National Assembly passes Law on Credit Institutions

The National Assembly passed the new Law on Credit Institutions on June 16, including a number of new provisions aimed at ensuring the safe and effective operation of the nation's banking system.

The new law gives specific restrictions on ownership ratios in credit institutions. Accordingly, an individual shareholder in a credit institution is not allowed to hold a stake of more than 5 per cent, and no organisation shareholder can hold an interest greater than 15 per cent.

In a credit institution organised as a limited liability company with two or more members, each member must be a legal entity as prescribed by the law of Viet Nam, and the maximum capital ownership of any member and its affiliates would not be allowed to exceed 50 per cent of capital charter.

The law no longer requires commercial banks to maintain a compulsory reserve ratio of 20 per cent of total deposits, but the State Bank of Viet Nam is empowered to set such a rate from time to time.

The law prohibits credit institutions from financing enterprises engaged in the securities business which are under the primary control of such credit institutions.
Taking effect next January 1, and replacing the 1997 law and its amendments, the new law also governs the functions, powers and organisations of bank inspectors and the oversight powers of the State Bank of Viet Nam.