The State Bank of Vietnam (SBV) will take bold actions against any breach of its rules on bank share ownership restriction.

According to the latest circular issued by the SBV, the move will make the banking sector more safe and transparent.

In Circular 06/2015/TT-NHNN released this week, the central bank states that credit institutions will have to cooperate with individuals or organisations that exceed its bank share ownership limits so that the existing cases of violations can be resolved by December 31, 2015.

The circular also regulates that from mid-July this year, credit institutions should not lend to individuals or organisations that breach the SBV's rule.

The central bank will also ban those who breach its rules, or their representatives, from becoming board members or taking key posts in banks unless their stakes are reduced.

The Government's website quoted a report from the central bank, saying that although the Law on Credit Institutions with regulations on bank share ownership limits has been in effect since 2011, some credit institutions haven't actively adjusted the ownership ratio to meet the regulations.

The central bank's report showed that five of the country's 33 commercial joint stock banks have breached the SBV's rule that limits a person's holdings to 5 percent in a bank and 15 percent in an institution.

The report also said eight commercial banks have yet to comply with a 20-percent ownership restriction applicable to a group of one shareholder and associates, which it said risks fuelling irregularities.

As a result, some individuals or organisations are still in breach of the SBV's rule on bank share ownership restriction, owning bank shares larger than permitted amounts, and hence, are capable of dominating the performance of credit institutions. The violation was partly liable for a rise in bad debts in banks.

As non-performing loans (NPLs) accounted for 3.57 percent of the total loans by the end of February, the central bank urged credit institutions to step up bad debt resolution from January, in a bid to reduce the rate to less than 3 percent by the end of this year.

Lenders will also have to resolve by June 30 at least 60 percent of the total bad loans they are supposed to handle in 2015. They will also have to transfer at least 75 percent of the total debts that they will register for sale to the national debt dealer, Vietnam Asset Management Company (VAMC), this year, within the same deadline. The deadline for selling all their NPLs to VAMC is September 30.-VNA