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Legal Update

Licence Revocation and Asset Liquidation Procedures Issued for Banks

28 December 2011
Mayer Brown JSM Legal Update

On 28 October 2011, the State Bank of Vietnam (SBV) issued Circular No. 34/2011/TT-NHNN ("Circular 34") guiding the sequence and procedures for (i) revocation of licences and liquidation of assets of credit institutions and foreign bank branches and (ii) revocation of licences of representative offices of foreign credit institutions and other foreign organisations with banking operations.
Circular 34 serves as a legal basis on which to restructure the banking system and protect capital depositors.

Applicable entities

Circular 34 applies to

  • credit institutions established and operating under the Law on Credit Institutions (except co-operative banks and people's credit funds);
  • foreign bank branches;
  • representative offices of foreign credit institutions and other foreign organisations with banking operations ("representative offices");
  • organisations and individuals involved in the revocation of the licence of a credit institution, foreign bank branch or representative office; and
  • organisations and individuals involved in liquidation of assets of a credit institution, foreign bank branch or representative office.

Procedures for revoking licence of a credit institution or a foreign bank branch

  • In the case of request by a credit institution or a foreign bank branch:

    • such credit institution or foreign bank branch is required to prepare (i) a liquidation plan (which is adopted by the relevant decision-making authority of the credit institution or foreign bank branch) and (ii) an application dossier (in such form and substance as may be required by Circular 34) to be lodged with the Banking Supervisory Department (BSD) under the SBV;
    • the BSD will have maximum 15 business days from the date of receipt of a proper application dossier to evaluate such dossier and seek comments from the SBV branch, the People's Committee of the locality where the credit institution or foreign bank branch is headquartered, Deposit Insurance of Vietnam and other relevant units of the SBV on, among other things, the proposed revocation and impact of the revocation on the relevant organisations or individuals;
    • the SBV branch, the People's Committee, Deposit Insurance of Vietnam and other relevant units of the SBV will, within 15 business days from the date of receipt of the BSD request, provide the BSD with their comments. Failure to send their comments within that time-limit will be deemed as agreeing to revocation of the licence;
    • within 10 business days of receipt of comments from the relevant authorities, the BSD will submit an appraisal report to the Governor for his decision to (i) revoke the licence or (ii) ask for further clarification;
    • the credit institution or the foreign bank branch in question must, upon receipt of further request by the BSD, send their clarification to the BSD;
    • within 10 business days of receipt of the above clarification, the BSD must re-submit an appraisal report to the Governor for his decision;
    • within 5 business days of receipt of the appraisal report, the Governor will make a decision

  • In the case of request by the relevant State authority:
    • upon proposal by an SBV branch or the relevant State authority, the BSD may make a submission to the Governor to issue a decision on revocation of the licence and liquidation of assets of the credit institution or the foreign bank branch in question;
    • within 60 days of the Governor's decision on revocation of a licence, the credit institution or foreign bank branch must prepare and submit to the SBV a liquidation plan together with the licence revocation application dossier;
    • upon receipt of the licence revocation application dossier, the BSD will conduct the procedures for revocation of the licence.

Revocation of licences and liquidation of assets

Circular 34 identifies authority and applicable laws in respect of licence revocation and asset liquidation.

AUTHORITY TO REVOKE LICENCES AND SUPERVISE LIQUIDATION

  • The Governor of the SBV has authority to issue a decision revoking the licence of any credit institution, foreign bank branch or representative office.
  • The SBV has authority to supervise the process of liquidation of assets of any credit institution, foreign bank branch or representative office.

APPLICABLE LAW

Circular 34 clearly sets out applicable laws in cases of licence revocation and asset liquidation as follows:

  • If a credit institution divides, demerges, merges or consolidates, the sequence and procedures for revocation of the licence will comply with legislation on the division, demerger, merger or consolidation of credit institutions.
  • If a credit institution is bankrupt, the SBV will revoke the licence immediately after the SBV provides a letter terminating special control or terminating application of measures to recover solvency or providing a letter not applying measures to recover solvency because the credit institution remains insolvent. Liquidation of assets of such credit institution will comply with legislation on bankruptcy.
  • In other cases, the sequence and procedures for revocation of the licence and liquidation of assets of a credit institution or foreign bank branch will comply with Circular 34.

Prohibited conduct during process of licence revocation and asset liquidation

As from the date the decision-making authority of a credit institution or foreign bank branch passes a decision revoking the licence (in a case where such institution itself requests revocation) or as from the date the Governor of the SBV provides an official request to terminate operation, the concerned credit institution or foreign bank branch is strictly prohibited to:

  • conceal or dispose of assets;
  • pay unsecured debts;
  • abandon or reduce a right to claim a debt;
  • convert unsecured debts into debts secured by assets of such credit institution or foreign bank branch;
  • donate, pledge, mortgage or lease assets;
  • sign any new contract which is not a contract aimed at carrying out termination of the operation; and
  • remit money or assets overseas.

Effective date

Circular 34 took effect as from 11 December 2011.

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