Circular No. 08/2009/TT-NHNN guiding the network operations of small-scale financial organizations

CIRCULAR

Guidelines on the network of operations of small-scale financial organizations

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Based on the Law on the State Bank of Vietnam dated December 12, 1997, and the Law on Credit Institutions dated December 12, 1997; the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam dated June 17, 2003; the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated June 15, 2004;

Based on Decree No. 96/2008/ND-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Based on Decree No. 28/2005/ND-CP dated March 9, 2005 of the Government on the organization and operation of small-scale financial organizations in Vietnam; Decree No. 165/2007/ND-CP dated November 15, 2007 of the Government supplementing, amending, and abolishing certain provisions of Decree No. 28/2005/ND-CP dated March 9, 2005 of the Government on the organization and operation of small-scale financial organizations in Vietnam;

The State Bank guides the contents related to the network of operations of small-scale financial organizations as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

These Circulars guide certain contents related to the network of operations in Vietnam of small-scale financial organizations that have been granted licenses for establishment and operation by the State Bank of Vietnam (hereinafter referred to as the State Bank).

Article 2. Interpretation of Terms

In this Circular, the following terms shall be understood as follows:

1. The network of operations of small-scale financial organizations includes: Branches, transaction offices, and transaction points located within the territory of the Socialist Republic of Vietnam.

2. Branches of small-scale financial organizations are dependent units, having seals, and conducting certain business activities according to the authorization of small-scale financial organizations.

3. Transaction offices are subordinate departments of branches of small-scale financial organizations, maintaining accounts and books and having seals, conducting certain transactions with customers.

The credit debt of one (01) customer at a transaction office shall not exceed thirty million dong.

4. Transaction points are subordinate departments of branches or transaction offices of small-scale financial organizations, without seals.

Transaction points may perform the following tasks:

a) Studying, understanding, and introducing customers;

b) Accepting loan application files, disbursing loans, and collecting debts for credit contracts signed by branches or transaction offices with customers;

c) Receiving mandatory savings and voluntary savings from small-scale financial customers up to three hundred thousand dong per deposit per customer.

Transaction points must ensure safety in transactions and money transfers. At the end of each day's transactions, transaction points must transfer all files, vouchers, and money to the branch or transaction office where the transaction point is subordinate for accounting and storage.

Article 3. Internal Regulations

Small-scale financial organizations must establish and promulgate internal regulations on operations and management of the network consistent with the scale of the organization and its operations. Such regulations must ensure the following basic contents:

1. Regulations on risk control and management information systems to ensure the effective control capability of the headquarters over branches, transaction offices, and transaction points of small-scale financial organizations.

2. Regulations on ensuring safety in transactions, vaults including requirements for fire prevention and extinguishment, and money transfers, management, and retention of vouchers.

Small-scale financial organizations must specify the maximum amount of cash retained in the vault at the end of each day for each specific transaction location based on the actual security conditions of the transaction location. Any amount exceeding the maximum limit set forth in the regulations must be deposited into a bank with a nearby headquarters relative to the transaction location of the small-scale financial organization.

Article 4. Duration of Branch Operations

The duration of branch operations shall be determined by the small financial organization, but shall not exceed the remaining operational period of the small financial organization from the date of opening the branch.

Article 5. Organization and Hierarchical Structure

The small financial organization decides and bears responsibility for organizing and hierarchically structuring its network based on compliance with the provisions of this Circular and relevant laws.

Chapter II

SPECIFIC PROVISIONS

Article 6. Operating Territory

A small financial organization may open branches within and outside the province or centrally-administered city where the main office of the small financial organization is located.

A branch of a small financial organization can only operate within the administrative boundaries of the province or centrally-administered city where the branch is located.

Article 7. Conditions for Opening Branches

1. For a small financial organization that wishes to open a branch based on converting an existing branch, upon reviewing the application file for establishing and operating a small financial organization, the State Bank will approve the request to open a branch if it meets the following conditions:

a) The branch has sufficient physical facilities to meet operational requirements (headquarters, secure vaults, etc.);

b) The existing branch is currently operating effectively; The branch has clear operational procedures (deposit receipt, lending, debt collection, etc.); The ratio of total overdue loan balances to total loan balances (PAR) is below 5%; The branch manager or branch manager has at least two years of experience in small-scale finance;

c) The small financial organization has clear internal regulations and management information systems to ensure effective control by the headquarters over the branch;

d) The number of branches opened by the small financial organization must satisfy:

1.5 billion VND * N < C

Where:

- C is the registered capital of the small financial organization (in Vietnamese Dong);

- N is the total number of branches proposed to be opened in provinces and cities.

2. Within one year from the date of opening operations, a small financial organization with less than two branches may open additional branches, but the maximum total number of branches shall not exceed two branches and must meet the following conditions:

a) There is a feasible business plan for the first two years of operation;

b) The small financial organization has clear internal regulations and management information systems to ensure effective control by the headquarters over the branch.

3. One year after the date of opening operations, a small financial organization may open a branch if it meets the following conditions:

a) There is a feasible business plan for the first two years of operation;

b) The business operations have been profitable in the immediately preceding year and income exceeds expenses up to the month immediately preceding the date of the request to open a branch;

c) It does not violate regulations on safety in small-scale financial operations and other relevant laws within one year prior to the date of the request to open a branch; The minimum capital adequacy ratio is at least 15% at the time of the request to open a branch;

d) It has an effective management, operational, audit, and internal inspection system;

e) It has clear internal regulations and management information systems to ensure effective control by the headquarters over the branch.

Article 8. Documents for Requesting to Open a Branch

1. The documents for requesting to open a branch submitted to the State Bank of Vietnam branch in the province/city directly under the central government (hereinafter referred to as the State Bank of Vietnam branch in the province/city) where the small-scale financial organization has its headquarters include:

a) The resolution of the Board of Directors on opening a branch;

b) The document of the General Director (Director) requesting to open a branch according to Appendix No. 01 (attached);

c) The project to open a branch, including the necessity, name, location, content, scope of operation, expected organizational structure, key personnel, and a feasible business plan for the first two years of operation;

d) Report on the current status of the information management system of the small-scale financial organization;

e) Internal regulations for managing the network of small-scale financial organizations;

g) Report on the ratios ensuring safety in the operation of the small-scale financial organization at the time of submitting the application to open a branch;

h) Written opinion of the People's Committee of the province/city where the small-scale financial organization plans to establish a branch.

2. The provisions of Clause 1 of this Article shall not apply to small-scale financial organizations that need to open branches as stipulated in Article 7, Clause 1 of this Circular.

The Governor of the State Bank of Vietnam considers and approves the request to open a network of small-scale financial organizations based on the application for issuing a license to establish and operate small-scale financial organizations and documents proving compliance with the conditions specified in Article 7, Clause 1 of this Circular.

Article 9. Procedure for Opening a Branch

1. Within fifteen working days from the date of receiving all documents as prescribed in Article 8, Clause 1 of this Circular, the State Bank of Vietnam branch in the province/city where the small-scale financial organization has its headquarters shall submit the documents and report to the Governor of the State Bank of Vietnam regarding the small-scale financial organization meeting the conditions to open a branch and clearly stating whether they agree or disagree with the opening of the branch; if they disagree, the reasons must be clearly stated.

2. Within thirty working days from the date of receiving the documents and report of the State Bank of Vietnam branch in the province/city where the small-scale financial organization has its headquarters as prescribed in Article 9, Clause 1 of this Circular, the Governor of the State Bank of Vietnam shall issue a document approving the request to open a branch according to Appendix No. 04 (attached); if not approved, a document specifying the reasons or requirements (if any) for approval shall be issued.

Article 10. Commencement of Branch Operations

1. Within six months from the date of receiving the approval document from the State Bank of Vietnam, the small-scale financial organization must commence operations of the branch.

A branch commences operations when it meets the following conditions:

a) Having a business registration in accordance with the law;

b) Having sufficient facilities to meet operational requirements (headquarters, information management system, safe storage, etc.);

c) Having competent personnel to meet managerial requirements, at least the head of the branch.

2. Fifteen working days before the commencement of branch operations, the small-scale financial organization must publish three consecutive issues in a central or local newspaper in the language of Vietnam where the branch is located; send a document to the State Bank of Vietnam (Central State Bank of Vietnam; State Bank of Vietnam branch in the province/city where the small-scale financial organization opens a branch) reporting compliance with the conditions specified in Clause 1 of this Article along with a certified copy of the business registration and a photograph of the published content.

3. If the small-scale financial organization needs to extend the deadline for commencing branch operations as stipulated in Article 10, Clause 1 of this Circular, twenty working days before the expiration of the commencement deadline, the small-scale financial organization must submit a document requesting an extension of the commencement deadline to the State Bank of Vietnam (Bank Inspection and Supervision Authority), clearly stating the reasons for the request.

Within fifteen working days from the date of receipt of the document requesting an extension of the commencement deadline from the small-scale financial organization, the State Bank of Vietnam shall issue a document approving the extension of the commencement deadline for the branch; if not approved, a document specifying the reasons shall be issued.

The maximum extension period for the commencement deadline for the branch shall not exceed six months.

4. At the end of the commencement deadline or the extended commencement period, if the branch does not commence operations, the approval document from the State Bank of Vietnam shall lose its validity.

Article 11. Changing the Branch Location

1. The Governor of the State Bank authorizes the Director of the State Bank Branch in provinces and cities to consider and approve the request for changing the branch location of small-scale financial organizations within their respective provinces and cities.

2. The documents submitted by small-scale financial organizations requesting to change the branch location include:

a) The resolution of the Board of Directors regarding the change of the branch location of the small-scale financial organization;

b) A written document from the General Director (Director) or an authorized representative proposing the change of the branch location of the small-scale financial organization, clearly stating the reasons for the change;

c) In cases where the branch location changes to another province or city, the application documents must include the written opinion of the People's Committee of the province or city where the small-scale financial organization intends to establish its branch headquarters;

d) Other relevant documents (if necessary) to clarify the contents mentioned in points a, b, and c of Clause 2 of this Article.

The documents specified in Clause 2 of this Article replace the provisions on the documents required for changing the branch location as stipulated in Point 57.3 of Circular No. 02/2008/TT-NHNN dated April 2, 2008, issued by the Governor of the State Bank.

3. The documents submitted by small-scale financial organizations requesting to change the branch location should be sent to the State Bank Branch in the province or city where the branch is located (in cases of changing the location within the provincial or municipal boundaries) or sent to the Central State Bank (in cases of changing the location to another province or city).

4. Within thirty working days from the date of receipt of the complete application documents for changing the branch location as prescribed in Clause 2 of this Article, the State Bank Branch in the province or city where the branch of the small-scale financial organization is located (in cases of changing the location within the provincial or municipal boundaries) or the Central State Bank (in cases of changing the location to another province or city) shall consider and approve the change of the branch location of the small-scale financial organization; if not approved, a written response explaining the reasons for non-approval shall be provided.

5. Within three months from the date of receiving the approval document from the State Bank, the small-scale financial organization must:

a) Register business operations in accordance with the law;

b) Notify the People's Committee of the province or city where the branch is located;

c) Publish in three consecutive central or local newspapers in the language of Vietnam about the change of the branch location;

d) Send a certified copy of the business registration and a photograph of the published notice before the branch operates at the new address to the State Bank Branch in the province or city where the branch of the small-scale financial organization is located (in cases of changing the location within the provincial or municipal boundaries) or to the Central State Bank (in cases of changing the location to another province or city).

The branch may only operate at the new location when it meets the conditions specified in Article 10, Clause 1, Point b of this Circular.

Article 12. Change of Branch Name

1. The Governor of the State Bank authorizes the Director of the State Bank Branch in the province or city where the branch is located to confirm the registration of the name change of the branch within their respective areas.

2. Small-scale financial organizations must submit a written registration of the name change to the State Bank Branch in the province or city according to Appendix No. 02 (attached).

3. Within five working days from the date of receipt of the registration document from the small-scale financial organization, the State Bank Branch in the province or city shall issue a confirmation of the name change registration of the branch according to Appendix No. 05 (attached).

4. Small-scale financial organizations must register business operations in accordance with the law and publicly announce the name change of the branch.

Article 13. Opening, changing name and/or location, and terminating operations of branch offices

1. The Governor of the State Bank of Vietnam authorizes the Director of the State Bank of Vietnam branch in the province/city where the branch is located to confirm registration for the opening, changing name and/or location, and termination of operations of small-scale financial organizations' branch offices within their jurisdiction.

2. Branch offices may only be opened within the province/city directly under the central government where the small-scale financial organization has its branch.

3. Small-scale financial organizations shall consider and decide on the opening of branch offices (including those established through conversion from existing transaction locations) when they meet the following conditions:

a) Having sufficient staff with adequate capability and professional experience to meet the operational requirements of the branch office;

b) Having sufficient physical facilities to meet the operational requirements of the branch office;

c) Having internal regulations in writing to manage the operations of the branch office ensuring safe, effective, and lawful operations.

4. Small-scale financial organizations must submit a registration document for the opening, changing name and/or location, and termination of operations of branch offices to the State Bank of Vietnam branch in the province/city according to Appendix No. 03 (attached).

Specifically, for cases of opening/terminating operations of branch offices, small-scale financial organizations must submit to the State Bank of Vietnam branch in the province/city a registration document accompanied by the Resolution of the Board of Directors related to the opening/termination of operations of branch offices.

5. The General Director (Director) of small-scale financial organizations is authorized to have the head of the branch sign the registration document to be submitted to the State Bank of Vietnam branch in the province/city where the small-scale financial organization's branch is located.

6. Within five working days from the date of receipt of the registration document from the small-scale financial organization, the State Bank of Vietnam branch in the province/city shall issue a confirmation document for the registration of opening, changing name and/or location, and termination of operations of branch offices according to Appendix No. 06 attached to this Circular.

7. Small-scale financial organizations must complete business registration in accordance with the law and commence operations of the branch office within three months from the date of receipt of the confirmation document from the State Bank of Vietnam branch in the province/city.

8. In the case where a small-scale financial organization terminates the operations of a branch office, the small-scale financial organization must fulfill all legal procedures to terminate the operations of the branch office in accordance with the law after receiving the confirmation document from the State Bank of Vietnam branch in the province/city and must publicly announce the termination of the branch office's operations. The branch of the small-scale financial organization where the branch office is subordinate shall assume all rights and obligations of the branch office after it ceases operations.

Article 14. Terminating Operations of Branches

1. A branch of a small-scale financial organization shall cease operations in any of the following circumstances:

a) Voluntary cessation of operations;

b) Compulsory cessation of operations;

c) Automatic cessation of operations.

2. Small-scale financial organizations are responsible for fulfilling the rights and obligations of the branch that ceases operations.

Article 15. Voluntary termination of branch operations

1. The documents for voluntarily terminating the operations of a small-scale financial organization's branch submitted to the State Bank of Vietnam include:

a) The Board of Directors' resolution on the termination of the branch's operations;

b) A document from the General Director (Director) requesting the termination of the branch's operations, specifying the reasons, name, and address of the branch being terminated;

c) A plan for resolving the rights and obligations of the branch being terminated.

2. Within thirty working days from the date of receiving the complete documents as stipulated in Article 15 Clause 1 of this Circular, the Governor of the State Bank shall issue a document approving the request to terminate the branch operations of the small-scale financial organization; if not approved, a document stating the reasons or requirements (if any) for termination shall be issued.

3. Within thirty working days from the date of receiving the approval document from the State Bank, the Chairman of the Board of Directors of the small-scale financial organization must issue a decision to terminate the branch's operations and carry out the legal procedures as prescribed by law.

4. The decision to terminate the branch operations of the small-scale financial organization's Chairman of the Board of Directors must contain the following main contents:

a) The name and address of the branch being terminated;

b) The reason for terminating the branch's operations;

c) The date of termination of the branch's operations;

d) The responsibility of the small-scale financial organization regarding the rights and obligations towards the customers of the terminated branch;

e) Other related contents.

Article 16. Mandatory termination of branch operations

1. The branch of a small-scale financial organization must be mandatorily terminated at the request of the State Bank when it is deemed necessary to ensure the safety and soundness of the small-scale financial organization.

2. In the case stipulated in Article 16 Clause 1 of this Circular, the State Bank shall issue a document requiring the small-scale financial organization to terminate the branch's operations.

3. Within fifteen working days from the date of receipt of the document requesting the termination of the branch's operations from the State Bank, the Chairman of the Board of Directors of the small-scale financial organization must:

a) Submit to the State Bank a plan for resolving the rights and obligations towards the customers of the branch;

b) Issue a decision to terminate the branch's operations; the decision to terminate the branch operations of the small-scale financial organization must contain the contents as prescribed in Article 15 Clause 4 of this Circular;

c) Carry out the legal procedures for terminating the branch's operations as prescribed by law.

Article 17. Automatic termination of branch operations

1. The branch of a small-scale financial organization automatically terminates its operations in the event that the small-scale financial organization ceases operations.

2. The documents, procedures, and formalities for the automatic termination of the branch operations of a small-scale financial organization shall be carried out in accordance with the provisions of the law on the termination of small-scale financial organizations.

Article 18. Announcement of termination of branch operations

1. The decision to terminate the branch operations of a small-scale financial organization must be:

a) Sent to the State Bank of Vietnam;

b) Sent to the State Bank branch in the province or city where the branch being terminated is located and where the small-scale financial organization has its headquarters;

c) Publicly posted at the location of the branch being terminated.

2. Within five days from the date the decision to terminate the branch operations of the small-scale financial organization takes effect, the small-scale financial organization must publish three consecutive notices in central and local newspapers announcing the termination of the branch's operations.

Chapter III

IMPLEMENTATION

Section I. RESPONSIBILITIES OF SMALL FINANCIAL ORGANIZATIONS

Article 19. Reporting

1. Branches of small financial organizations must comply with the financial reporting system and statistical reporting system as prescribed by the State Bank of Vietnam.

2. Branches of small financial organizations shall be responsible for submitting ad hoc reports upon request of the Governor of the State Bank of Vietnam or the State Bank of Vietnam branch in the province or city where the branch is located.

Article 20. Handling Violations

Small financial organizations that violate the provisions set forth in this Circular shall be subject to legal sanctions depending on the nature and severity of the violation.

Section II. RESPONSIBILITIES OF UNITS UNDER THE STATE BANK OF VIETNAM

Article 21. Responsibilities of the Banking Inspection and Supervision Authority

1. Upon receipt of the application file and report from the State Bank of Vietnam branch in the province or city where the headquarters of the small financial organization is located regarding the establishment of a branch as stipulated in Clause 1 of Article 8 of this Circular, the Banking Inspection and Supervision Authority shall be responsible for soliciting opinions from relevant units, compiling them, and presenting them to the Governor of the State Bank of Vietnam for consideration and approval or disapproval of the application to establish a branch of the small financial organization.

2. In cases where a small financial organization applies to establish a branch based on the transformation of an existing branch as stipulated in Clause 2 of Article 8, the Banking Inspection and Supervision Authority shall be responsible for organizing inspections and examinations of existing branches and providing an assessment on whether they meet the conditions for establishing a branch as stipulated in Clause 1 of Article 7 of this Circular before presenting them to the Governor of the State Bank of Vietnam for consideration and approval or disapproval of the application to establish a branch of the small financial organization.

3. After receiving complete applications for terminating the operations of a branch of a small financial organization as stipulated in Clause 1 of Article 15 or based on the circumstances specified in Clause 1 of Article 16 of this Circular, the Banking Inspection and Supervision Authority shall send a document soliciting opinions from the State Bank of Vietnam branch in the province or city where the small financial organization's branch is located; compile and present them to the Governor of the State Bank of Vietnam for consideration and approval or disapproval of the application to terminate the operations of the branch or issue a document requesting the small financial organization to terminate the operations of the branch.

4. It is the lead unit to receive reports from the State Bank of Vietnam branch in the province or city regarding:

a) Changes in the name or location of a branch of a small financial organization.

b) Establishment, change of name and/or location, termination of operations of a transaction office of a small financial organization.

Article 22. Responsibilities of the State Bank of Vietnam Branch in the Province or City Where the Headquarters of the Small Financial Organization Is Located

1. Upon receipt of the complete application file as stipulated in Clause 1 of Article 8 of this Circular, the State Bank of Vietnam branch in the province or city where the headquarters of the small financial organization is located shall be responsible for assessing whether the small financial organization meets the conditions for establishing a branch and providing an opinion of agreement or disagreement to the State Bank of Vietnam Central Office (Banking Inspection and Supervision Authority); in case of disagreement, the reasons must be clearly stated.

2. Shall be accountable to the Governor of the State Bank of Vietnam for the opinions and decisions made as stipulated in Clause 1 of this Article.

Article 23. Responsibilities of the State Bank Branch in the province or city where the small financial organization has a branch

1. Within a maximum period of ten working days from the date of receipt of the request of the Central State Bank (Bank Inspection and Supervision Authority) regarding the small financial organization opening or ceasing operations of its branch, the State Bank branch in the province or city shall provide comments in writing to the Central State Bank (Bank Inspection and Supervision Authority), clearly stating agreement or disagreement; in case of disagreement, the reasons must be specified.

2. Cooperate with the Bank Inspection and Supervision Authority in conducting inspections and examinations as stipulated in Article 21 Clause 2 of this Circular.

3. Manage and supervise the inauguration, operation, and cessation of operations of branches of small financial organizations within its jurisdiction; handle violations according to regulations and report to the Governor of the State Bank.

4. Examine and approve, then report to the Governor of the State Bank on changes in the location of branches of small financial organizations within its jurisdiction.

5. Confirm registration for changing the name of a branch, confirm registration for opening, changing the name and/or location, and ceasing operations of transaction offices of small financial organizations within its jurisdiction.

6. Inspect and supervise the operations of transaction offices of small financial organizations within its jurisdiction.

Upon discovering that transaction offices within its jurisdiction do not meet the conditions prescribed in Article 13 Clause 3 of this Circular, the State Bank branch in the province or city must require the small financial organization to temporarily cease operations of the transaction office and take corrective measures or cease operations of the transaction office; handle violations according to the law.

7. Regularly every quarter or at any time upon request, report to the Central State Bank (Bank Inspection and Supervision Authority) on the situation of opening, changing locations, and ceasing operations of transaction offices for small financial organizations within its jurisdiction.

8. Shall be responsible before the Governor of the State Bank for the opinions and decisions stated in Article 23 of this Circular.

Section III. IMPLEMENTATION PROVISIONS

Article 24. This Circular takes effect from June 12, 2009.

Article 25. The Head of the Office, Heads of relevant units under the State Bank, Governors of State Bank branches directly under the Central Government, Chairmen of Management Boards, General Directors (Directors) of small financial organizations, and related organizations and individuals are responsible for implementing this Circular.

During implementation, if there are any difficulties, they are requested to promptly reflect them to the State Bank for guidance and resolution./.