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The State Bank of Vietnam (SBV) has recently released a draft circular outlining key principles for mergers and consolidations involving credit institutions. The proposed framework aims to ensure compliance, transparency, and stability throughout the merger and consolidation process, safeguarding the rights of stakeholders while adhering to the relevant laws.
Five Key Principles for Mergers and Consolidations
The draft circular establishes five essential principles that must be followed during the merger or consolidation of credit institutions:
- Stakeholder Agreement and Operational Continuity: Mergers and consolidations must align with agreements made among stakeholders and ensure the uninterrupted operation of the involved credit institutions.
- Client and Creditor Protection: The process must guarantee the lawful rights and interests of clients and creditors. Compliance with the draft circular and other applicable laws is mandatory.
- Confidentiality and Transparency: Information regarding the merger or consolidation must remain confidential until projects are approved to maintain institutional stability. Additionally, the process must adhere to principles of prudence, honesty, and accuracy while preventing any misunderstanding in the submitted documents.
- Asset Protection: The dissipation of assets in any form is strictly prohibited. Any transfer or sale of assets must be conducted transparently and under the law and stakeholder agreements. These transactions must not compromise the safety of assets or the rights of credit institutions and other related parties.
- License Validity Adjustments:
- For consolidating institutions, the establishment and operation licenses of the to-be-consolidated entities will become invalid once the new consolidated institution begins operations.
- For merging institutions, the licenses of the to-be-merged entities will be invalidated when the SBV modifies the license of the merging credit institution.
Compliance with Competition Law and Banking Regulations
The draft circular stipulates additional requirements to ensure legality and stability:
- Credit institutions involved in the merger or consolidation must not fall under prohibited economic concentration cases, except in cases exempted under the Law on Competition.
- The merger or consolidation projects must receive approval from competent authorities.
- Post-merger or consolidation, the newly formed entities must comply with regulations concerning safety limits, capital contribution ratios, share ownership limits, and banking operating conditions.
This proposed framework underscores the SBV’s commitment to fostering a transparent and stable banking sector. By enforcing these principles, the SBV aims to streamline merger and consolidation processes while protecting the interests of stakeholders and maintaining trust in Vietnam’s financial system.
The draft circular remains open for public consultation, signaling the SBV’s intention to incorporate feedback from industry experts and stakeholders before finalizing the regulations.
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