Decision No. 01/2008/QD-NHNN Issuing regulations on establishing and terminating operations of branches and representative offices of non-bank financial institutions

Pursuant to …;

Issuing Regulations on the establishment and termination of operations of branches and representative offices of non-bank financial institutions

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam 1997 and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam 2003;
Pursuant to the Law on Credit Institutions 1997 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions 2004;
Pursuant to the Enterprise Law 2005;
Pursuant to Decree No. 52/2003/ND-CP dated May 19, 2003, issued by the Government, detailing the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;
Pursuant to Decree No. 16/2001/ND-CP dated May 2, 2001 of the Government on the organization and operation of finance leasing companies and Decree No. 65/2005/ND-CP dated May 19, 2005 of the Government amending and supplementing certain provisions of Decree No. 16/2001/ND-CP dated May 2, 2001 of the Government on the organization and operation of finance leasing companies;
Pursuant to Decree No. 79/2002/ND-CP dated October 4, 2002 of the Government on the organization and operation of financial companies;
At the proposal of the Director of the Department of Banks and Non-Bank Financial Institutions,

DECISION:

Article 1. This Decision promulgates the Regulations on the establishment and termination of operations of branches and representative offices of non-bank financial institutions.

Article 2. This Decision shall take effect fifteen days from the date of publication in the Official Gazette and replaces Decision No. 24/2003/QD-NHNN dated January 7, 2003 of the Governor of the State Bank of Vietnam promulgating the Regulations on the establishment and termination of operations of branches and representative offices of non-bank financial institutions.

Article 3. The Heads of the Office, the Directors of the Department of Banks and Non-Bank Financial Institutions, the Heads of units under the State Bank of Vietnam, the Governors of the State Bank Branches in provinces and centrally-administered cities, the Chairmen and members of the Boards of Management, the Heads and members of the Supervisory Boards, and the General Managers (Directors) of non-bank financial institutions are responsible for implementing this Decision.

REGULATIONS

on the establishment and termination of operations of branches and representative offices of non-bank financial institutions
(issued pursuant to Decision No. 01/2008/QD-NHNN dated January 9, 2008 of the Governor of the State Bank of Vietnam)

Chapter 1
GENERAL PROVISIONS

Article 1. Scope and Applicability

These Regulations govern the establishment and termination of operations of branches and representative offices of non-bank financial institutions operating in Vietnam.

Article 2. Interpretation of Terms

In these Regulations, the following terms have the meanings set forth below:

1. Non-bank financial institution means a financial company, a finance leasing company, and other non-bank financial institutions as prescribed by the State Bank of Vietnam.

2. Branch of a non-bank financial institution means a dependent unit with its own seal that performs certain functions and tasks of the non-bank financial institution according to the authorization of the non-bank financial institution.

3. Representative office of a non-bank financial institution means a dependent unit with its own seal that performs representative tasks according to the authorization of the non-bank financial institution. A representative office does not engage in business activities.

4. Transaction office is a department subordinate to the headquarters or branch of a non-bank financial institution, recorded in the books and has its own seal.

5. Network information management system means the connection of the information system between the headquarters and the information systems at the branches of non-bank financial institutions to update daily reports on the operational status of the branches at the headquarters of the non-bank financial institution.

Article 3. Requirements for management and operations

1. Non-bank financial organizations must issue internal regulations to manage the activities of their branches, including:

a) Regulations on the information network system between the headquarters and the branch of the non-bank financial organization;

b) Regulations on ensuring safety in transactions, vaults, and money transfers, managing and storing documents, fire prevention and firefighting requirements for the branch in accordance with current laws;

c) Regulations on internal inspection and control of the branch;

d) Regulations on risk management in the branch's operations;

đ) Regulations on the asset-liability management system for the branch;

e) Regulations on the organizational model, functions, tasks, and scope of operations of the branch, as well as conditions and standards for the Branch Manager, Deputy Branch Manager, heads of departments, and the internal inspection and control system at the branch;

g) Other regulations according to the supervisory management requirements of each non-bank financial organization.

2. Non-bank financial organizations must issue internal regulations to manage the activities of their representative offices, including:

a) Regulations on the functions, tasks, content of activities, and financial systems of the representative office; authority and standards for the head of the representative office and other managerial staff;

b) Other regulations according to the operational management requirements for the representative office.

Chapter 2
SPECIFIC PROVISIONS

Section 1. ESTABLISHING BRANCHES AND REPRESENTATIVE OFFICES IN THE COUNTRY

Article 4. Conditions for non-bank financial organizations to establish branches and representative offices

1. Conditions for establishing branches:

1.1. After one year of operation, a non-bank financial organization may establish a branch if it meets the following conditions:

a) Having sufficient registered capital to meet the requirements for establishing a branch;

b) Ensuring safety ratios in operations at the time of application for establishing a branch and throughout the year of application;

c) Issuing complete internal regulations to manage the branch's operations as stipulated in Clause 1 of Article 3 of this Regulation;

d) The previous year's business profit before tax relative to average equity should not be less than 20%;

đ) Management and operation systems, internal inspection and control systems, and internal audit systems must comply with the State Bank of Vietnam's regulations and not violate current laws regarding operations;

e) Regarding the number of branches: The number of branches that can be established is calculated using the following formula:

n =

Where: * n is the number of branches to be established (including existing branches), only whole numbers are counted;

* C is the current registered capital (in billion VND);

* Co is the minimum statutory capital required for the type of non-bank financial organization at the time of application for establishing a branch, measured in billion VND.

g) The proposed location for the branch must align with the operational needs of the non-bank financial organization and demonstrate economic efficiency after the establishment of the branch;

h) Non-performing loan ratio (NPL) at the time of establishing the branch:

- For leasing companies, it must be below 3% of total outstanding loans.

- For finance companies, it must be below 2% of total outstanding loans.

1.2. Non-bank financial organizations operating in consumer credit without accepting personal deposits will not be subject to a one-year waiting period for establishing branches if they meet the conditions specified in points a, b, c, đ, e, g, and h of Clause 1.1 of this Article.

2. Conditions for establishing representative offices:

a) At least one year of operation;

b) A need to establish a representative office to promote activities, seek out, and manage customers;

c) Sound financial condition and compliance with safety regulations in operations;

d) Management and operation systems and internal inspection and control systems must not violate the State Bank of Vietnam's regulations and current laws;

đ) Issuing complete internal regulations to manage the representative office's operations as stipulated in Clause 2 of Article 3 of this Regulation.

Article 5. Documents for Establishing a Branch or Representative Office

To establish a branch or representative office, a Non-Bank Financial Institution shall submit to the State Bank of Vietnam two (2) sets of documents, including:

1. A document from the Chairman of the Board of Directors or an authorized person requesting to establish a branch or representative office, which summarizes: the need for operation, name, location, content, scope of operation of the branch or representative office, report on operational status and number of existing branches and representative offices, while affirming that they meet the conditions stipulated in Article 4 of this Regulation to establish a branch or representative office;

2. An authorization document from the Chairman of the Board of Directors (in cases of delegation);

3. Resolutions and minutes of meetings of the Board of Directors regarding the establishment of a branch or representative office;

4. A proposal for establishing a branch or representative office, clearly stating the need for operation; planned organizational structure; content, scope, and activity plan for the first three (3) years;

5. Relevant documents specified in Article 3 and documents proving compliance with the conditions stipulated in Article 4 of this Regulation;

6. A document from the People's Committee of the province or city approving the Non-Bank Financial Institution to set up a branch or representative office within their jurisdiction;

7. A document from the Governor of the State Bank of Vietnam Branch in the province or centrally-administered city where the Non-Bank Financial Institution plans to set up a branch or representative office, concerning the necessity, operational needs, and operating area of the branch or representative office of the Non-Bank Financial Institution;

8. A document confirming the lawful ownership or lawful right to use the premises of the branch or representative office.

Article 6. Commencement of Operations

1. Within six (6) months from the date of receiving the approval document for establishing a branch or representative office from the State Bank of Vietnam, the Non-Bank Financial Institution must commence operations of the branch or representative office.

2. To be able to commence operations, the branch or representative office must complete business registration procedures, publish notices in central and local newspapers for three (3) consecutive issues, comply with the State Bank of Vietnam’s regulations on commencement of operations, and submit to the State Bank of Vietnam (Department of Banks and Non-Bank Financial Institutions):

a) Copies of central and local newspapers announcing the commencement of operations;

b) Certified copies of the Business Registration Certificate;

c) A report document on completion of procedures and commencement of operations;

3. If, beyond the prescribed time limit, the Non-Bank Financial Institution does not put the branch or representative office into operation, the State Bank of Vietnam will revoke the approval document for establishing the branch or representative office. In case the Non-Bank Financial Institution wishes to re-establish a branch or representative office, it must follow the procedures and documents stipulated in this Regulation.

Article 7. Transaction Offices

The establishment of transaction offices by Non-Bank Financial Institutions must comply with the following provisions:

1. Transaction offices can only be established in provinces or cities where the main office or branch of the Non-Bank Financial Institution is located;

2. There must be specific regulations on the content of activities, functions, responsibilities, and clear hierarchical levels for transaction offices;

3. The decision to allow the maintenance of cash reserves and cash reserve limits is within the authority of the Board of Directors, General Director (Director) of the Non-Bank Financial Institution, based on ensuring compliance with transaction safety, vault security, fund transfer requirements, and fire prevention and extinguishing standards;

4. The loan or lease amount for a single customer may not exceed three hundred million Vietnamese dong;

5. The General Director (Director) of the Non-Bank Financial Institution or the Branch Director of the Non-Bank Financial Institution is responsible for the activities of the transaction offices under the main office or branch and has the responsibility to register with the State Bank of Vietnam Branch in the province or centrally-administered city where the transaction office is established, and report to the State Bank of Vietnam (Department of Banks and Non-Bank Financial Institutions) according to the attached annex before officially commencing operations;

6. In the event of ceasing operations of a transaction office, a notification document must be sent to the State Bank of Vietnam Branch in the province or centrally-administered city where the transaction office is located, and publicly announced at the location of the transaction office being closed, with a notice published in the local newspaper fifteen (15) days prior to the expected cessation of operations, including the handling of the transfer of obligations and rights of the transaction office, and those related parties.

PART 2. TERMINATION OF BRANCH AND REPRESENTATIVE OFFICE OPERATIONS IN THE COUNTRY

Article 8. Circumstances for Terminating Branch and Representative Office Operations

1. Being revoked by the State Bank of Vietnam of the approval document for non-bank financial institutions to open branches or representative offices due to failure to meet the required conditions for commencement of operations within the stipulated period or serious violation of legal regulations during operations.

2. Voluntarily requesting closure of branches or representative offices due to lack of need for continued operations.

3. The non-bank financial institution having branches or representative offices being declared bankrupt or dissolved according to legal provisions.

Article 9. Termination of Branch and Representative Office Operations

1. In cases where the State Bank of Vietnam revokes the approval document for opening branches or representative offices as stipulated in Clause 1, Article 8 of this Regulation, the State Bank of Vietnam will announce the reasons and specify the procedures and responsibilities of relevant units for terminating branch and representative office operations.

2. In cases of voluntarily requesting closure of branches or representative offices as stipulated in Clause 2, Article 8 of this Regulation, the non-bank financial institution shall submit two (2) sets of documents to the State Bank of Vietnam, including:

a) A document from the Chairman of the Board of Directors or authorized person proposing to terminate branch or representative office operations, detailing the name, address, operational status, voluntary closure reasons, responsibilities, and procedures for terminating branch or representative office operations;

b) An authorization document from the Chairman of the Board of Directors (for delegated cases);

c) Resolutions and minutes of meetings of the Board of Directors regarding the termination of branch or representative office operations;

d) Opinions of the Governor of the State Bank of Vietnam Branch in the province or centrally-administered city regarding the non-bank financial institution's request to terminate branch or representative office operations in that area;

đ) Plans for handling issues arising from the termination of branch or representative office operations, specifying the current financial situation of the branch or representative office and plans for resolving organizational and operational issues.

3. In cases where the non-bank financial institution is dissolved or declared bankrupt as stipulated in Clause 3, Article 8 of this Regulation, the State Bank of Vietnam will specify the termination of branch and representative office operations in the decision to revoke the establishment and operation license.

Article 10. Procedures and Formalities for Voluntary Termination of Branch and Representative Office Operations

1. Within thirty (30) working days from the date of receiving the approval document from the State Bank of Vietnam, the Chairman of the Board of Directors of the non-bank financial institution must issue a decision to terminate branch or representative office operations.

2. The decision to terminate operations must include the following main contents:

a) Name and address of the branch or representative office whose operations are terminated;

b) Reasons for terminating branch or representative office operations;

c) Date of termination of operations;

d) Responsibilities of the non-bank financial institution towards creditors.

3. The decision to terminate branch or representative office operations of the non-bank financial institution must be sent to the State Bank of Vietnam and the State Bank of Vietnam Branch in the province or centrally-administered city where the non-bank financial institution is headquartered and where the branch or representative office is located; simultaneously, it must be publicly posted at the headquarters of the branch or representative office being terminated; and published in central or local newspapers for three (3) consecutive issues fifteen (15) days prior to the termination date.

4. Non-bank financial institutions with branches or representative offices terminating operations have the responsibility to settle obligations to creditors and resolve other related issues according to legal provisions.

PART 3. ESTABLISHING AND TERMINATING THE OPERATIONS OF FOREIGN BRANCHES AND REPRESENTATIVE OFFICES OF NON-BANK FINANCIAL INSTITUTIONS

Article 11. Conditions for Establishing Foreign Branches and Representative Offices

To establish a branch or representative office abroad, non-bank financial institutions, in addition to the conditions stipulated in Article 4 of this Regulation, must:

1. Have at least three years of operational experience;

2. Have a feasible business plan abroad demonstrating the necessity of establishing a branch or representative office abroad;

3. Only establish in countries or territories that have signed agreements with Vietnam regarding supervision and inspection of activities;

4. Commit to complying with procedures related to the establishment of branches or representative offices as prescribed by the countries or territories where the non-bank financial institution intends to locate its branch or representative office.

Article 12. Procedures for Requesting to Establish Foreign Branches and Representative Offices

1. Non-bank financial institutions wishing to establish a branch or representative office abroad must prepare two sets of application documents and submit them to the State Bank of Vietnam:

a) A document from the Chairman of the Board of Directors or an authorized person regarding the establishment of a branch or representative office abroad, including a summary of the need for operations, name, proposed location, and planned activities;

b) An authorization document from the Chairman of the Board of Directors (for delegated cases);

c) Resolutions and minutes of the Board of Directors, resolutions and minutes of the shareholders' meeting (for joint-stock non-bank financial institutions) concerning the establishment of a branch or representative office abroad;

d) Documents proving compliance with the conditions set forth in Article 11 of this Regulation;

đ) A request to the State Bank of Vietnam to provide comments to the supervisory authority over the branch or representative office in the foreign country if required;

e) Documentation on the establishment of branches or representative offices according to the regulations of the countries or territories where the non-bank financial institution plans to establish a branch or representative office;

2. The approval for establishing a branch or representative office abroad issued by the State Bank of Vietnam is valid for twenty-four months. If the validity period expires without obtaining permission from the foreign country and there is still a need, the non-bank financial institution must report to the State Bank of Vietnam and request an extension.

Article 13. Reporting

1. Within thirty days from the date the foreign country permits the establishment of a branch or representative office, the non-bank financial institution must submit a report to the State Bank of Vietnam (Department of Banks and Non-Bank Financial Institutions, Banking Inspection Department) a copy of the approval for establishing a branch or representative office abroad;

2. During the course of operations, the non-bank financial institution must report to the State Bank of Vietnam on the organizational structure and activities of the branch or representative office abroad every six and twelve months.

Article 14. Terminating Operations of Foreign Branches and Representative Offices

The termination of operations of a branch or representative office of a non-bank financial institution abroad must comply with the laws of the country or territory where the branch or representative office is located and must be reported to the State Bank of Vietnam.

PART 4. RESPONSIBILITIES OF THE STATE BANK OF VIETNAM

Article 15. Responsibilities of the Department of Banks and Non-Bank Financial Institutions

1. Receive applications for establishing branches or representative offices or applications for approval to voluntarily close branches or representative offices of non-bank financial institutions.

2. Within a maximum period of 10 (ten) working days from the date of receipt of complete application files from non-bank financial institutions requesting to establish or cease operations of branches or representative offices, the Department of Banks and Non-Bank Financial Institutions shall be responsible for sending requests for opinions to the State Bank of Vietnam Branches in provinces and centrally-run cities where the non-bank financial institution proposes to establish or cease operations of its branches or representative offices, and the Banking Inspection Agency;

3. Within a maximum period of 15 (fifteen) working days from the date of receipt of complete opinions from relevant units, the Department of Banks and Non-Bank Financial Institutions shall compile and submit to the Governor of the State Bank of Vietnam for signing the approval or disapproval document for non-bank financial institutions:

a) Establishing or ceasing operations of branches or representative offices within the country;

b) Establishing branches or representative offices abroad.

Article 16. Responsibilities of the Banking Inspection Agency

1. Within a maximum period of 07 (seven) working days from the date of receipt of the request from the Department of Banks and Non-Bank Financial Institutions, the Banking Inspection Agency shall provide an evaluation opinion on the operational situation and compliance with conditions stipulated in Points b, c, and h Clause 1.1 Article 4 of this Regulation regarding the establishment of branches, or Points c, d, and đ Clause 2 Article 4 of this Regulation regarding the establishment of representative offices.

2. Thirty (thirty) days after the branch commences operations, the State Bank of Vietnam Branch in provinces and centrally-run cities shall conduct inspections of branches and representative offices established domestically to ensure compliance with this Regulation, current laws, and internal management regulations governing the operations of branches and representative offices of non-bank financial institutions.

Article 17. Responsibilities of the State Bank of Vietnam Branches in Provinces and Centrally-Run Cities

1. Where non-bank financial institutions establish branches or representative offices:

a) Supervise the opening and operation of branches and representative offices of non-bank financial institutions in the area. Report any unusual organizational and operational changes of branches and representative offices of non-bank financial institutions in the area to the State Bank of Vietnam for timely handling;

b) Conduct inspections and audits of branches and representative offices of non-bank financial institutions in the area;

c) Within a maximum period of 07 (seven) working days from the date of receipt of the request from non-bank financial institutions to establish branches or representative offices in the area, the State Bank of Vietnam Branch in provinces and centrally-run cities shall issue a written opinion on the need for banking activities in the area, approving or disapproving the establishment of branches or representative offices by non-bank financial institutions in the area. In case of disapproval, the reasons must be clearly stated.

2. Where non-bank financial institutions have their headquarters: Within a maximum period of 07 (seven) working days from the date of receipt of the request from the State Bank of Vietnam regarding the non-bank financial institution's proposal to establish branches or representative offices, the State Bank of Vietnam Branch in provinces and centrally-run cities must issue a written assessment on the conditions stipulated in Article 4 of this Regulation and an opinion on the proposal of the non-bank financial institution. In case of disapproval, the reasons must be clearly stated.

Chapter 3
IMPLEMENTING PROVISIONS

Article 18. Adjustment Period

1. Within one (1) year from the date this Regulation takes effect, non-bank credit organizations must review their entire branch, representative office, and transaction room system to self-adjust the number of branches, representative offices, and transaction rooms; issue internal regulations to manage the operations of branches, representative offices, and transaction rooms to ensure compliance with the provisions of this Regulation;

2. Non-bank credit organizations that currently have more branches than allowed under point e, Clause 1.1, Article 4 of this Regulation shall develop plans to reorganize or cease operations of branches and transaction rooms and will not be permitted to open new branches.

||| Article 19. Violation Disposition

Non-bank credit organizations that violate this Regulation may be subject to legal proceedings depending on the nature and severity of the violation.

GOVERNOR
DEPUTY DIRECTOR




Tran Minh Tuan

Appendix

NON-BANK CREDIT ORGANIZATION SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
--------------------------………, day month year

APPLICATION FOR ESTABLISHING A TRANSACTION ROOM

Respectfully submitted to: State Bank Branch in Province/City …

(where the non-bank credit organization establishes its transaction room)

1. Name of the non-bank credit organization:

2. Operating license number:

3. Head office location:

4. Registered capital:

5. Legal representative: - Position:

6. Authorized representative: - Position:

7. Name of the branch of the non-bank credit organization:

8. Branch location:

9. Representative: - Position:

Application for establishing a transaction room as follows:

1 - Transaction room name:

2 - Decision to establish a transaction room number: …/... dated …/…/.../…of the Chairman of the Board of Directors (or of the authorized person).

3 - Transaction room location:

4 - Representative: - Position:

5 - Activities:

-

-