Decision No. 215/1998/QĐ-NHNN Issuing Special Supervision Regulations for Joint Stock Credit Institutions in Vietnam

Pursuant to …;

Regarding the issuance of the Regulation
Special supervision of Joint Stock Credit Institutions of Vietnam

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Government Organization Law dated September 30, 1992;

Pursuant to Decree No. 15/CP dated March 2, 1993 of the Government on the tasks, powers, and responsibilities of Ministries and ministerial-level agencies;

Pursuant to Decision No. 96/1998/QD-TTg dated May 19, 1998 of the Prime Minister on consolidating and restructuring joint stock commercial banks in Ho Chi Minh City;

At the proposal of the Director of the Financial Institutions Department - State Bank,

Pursuant to …;

Article 1.- This Decision promulgates the "Regulations on Special Supervision of Joint Stock Credit Institutions of Vietnam."

Article 2.- THIS DECISION SHALL TAKE EFFECT 15 DAYS FROM THE DATE OF SIGNATURE.

Article 3.- The Director of the Governor's Office, Heads of the Financial Institutions Department, Chief Inspector of the State Bank of Vietnam, Heads of units under the Central State Bank related to this matter; Governors of State Bank Branches in provinces and cities; Chairmen of Management Boards, General Directors (Directors) of Joint Stock Credit Institutions shall be responsible for implementing this Decision./.

REGULATIONS
SPECIAL SUPERVISION OF CREDIT INSTITUTIONS
||| VIETNAMESE JOINT STOCK CREDIT ORGANIZATIONS
(Annexed to Decision No. 215/1998/QĐ-NHNN dated June 29, 1998 of the Governor of the State Bank of Vietnam)
In order to ensure the legitimate rights of depositors, assist credit institutions in overcoming financial difficulties, maintain their ability to pay and liquidity, the State Bank of Vietnam (hereinafter referred to as the State Bank) decides to place credit institutions under special supervision when they fall into one or more situations specified in Article 5 of these Regulations.

PART I. GENERAL PROVISIONS

Article 1. Special supervision is the implementation by the State Bank of special management measures as stipulated in these Regulations to directly supervise the organization and operation of Credit Institutions.

Article 2. These Regulations apply to joint stock commercial banks and joint stock finance companies (hereinafter referred to as Joint Stock Credit Institutions) placed under special supervision by the State Bank.

Article 3. 1. The Governor of the State Bank decides to place Joint Stock Credit Institutions under special supervision and to terminate such supervision;

Article 4.

2. Decisions on special supervision and termination of special supervision are announced by the State Bank to competent state agencies and relevant agencies in the locality for coordinated implementation.

Joint Stock Credit Institutions may be placed under special supervision when they fall into one or more of the following situations:

PART II. SPECIFIC PROVISIONS

Article 5. 1. There is a risk of losing the ability to pay, manifested as follows:

1.1. For three consecutive times within a month, unable to maintain the value of liquid assets equivalent to liabilities payable within the next three working days;

1.2. Unable to mobilize funds to settle maturing debts;

2.1. Non-performing loans and overdue loans exceeding 12 months account for more than 10% of total outstanding loans;

2.1. Continuously failing to maintain the minimum capital adequacy ratio of 8% between own capital and assets "Have," including off-balance sheet commitments, adjusted according to the level of risk, for three consecutive months.

2.2. Debts from customers who have no ability to repay and no legal collateral exceed 100% of the institution's own capital.

3. Accumulated losses exceed 50% of the total subscribed capital and reserves.

1. When there is a risk of falling into one of the situations mentioned in Article 5, Joint Stock Credit Institutions must immediately report to the State Bank Branch where the institution's headquarters is located about the current financial situation, causes, and measures already applied or planned to be applied to address the issues.

Article 6.

2. Based on the report of Joint Stock Credit Institutions as stipulated in Clause 5.1 of this Article and their ability to self-correct, or through inspection and supervision work, if it is found that Joint Stock Credit Institutions have fallen into one of the situations mentioned in Article 5, the Director of the State Bank Branch where the Joint Stock Credit Institution's headquarters is located or the Inspectorate of the State Bank must report and propose the Governor of the State Bank to decide to place the Joint Stock Credit Institution under special supervision.

The decision on special supervision includes the following contents:

Article 7. 1. Name of the Joint Stock Credit Institution subject to special supervision;

2. Reason for special supervision;

3. Names and specific duties of members of the Special Supervision Board;

4. Duration of special supervision.

1. The Special Supervision Board is established by the Governor's Decision of the State Bank, with the Head appointed by the Governor of the State Bank.

Article 8.

2. The Head of the Special Supervision Board is responsible for assigning tasks to members of the Board within the scope of their duties and powers as prescribed; responsible for handling issues related to the process of special supervision of Joint Stock Credit Institutions; accountable to the Director of the State Bank Branch and the Governor of the State Bank for managing the Special Supervision Board and decisions related to the special supervision of credit institutions.

3. The Special Supervision Board must have at least three members, and members of the Special Supervision Board must meet the following criteria:

3.1. They are staff of the State Bank Branch, belonging to departments such as credit institution management, general affairs (where there is no credit institution management department), Inspection, Foreign Exchange Management, Accounting, Credit;

3.2. They have professional expertise and at least three years of experience in the banking industry;

3.3. They are not shareholders, parents, spouses, or children of any member of the Management Board, Supervisory Board, General Director (Director) of the Joint Stock Credit Institution subject to special supervision.

4. Members of the Special Supervision Board perform their duties according to the assignment of the Head and are accountable to the Head, the Director of the State Bank Branch in provinces and cities, and the Governor of the State Bank for the execution of their tasks. Replacement of members of the Special Supervision Board is decided by the Governor of the State Bank based on the proposal of the Director of the State Bank Branch in provinces and cities and the Head of the Special Supervision Board.

5. If necessary, the Governor of the State Bank will designate another credit institution to participate in the special supervision of Joint Stock Credit Institutions and appoint staff from that credit institution to join the Special Supervision Board.

The Special Supervision Board has the following tasks, powers, and responsibilities:

Article 9. 1.1. Directing the Management Board, Supervisory Board, General Director (Director) of Joint Stock Credit Institutions placed under special supervision to develop plans to consolidate organizational structure and operations.

1. Duties:

1.1. Direct the Board of Directors, Supervisory Board, and General Director (Director) of a joint-stock credit organization placed under special control to develop plans to strengthen the organization and its operations.

The content of the plan must clearly demonstrate: the current organizational structure and operations, causes, measures, implementation time frame, and the effectiveness of the plan;

1.2. Direct and supervise Joint Stock Credit Organizations to implement the measures outlined in the plan to strengthen the Joint Stock Credit Organization which has been approved by the Special Supervisory Board;

To direct the implementation of the plan, the Special Supervisory Board has the right to request Joint Stock Credit Organizations to:

1.2.1. Report, provide documentation, and information related to human resources organization, operational status, and financial condition;

1.2.2. Inventory all existing assets or conduct independent audits to determine the operational and financial status at the time the Joint Stock Credit Organization was placed under special supervision to accurately reflect its financial situation;

12.3. Invite debtors and creditors to publicly reconcile accounts to determine the ability to collect and repay debts;

1.2.4. Prepare files requesting relevant legal authorities to handle individuals who violate laws or intentionally fail to repay debts;

1.3. Regularly report to the Branch Governor of the State Bank on the status and developments of the Joint Stock Credit Organization; submit monthly reports evaluating the results of implementing the plan to strengthen the Joint Stock Credit Organization to the Governor of the State Bank;

2. Authorities:

2.1. Has the authority to suspend activities that are not in accordance with the approved plan, or those that may jeopardize the interests of depositors due to non-compliance with safety regulations. Within a maximum of three days, report to the Governor of the State Bank about the decision to suspend such activities;

2.2. Propose to the Governor of the State Bank to suspend the management, operation, and oversight rights of members of the Board of Directors, Supervisory Board, General Director (Director), Deputy General Director (Deputy Director);

2.3. Require the Board of Directors, General Director (Director) to dismiss or suspend from duty those employees within the credit organization who violate laws or fail to comply with the approved plan for strengthening the organization and operations;

2.4. Recommend to the Governor of the State Bank to extend or terminate the period of special supervision;

2.5. Recommend to the Governor of the State Bank to grant special loans to ensure the ability to pay customer deposits;

2.6. Propose to the Governor of the State Bank to decide on issues arising outside the scope of the plan for strengthening and rectifying the joint stock credit organization during the special supervision period;

Responsibilities:

The Special Supervisory Board is responsible to the Governor of the State Bank for its decisions made during the special supervision process;

Article 10.

1. The Special Supervisory Board operates within the Joint Stock Credit Organization under special supervision;

2. The Special Supervisory Board uses the stamp of the State Bank Branch in documents and reports signed by the Head of the Board; keep confidential the status of the credit organization unless required in writing by authorized agencies;

3. The Special Supervisory Board concludes its mission when the Governor of the State Bank decides to terminate the special supervision of the Joint Stock Credit Organization;

Article 11. The Board of Directors, Supervisory Board, and General Director (Director) of the Joint Stock Credit Organization under special supervision are responsible for:

1. Developing a plan to strengthen the organization and operations to be submitted to the Special Supervisory Board for approval and organizing its implementation;

2. Continuing to manage, oversee, and operate the organization in compliance with legal and State Bank regulations, except where management, operation, and oversight rights have been suspended;

3. Working regularly within the Joint Stock Credit Organization to implement the strengthening plan and monitor the operations of the Management Board. Individuals deliberately avoiding their duties will be held accountable according to current laws;

4. Being responsible for matters related to the organization and operations of the Joint Stock Credit Organization before, during, and after the special supervision period;

5. In case a temporary Management Board needs to be established as per Section 2.2 Clause 2 Article 9, the temporary Management Board must immediately define the responsibilities of former Board of Directors, Supervisory Board, and Management Board members and take over the management, oversight, and operation of the Joint Stock Credit Organization;

6. Strictly comply with the requirements of the Special Supervisory Board;

7. Report on the progress and results of implementing special supervision measures as requested by the Special Supervisory Board;

8. Implement cost-cutting measures to minimize financial losses;

9. Provide workspace and equipment for the Special Supervisory Board;

Article 12. To ensure the safety of assets of the Joint Stock Credit Organization, during the special supervision period, the Joint Stock Credit Organization is strictly prohibited from performing the following tasks without the approval of the State Bank:

1. Allowing shareholders to transfer shares;

2. Distributing dividends (if any);

3. Concealing, disposing, pledging, mortgaging, or transferring assets and related documents and records;

4. Refusing or reducing rights, obligations, and responsibilities towards customers;

Article 13. To ensure the ability to pay customer deposits, the Joint Stock Credit Organization under special supervision may receive special loans from other credit organizations or the State Bank upon request of the Board of Directors of the Joint Stock Credit Organization and the Special Supervisory Board. This special loan shall be prioritized for repayment ahead of all other debts of the organization; procedures for borrowing and using this loan must comply with current regulations;

Article 14. The Governor of the State Bank decides the specific duration of special supervision for each Joint Stock Credit Organization;

If necessary and upon request of the Joint Stock Credit Organization, the State Bank may allow the Joint Stock Credit Organization to extend the special supervision period. The special supervision period (including any extension) shall not exceed two years;

Article 15. The Governor of the State Bank decides to terminate special supervision of the Joint Stock Credit Organization in the following cases:

1. Upon expiration of special supervision without extension, or if a joint-stock credit institution is unable to resolve the causes leading to special supervision, and the State Bank decides to revoke its operating license.

2. A joint-stock credit institution has overcome the causes leading to special supervision and returned to normal operations.

3. A joint-stock credit institution is merged or consolidated with another credit institution in accordance with current laws.

4. A joint-stock credit institution falls into bankruptcy and is declared bankrupt by the competent state authority as prescribed by law.

Chapter III. IMPLEMENTATION ORGANIZATION

Article 16.

1. The State Bank Inspectorate is responsible for receiving files proposed by the State Bank Branches in provinces and cities; reviewing and submitting to the Governor of the State Bank for decisions on placing joint-stock credit institutions under special supervision, extending the period of special supervision, ending special supervision; directing the Special Supervision Board to perform tasks, powers, and responsibilities stipulated in this Regulation, and monitoring the situation of joint-stock credit institutions during the special supervision period.

2. The Department of Financial Institutions is responsible for coordinating with the State Bank Inspectorate to assess the actual status of joint-stock credit institutions to submit to the Governor of the State Bank for decisions on placing credit institutions under special supervision, extending the period of special supervision, ending special supervision; submitting to the Governor of the State Bank specific handling plans for each joint-stock credit institution before, during, and after the special supervision period.

3. Departments and Bureaus under the Central State Bank, based on their functions and responsibilities, are responsible for guiding the resolution of issues related to the organization and operation of joint-stock credit institutions under special supervision.

Article 17.

1. The Director of the State Bank Branch in the province or city where the joint-stock credit institution is placed under special supervision has its main office:

1.1. Cooperating with the State Bank Inspectorate, proposing to the Governor of the State Bank to decide on special supervision of joint-stock credit institutions;

1.2. Proposing to extend the period of special supervision or end special supervision;

1.3. Appointing staff meeting the conditions and criteria to join the Special Supervision Board;

1.4. Serving as the point of contact with functional agencies to handle issues arising in the area during the special supervision of joint-stock credit institutions;

1.5. Directly overseeing the activities of the Special Supervision Board according to the authorization of the Governor of the State Bank;

1.6. Being accountable to the Governor of the State Bank for the special supervision of joint-stock credit institutions in the area;

2. The Director of the State Bank Branch in the province or city where the joint-stock credit institution is placed under special supervision has its branch office: is responsible for cooperating with the Special Supervision Board in handling issues related to implementing consolidation plans for the organization and operation of joint-stock credit institutions under special supervision.