New regulations on the merger, consolidation and acquisition of credit institutions

On February 11, 2010 the Governor of the State Bank of Vietnam (SBV) issued the Circular No. 04/2010/TT-NHNN permitting banks, finance companies, finance lease companies and cooperative credit organizations to merge, consolidate and acquire other credit organizations. Circular 04 aims to replace the obsolete regulations under Decision No.241/1998/QĐ-NHNN dated July 15, 1998 on merger, consolidation and acquisition of credit institutions with more effective regulations governing these sensitive activities.

Under Circular 04 the merger, consolidation and acquisition of credit institutions are allowed under certain forms. Banks are allowed to merge with, consolidate into or acquire other kinds of credit institution, but finance companies and finance lease companies are allowed to merge with or consolidate into companies of the same kind. Particularly regarding the acquisition, banks may only acquire finance companies, finance lease companies or finance companies acquire finance lease companies.

One of the conditions for the merger, consolidation or acquisition to proceed is the exclusion of economic concentration as stipulated by the Law on Competition. The involved credit institutions shall jointly prepare a proposal which must not be contrary to contents of the signed contract. Besides, the surviving credit organization must meet the legal capital condition.

Procedurally SBV will consult opinions of the SBV branch, the local People's Committee and other specialized agencies under SBV regarding the application dossier submitted to it. If approved in principle, the involved credit organizations must agree on the changed contents of the proposal and re-submit it to SBV for an official approval. After that, the disappearing entity shall complete the withdrawal of its business license, while the surviving entity shall implement business registration, public announcement and opening ceremony, etc.

Circular 04 prohibits any form of disposal of the credit institution's assets during the appraisal process.

The Circular takes effect after 45 days from the signing date.