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SBV tightens control over weak banksThe State Bank of Vietnam (SBV) is planning to force incompetent banks to accept outside “special control” in a push toward restructuring and mergers and acquisitions.

Circular 7, issued by the SBV, will take effect from April 27, and will require banks deemed to be weak to accept direct control by SBV. Such banks will include those who have committed serious violations and those who are unable to meet their financial obligations. The state bank said this is a measure to protect the banking system as a whole.

The SBV will require managers of these institutions to increase their chartered capital for a determined period of time. Failing to do so would result in forced restructuring or mergers.

The regulation stipulates that banks showing high losses in their latest financial reports or those which file for bankruptcy could pose a threat to the entire banking system in the country, so steps must be taken to prevent this, including forced mergers and acquisitions by more stable financial institutions.

The governor of SBV also mandated the appointment of a committee of banking experts, including members of both SBV and Deposit Insurance of Vietnam, to be set up to take control of failing banks.

The committee will be authorised to request weak banks to make self-audits or hire independent agencies to assess the banks’ solvency and management structure. The committee will also be granted powers to evaluate the capacity of weak financial institutions to pay debts. The committee will also seek approval from the governor of SBV for any plans to buy stakes in banks considered “weak” by other financial institutions.

Any bank placed under special control will also have to create plans to strengthen their operations upon request from the committee.


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