Circular No. 10/2011/TT-NHNN on criteria for selecting strategic shareholders for state-owned commercial banks undergoing equitization

CIRCULAR

Regulations on criteria for selecting strategic shareholders

for state-owned commercial banks undergoing equitization

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Organizations No. 47/2010/QH12 dated June 16, 2010;

Pursuant to Decree No. 96/2008/NĐ-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Decree No. 109/2007/NĐ-CP dated June 26, 2007 of the Government on converting state-owned enterprises with 100% state capital into joint-stock companies;

Pursuant to Decree No. 69/2007/NĐ-CP dated April 20, 2007 of the Government on foreign investors purchasing shares of Vietnamese commercial banks;

Based on the guidance of the Prime Minister in Official Letter No. 7054/VPCP-ĐMDN dated October 12, 2009 of the Government Office regarding the criteria for selecting strategic shareholders of state-owned commercial banks undergoing equitization;
The State Bank of Vietnam (hereinafter referred to as the State Bank) hereby stipulates the criteria for selecting strategic shareholders of state-owned commercial banks undergoing equitization as follows:

Article 1. Scope of Regulation and Applicability

Article 1. This Circular stipulates the criteria for selecting strategic shareholders for state-owned commercial banks undergoing equitization.

The approval of strategic shareholders for state-owned commercial banks shall be carried out in accordance with Decree No. 109/2007/NĐ-CP dated June 26, 2007 of the Government on converting state-owned enterprises with 100% state capital into joint-stock companies and other relevant provisions of the law.

Article 2. Scope of application

a) State-owned commercial banks currently undergoing equitization;

b) State-owned commercial banks that have been equitized but have not yet been listed on the stock market;

c) State-owned commercial banks that have been equitized and listed on the stock market.

Article 3. Purpose and requirements

1. State-owned commercial banks undergoing equitization select strategic shareholders with the aim of choosing investors with reputation, financial capacity, and ability to support state-owned commercial banks undergoing equitization in:

a) Enhancing governance, management, and risk management capabilities;

b) Applying modern technology;

c) Developing banking products and services;

d) Developing other areas consistent with the development strategy of state-owned commercial banks undergoing equitization;

2. Strategic shareholders of state-owned commercial banks undergoing equitization must ensure compliance with the following requirements:

a) Having strategic interests consistent with the development strategy of state-owned commercial banks undergoing equitization;

b) Not creating conflicts of interest;

c) Not creating monopolies in unfair competition against other customers and investors of state-owned commercial banks undergoing equitization and other credit institutions.

Article 4. Criteria for Selecting Strategic Shareholders

Strategic shareholders must meet the following minimum criteria:

1. For foreign strategic shareholders:

a) Being a foreign credit institution or financial organization with total assets of at least 20 (twenty) billion US dollars in the year preceding the year of registration to participate as a strategic shareholder;

b) Having more than 5 (five) years of international operating experience;

c) Being rated by independent international credit rating organizations (Moody's, Standard & Poor, Fitch Ratings...) at a level indicating the ability to fulfill financial commitments and operate normally even under adverse economic conditions;

d) Not being a strategic shareholder, major shareholder, or founding shareholder of any credit institution in Vietnam;

e) Committing in writing to support state-owned commercial banks undergoing equitization in the fields specified in Clause 1 of Article 2 of this Circular and committing to a long-term relationship with state-owned commercial banks undergoing equitization.

2. For domestic strategic shareholders:

a) Being an experienced enterprise with good governance capabilities;

b) Having total assets of at least 3,000 (three thousand) billion Vietnamese dong in the year preceding the year of registration to participate as a strategic shareholder;

c) Having sufficient contributed capital: net worth minus long-term investments made with net worth and short-term assets minus short-term debt remaining at least equal to the registered contribution amount for participation as a strategic shareholder;

d) Having a return on equity (ROE) of over 15%, a return on assets (ROA) of over 1% in the immediately preceding year before the year of registration to participate as a strategic shareholder, and positive net profit for three consecutive years prior to the year of registration to participate as a strategic shareholder;

e) Not having bad debts at credit institutions;

f) Not being a strategic shareholder, major shareholder, or founding shareholder of any credit institution in Vietnam at the time of registration to participate as a strategic shareholder;

g) Committing in writing to support state-owned commercial banks undergoing equitization in one or more of the fields specified in Clause 1 of Article 2 of this Circular;

h) Committing in writing not to transfer the purchased shares for a minimum period of 5 years from the date of purchase, becoming a strategic shareholder, and not engaging in transactions with state-owned commercial banks undergoing equitization that would lead to conflicts of interest and create monopolies or unfair competition against other customers and investors of state-owned commercial banks undergoing equitization and other credit institutions;

i) For domestic strategic shareholders who are credit institutions, in addition to the conditions set forth in Points a, b, c, d, e, g, and h of Clause 2 of this Article, they must also meet the following criteria:

- Ensuring the maintenance of restrictions to ensure safety in the operation of credit institutions as prescribed by the State Bank;

- Having a capital adequacy ratio (CAR) of over 10% in the immediately preceding year before the year of registration to participate as a strategic shareholder;

- Having a non-performing loan ratio of less than 2% in the immediately preceding year before the year of registration to participate as a strategic shareholder;

- Credit institutions may not purchase shares of state-owned commercial banks undergoing equitization if such banks are shareholders or contributors of capital to those credit institutions at the time of registration to participate as a strategic shareholder.

Article 4. Selection of strategic shareholders

Based on the provisions of this Circular, state-owned commercial banks undergoing shareholding reform shall specifically establish criteria for selecting strategic shareholders, to be included in the content of the shareholding reform proposal for state-owned commercial banks (for state-owned commercial banks currently undergoing shareholding reform) or the plan for selecting strategic shareholders (for state-owned commercial banks that have completed shareholding reform), to be submitted to the Prime Minister for approval, and such criteria may only be used to select strategic shareholders after being approved by the Prime Minister.

Article 5. Implementation Provisions

1. This Circular takes effect from June 1, 2011.

2. The Director of the Office, the Head of the Banking Inspection and Supervision Department, the Heads of units under the State Bank, and the Chairmen of the Boards of Directors of state-owned commercial banks undergoing shareholding reform are responsible for implementing this Circular.