What are the requirements for issuance of licenses for establishment and operation of foreign bank branches in Vietnam from July 1, 2024?
- What are the requirements for issuance of licenses for establishment and operation of foreign bank branches in Vietnam from July 1, 2024?
- What operations are foreign bank branches in Vietnam not allowed to conduct under the Law on Credit Institutions 2024?
- Vietnam: When does the latest Law on Credit Institutions 2024 come into force?
What are the requirements for issuance of licenses for establishment and operation of foreign bank branches in Vietnam from July 1, 2024?
Pursuant to the provisions of Clause 3, Article 29 of the Law on Credit Institutions 2024, a foreign bank’s branch may obtain a license when fully meeting the following requirements:
- Its provided capital is not smaller than the legal capital;
- Its owner is a single-member limited liability company and its founding shareholders or members are juridical persons that are legally operating and financially capable for capital contribution. Its founding shareholders or members are individuals that have full legal capacity and are financially capable for capital contribution;
- Its managers, executives and members of the Board of Controllers fully meet the criteria and requirements under Article 41 of Law on Credit Institutions 2024;
- It has an establishment plan and a feasible business plan which neither affect the safety and stability of the credit institution system nor create monopoly or restrict competition or create unfair competition within the credit institution system.
- The foreign credit institution may conduct banking operations under the law of the country where it is headquartered;
- Operations to be conducted in Vietnam must be those which the foreign credit institution is issued with license to conduct in the country where it is headquartered;
- The foreign credit institution meets requirements for total assets and financial status under regulations of the Governor of State Bank, and satisfies regulations on assurance of operation safety under regulations of the country where it is headquartered;
- A competent authority of the country where the foreign credit institution is headquartered has signed an agreement with the State Bank on inspection and supervision of banking operations and exchange of information on banking safety supervision and made a written commitment on consolidated supervision of the foreign credit institution's operations according international practices.
- The foreign bank shall make a written commitment to be liable for all obligations and commitments of its branch in Vietnam, and to ensure that the actual value of the provided capital is not lower than the legal capital and it observes regulations on assurance of operation safety under Law on Credit Institutions 2024.
- If it is required to establish the second foreign bank’s branch and subsequent foreign bank branches in Vietnam, the foreign bank shall ensure that the foreign bank's branch which is operating in Vietnam for 03 years preceding the year of the proposal to establish new branches does not commit violations against regulations of law, achieves the minimum safety ratios, and earns profits.
What are the requirements for issuance of licenses for establishment and operation of foreign bank branches in Vietnam from July 1, 2024? (Image from the Internet)
What operations are foreign bank branches in Vietnam not allowed to conduct under the Law on Credit Institutions 2024?
Pursuant to the provisions of Article 131 of the Law on Credit Institutions 2024, foreign bank branches are not allowed to conduct following operations:
- Operations specified in Article 111 of Law on Credit Institutions 2024, including:
Capital contribution and share purchase
1. Each commercial bank may only use its charter capital and reserve fund to contribute capital or purchase shares under Clauses 2, 3, 4 and 8 of this Article.
2. Commercial banks shall establish or acquire subsidiaries or associate companies to conduct the following business activities:
a) Securities underwriting and securities brokerage; management and distribution of securities investment fund certificates; and securities investment portfolio management and stock trade;
b) Financial leasing;
c) Insurance.
3. Commercial banks may establish or acquire subsidiaries or associate companies operating in fields, including management of debts and utilization of assets, remittance, gold trade, factoring, and issuance of credit cards, consumer credit, intermediary payment services and credit information.
4. Commercial banks may contribute capital to, or purchase shares from, enterprises operating in the following fields:
a) Insurance, securities, remittance, gold trade, factoring, issuance of credit cards, consumer credit, intermediary payment services and credit information;
b) Other fields other than those specified at Point a of this Clause after obtainment of the written approval from the State Bank.
5. Commercial banks shall establish or acquire subsidiaries or associate companies according to regulations in Clause 2 and Clause 3 of this Article after obtaining written approval from the State Bank.
6. The Governor of State Bank shall provide for requirements, documents, and procedures for approval for establishment and acquisition of subsidiaries or associate companies, capital contribution and share purchase by commercial banks; conditions for increase in capital at subsidiaries or associate companies of commercial banks; operations of subsidiaries or associate companies of commercial banks in the fields of management of debts and utilization of assets.
7. Commercial banks shall establish subsidiaries or associate companies according to regulations of this Law and other relevant laws.
8. Commercial banks and their subsidiaries may purchase or hold shares of other credit institutions under conditions and within the limits provided by the Governor of State Bank.
- Operations not permitted to be conducted by the parent bank of foreign bank branches in the country where it is headquartered.
Vietnam: When does the latest Law on Credit Institutions 2024 come into force?
In the newly officially promulgated Law on Credit Institutions 2024, specifically Article 209 of the Law on Credit Institutions 2024 stipulates:
The Law on Credit Institutions 2024 comes into force from July 1, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024, which come into force from January 1, 2025.
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