Law on Credit institutions 2024

1. Expanded scope and applicability

The Law applies to credit institutions, foreign bank branches, finance companies, financial leasing companies, microfinance institutions, and other organizations engaged in banking-related activities in Vietnam.

2. Stricter licensing conditions and banking governance

• Introduces additional requirements for financial capacity and managerial qualifications when establishing a credit institution. 

• Raises ethical and professional standards for members of the Board of Directors, executive board, and other key management positions. 

• Requires greater transparency on shareholding structures, major shareholders, and tightens control over cross-ownership. 

3. Special control and resolution of weak credit institutions

• Clearly defines conditions for placing a credit institution under special control when it faces solvency or systemic risks. 

• Adds mechanisms for mandatory transfer or controlled bankruptcy of weak institutions. 

• Clarifies the role of the State Bank of Vietnam in approving recovery plans and overseeing the entire resolution process. 

4. Enhanced supervision, transparency, and market discipline

• Grants the State Bank of Vietnam greater powers in inspection, supervision, and enforcement. 

• Imposes stricter requirements on capital adequacy ratios, share ownership, and activities such as corporate bond investments. 

5. Protection of depositors and financial system stability

• Prioritizes the protection of depositors’ rights during the resolution of insolvent credit institutions. 

• Increases accountability of deposit insurance organizations and strengthens mechanisms for managing the aftermath of bank failures.