According to Deputy Governor of the State Bank Doan Thai Son, the Law on Credit Institutions 2024 has many new points, including clearly stipulating the measures to be applied when a credit institution suffers a mass withdrawal of money and measures to support liquidity, ensure system safety, and ensure the rights of depositors.
This morning (February 19), at the press conference announcing the President's order promulgating the Law on Credit Institutions, which was passed by the 15th National Assembly at the 5th extraordinary session (January 18, 2024), Deputy Governor of the State Bank Doan Thai Son said that the Law has completed regulations on improving governance and management requirements, limiting the abuse of major shareholder rights, governance and management rights to manipulate the operations of credit institutions.
Accordingly, the Law on Credit Institutions 2024 has reduced the limit on the share ownership ratio of institutional shareholders, groups of shareholders and related persons; stipulated a 5-year roadmap to gradually reduce the credit limit; and amended and supplemented regulations on the concept of related persons.
The Law supplements the responsibility to announce and publicize information of shareholders owning 1% or more of the charter capital of a credit institution, information about related persons of managers and executives of the credit institution, etc.
"These are regulations to improve the management and operation capacity, transparency of the operations of credit institutions and foreign bank branches, and limit the manipulation and domination of operations by major shareholders and groups of major shareholders at credit institutions," said Mr. Son.
In addition, the Law on Credit Institutions 2024 has added a provision requiring commercial banks and foreign bank branches to develop a proposed remediation plan in cases of early intervention. The remediation plan must be developed and approved before July 1, 2025 or within 1 year from the date of license issuance.
The Deputy Governor emphasized the spirit of “from afar, from early”, when discovering credit institutions that are in need of early intervention, the State Bank will send a document to the credit institution. This document will clearly state the requirements and restrictions for the credit institution, including the development and updating of plans to overcome weaknesses arising in the operations of the credit institution.
In case the credit institution successfully implements the remedial plan and returns to normal operations, the application of restrictive measures and requirements of the State Bank will also end.
The law also changes the approach to early intervention in credit institutions in line with international practice. At least every 2 years, commercial banks and foreign bank branches must update and adjust their remedial plans to ensure they are consistent with the operational practices of credit institutions.
Add regulations on mass withdrawal
The new Law on Credit Institutions also adds regulations on mass withdrawals, clearly stipulating the measures to be applied when a credit institution is subject to mass withdrawals, including the bank's own measures and measures to support liquidity, ensure system safety, and ensure the rights of depositors.
Regarding special control and restructuring plans for credit institutions, the new law stipulates recovery plans, merger plans, consolidation plans, transfer of all shares and capital contributions, compulsory transfer plans, dissolution plans, and bankruptcy plans.
The Law on Credit Institutions stipulates measures to be applied when a credit institution suffers a mass withdrawal of money, including self-measures by the bank and measures to support liquidity and ensure system safety...
The Law on Credit Institutions consists of 15 chapters and 210 articles, effective from July 1, 2024. The law adds transitional provisions to the amended and supplemented provisions of the law to limit major impacts on the market when the law comes into effect.
Detailed regulations on the Law on Credit Institutions 2024, expected to have 2 decrees and 4 circulars.
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