VietNamNet Bridge – The central bank issued a circular on Thursday making clear that it will force banks under special scrutiny to either revise up chartered capital or merge with others to secure healthy operations.

Illustrative image. (Photo: Internet)

According to Circular No. 07, fresh capital injections will ensure banks’ capital is not lower than their legal capital while other safety criteria are met. If a bank fails to increase capital as required, it will have to send the central bank a restructuring project or will be compelled to merge with or acquired by other lenders.

The central bank will assign credit institutions to contribute capital or buy shares of the banks under special surveillance if struggling banks’ accumulative losses exceed their chartered capital and reserve funds or their stoppage of operations may imperil the banking system.

The circular stipulates that the central bank will hold responsibility for special scrutiny over weak banks. The agency will also decide the selection of members of the board of special scrutiny, including officials of the central bank, Deposits Insurance of Vietnam, banking experts and staff of credit institutions.

This type of scrutiny is imposed on banks facing insolvency or making serious violations.

Information about banks under special supervision will be made public in the media, at their head offices, in press conferences and on the websites of the banks in question and the central bank. Solutions to fix these banks will also be announced.

The central bank’s governor will decide time, content and methods to announce information on a case-by-case basis.

The circular will take affect on April 27.

Source: SGT