the market.
For issues such as tightening cross-ownership, backyard and abuse of power to grant credit to a group of bank shareholders, the draft provides regulations. Specifically, an individual is not expected to own more than 3% of the charter capital of a credit institution (currently 5%). An institutional shareholder cannot own more than 10% of the charter capital of a credit institution (currently 15%).
Shareholders and related persons may not own more than 15% (a decrease of 5% compared to current regulations) of the charter capital of a credit institution. Major shareholders of a bank and related persons may own up to 5% of the charter capital of other banks.
The maximum credit balance for one customer is also expected to decrease from the current 15% to 10%, based on the bank's own capital. Total outstanding credit for a customer and related person is up to 15% of own capital (decreased from the regulation of 25%).
According to the draft, the Prime Minister will decide the maximum credit limit exceeding the loan limit in special cases when the syndication capacity of banks or foreign bank branches is not sufficient.
Regarding the resolution of non-performing loans and collaterals of bad debts, the draft law specifically regulates the provisions of Resolution No.42, but adds regulations on buying and selling non-performing loans. Accordingly, non-performing loan trading and handling organizations may purchase bad debts that are being planned on or off the bank's balance sheet; be agreed with the bank to divide the remaining value (if any) of the amount recovered from the non-performing loans, after deducting the purchase price and handling costs.
