The State Bank of Vietnam (SBV) can take early intervention measures against weak credit institutions in the supervision process from July this year, according to a new SBV regulation.
Under Circular 04/2018/NHNN-TT, which will replace Circular 08/2017/TT-NHNN from July 1 this year, the SBV Governor stipulated orders and procedures for banking supervision, aimed at minimising the weakness of credit institutions and contributing to restricting risks to the banking system.
The new circular is also expected to help Vietnam’s regulations in the banking industry to gradually match international rules.
Accordingly, besides making recommendations, issuing warnings or dealing with administrative violations as currently occurs, the SBV chief inspector or directors of SBV’s branches in cities and provinces can submit proposals to the SBV Governor to consider and take early intervention actions against ailing credit institutions.
Within 30 days of receiving the early intervention application announcement, the ailing credit institutions must report to the SBV their status, cause and solutions to resolve the weakness in written documents.
SBV inspection bodies will also be allowed to conduct extraordinary inspections on these credit institutions during the supervision process.
Assessing this decision, Bao Viet Securities Company (BVSC) said it was necessary to add early intervention to the existing banking supervision measures as the costs (of both time and money) to overcome the weaknesses of these credit institutions would be minimised and at the same time would contribute to reducing the risk for the whole banking system.
BVSC analysts also proposed that the legal framework related to the supervision should be studied, updated and supplemented continually to keep up with the reality of banking operations.
According to SBV Governor Le Minh Hung, reports from the Ministry of Public Security showed that 95 economic cases in the banking sector were detected and prosecuted, with nearly 200 banking employees and officials being accused in the 2011-16 period.
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