After five years implementing the Government’s plan to restructure Vietnamese banking system and slashing the number of commercial banks operating in the country by one-fifth , the State Bank of Vietnam (the “SBV”) has upgraded its regulatory arsenal to move to the next phase of the banking structural reform. On the last day of 2015, the SBV issued one of its final pieces of legislation of the year – Circular 36/2015/TT-NHNN regulating the reorganisation of credit institutions (“Circular 36”). The new circular will take effect shortly after the traditional Lunar New Year on 1 March 2016. Here are three things you should know about this circular which the SBV hopes will help it in reaching the ambitious target set by the SBV Governor to reduce the number of commercial banks to under 20:

Focus on mergers and consolidations. Circular 36 focuses only on mergers (a credit institution absorbs one or more credit institutions) and consolidations (a new entity is created from two or more credit institutions). Partial and full acquisitions are left out of its scope and continue to be regulated by separate regulations. Circular 36 deals only with the change in the legal form of credit institutions following acquisitions, e.g. the conversion of a limited liability commercial bank to a joint-stock commercial bank.

Disclosure of merger / consolidation agreements. Circular 36 introduces a new, and quite onerous, requirement that a copy of the merger / consolidation agreement be sent to the merging / consolidating credit institutions’ creditors and notified to the employees within 15 days following the in-principle approval of the merger / consolidation by the SBV. It is not clear whether the “creditors” include all the depositors as well.

Lawful representatives. Circular 36 introduces a new notion of “lawful representatives” of merging / consolidating credit institutions authorised to sign key regulatory paperwork on behalf of the relevant credit institutions. While this is a welcome procedural improvement, lawful representatives are not defined by the circular and there is no such definition in the new Law on Enterprises (although it is mentioned there) . Interestingly, it is the legal representative(s) of the credit institutions who are responsible for the completeness, accuracy, regularity, lawfulness of the dossiers submitted to the SBV, and not the lawful representative signing the dossier.