Circular No. 178/NH-TT guiding the implementation of the regulations on foreign bank branches and joint venture banks operating in Vietnam

CIRCULAR

OF THE STATE BANK OF VIETNAM

Guidelines for Implementing the Rules on Expenses

for foreign banks' branches, joint venture banks operating in Vietnam

The Council of Ministers has issued Decree No. 189-HĐBT dated June 15, 1991, promulgating the "Rules on Foreign Banks' Branches and Joint Venture Banks Operating in Vietnam," the State Bank provides additional guidance as follows:

I. GENERAL ISSUES

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

1.1. "Home country bank" means a foreign bank established under the laws of a foreign country with a branch operating in Vietnam;

1.2. "Foreign bank's branch" means a part of the home country bank permitted to operate in Vietnam;

1.3. "Dependent branch" means a dependent part of a foreign bank's branch operating in Vietnam;

1.4. "Joint venture bank" means a bank established through the contribution of capital by a Vietnamese bank (one or more banks) and a foreign bank (one or more banks) based on a joint venture agreement, with its headquarters in Vietnam;

1.5. "Branch of a joint venture bank" means a part of the joint venture bank operating in Vietnam;

1.6. "Allocated capital" means the capital of a foreign bank's branch provided by the home country bank to operate in Vietnam;

1.7. "Charter capital" means the capital contributed by the Vietnamese bank and the foreign bank according to the Articles of Association of the joint venture bank.

2. A foreign bank's branch may open a dependent branch to operate in Vietnam upon approval by the State Bank.

A foreign bank's branch and its dependent branch are considered a single legal entity.

3. A joint venture bank may open a branch to operate in Vietnam and abroad upon approval by the State Bank. The joint venture bank and its branch are considered a single legal entity.

II. DOCUMENTS AND PROCEDURES FOR APPLICATION

FOR PRINCIPAL APPROVAL LETTER AND OPERATING LICENSE

1. Documents for applying for a principal approval letter include:

1.1. Application for a principal approval letter (Annex 1 and 2).

1.2. Supporting documents attached to the application include:

a) Operating license of the home country bank;

b) Current articles of association of the home country bank;

c) Confirmation from an authorized body in accordance with the laws of the home country allowing the home country bank to establish a branch or joint venture in Vietnam;

d) Certificate from an authorized body in accordance with the laws of the home country regarding the charter capital and actual contributions of the home country bank for the current year;

e) Summary balance sheet, profit and loss statement, and report on operational status over the last three years of the home country bank;

g) Business plan in Vietnam, including a three-year operational plan;

h) Brief history of the establishment and development of the home country bank confirmed by the Central Bank or Ministry of Finance;

i) Summary of cooperation between the home country bank and Vietnamese banks and economic organizations;

k) In the case of establishing a joint venture bank, in addition to the above documents, the joint venture parties must submit to the State Bank a draft joint venture agreement between the Vietnamese bank and the foreign bank participating in the joint venture bank;

l) Other documents requested by the State Bank.

1.3. Within three months from the date of receipt of complete documents, the State Bank will consider issuing a principal approval letter for opening a foreign bank's branch or joint venture bank in Vietnam (Annex 3). If rejected, the State Bank will notify the applicant of the reasons.

1.4. The principal approval letter is valid for twelve months from the date of issuance. Within this period, the foreign bank and the joint venture bank parties must submit further necessary documents to the State Bank to apply for an operating license. Beyond this period, the principal approval letter becomes invalid.

2. Documents for applying for an operating license:

2.1. Application for an operating license for a foreign bank's branch in Vietnam (Annex 4), signed by the Chairman of the Board of Directors.

2.2. Application for an operating license for a joint venture bank (Annex 5), jointly signed by the authorized representatives of each party participating in the joint venture bank.

2.3. Power of attorney for the signatories of the documents.

2.4. Supporting documents attached to the application for an operating license include:

a) List of foreign staff and number of Vietnamese staff working at the foreign bank's branch, joint venture bank (Annex 6);

b) Brief resumes of the Branch Manager of the foreign bank, members of the Board of Directors, and Management Board of the joint venture bank (Annex 7);

c) Legal documents appointing the Branch Manager of the foreign bank, members of the Board of Directors, and Management Board of the joint venture bank;

d) Other documents requested by the State Bank.

2.5. For joint venture banks, in addition to the above documents, the joint venture parties must submit to the State Bank the following documents:

2.5.1. Official joint venture agreement containing the following main contents:

a) Name, address, nationality of the representative for each party participating in the joint venture;

b) Name of the joint venture bank;

c) Location of the head office;

d) Duration of operation;

e) Charter capital: ratio of capital contribution by each party, including contributions in foreign currency, Vietnamese dong, and in kind if applicable; capital contribution plan;

g) Number of Board of Directors members and number of staff, ratio of staff from each side;

h) Financial principles: accounting, establishment and use of funds;

i) Profit and loss sharing ratio for each party participating in the joint venture;

k) Procedures for resolving disputes between parties arising from the implementation of the joint venture agreement, procedures for dissolution and liquidation;

l) Arbitration body and applicable law in case of dispute;

m) Obligations of the parties in implementing the joint venture agreement;

n) Conditions for amending and supplementing the joint venture agreement;

o) Contract conditions for the joint venture to take effect.

2.5.2. Draft articles of association of the joint venture bank.

2.6. Within three months from the date of receipt of all the documents specified in point 2 of Section II, the State Bank will consider issuing an operating license for the foreign bank's branch and joint venture bank.

In case of refusal to issue the business license, the State Bank shall notify the bank that submitted the application with the reasons.

3. The documents mentioned in Points 1 and 2 of Section II hereof shall be made in two copies, one copy in one of the three languages English, French, Russian, and one copy in Vietnamese. Copies in foreign languages of the original document must be certified by the notary office of the country of origin; Vietnamese translations must be certified by a Vietnamese notary office.

4. In cases where it is necessary to change or supplement the contents of the issued business license, the Branch of Foreign Bank, Joint Stock Bank must request the State Bank for approval in writing.

5. Within fifteen days from the date of the following changes, the Branch of Foreign Bank, Joint Stock Bank must notify the State Bank in writing.

5.1. Appointment or dismissal of the Branch Manager of the Foreign Bank;

5.2. Changes or supplements to the Charter of the Home Bank;

5.3. Personnel changes in the Board of Directors and Management Board of the Home Bank;

5.4. Change of address of the Home Bank.

III. PROCEDURES FOR OPENING AND OPERATING

1. License fee for business operation:

Within fifteen days from the date of issuance of the business license, the Branch of Foreign Bank, Joint Stock Bank must pay a registration fee of 0.2% (two thousandths) in US dollars or freely convertible foreign currency equivalent to the authorized capital or charter capital at the State Bank's headquarters.

This fee cannot be deducted from the authorized capital of the Branch of Foreign Bank or the charter capital of the Joint Stock Bank and will not be refunded.

2. Regarding the authorized capital of the Branch of Foreign Bank, the charter capital of the Joint Stock Bank:

2.1. Within six months from the date of issuance of the business license and no later than fifteen days before the opening date, the Branch of Foreign Bank, Joint Stock Bank must transfer the entire authorized capital or charter capital into a temporary account in foreign currency opened at the State Bank.

The balance on the temporary deposit account will not earn interest until the opening date.

2.2. For Joint Stock Banks with charter capital contributed in Vietnamese dong; if permitted by the State Bank, they must open a temporary account in Vietnamese dong at the State Bank.

The balance on the temporary deposit account will not earn interest until the opening date.

2.3. In cases where the authorized capital or charter capital includes part in kind, the Branch of Foreign Bank, Joint Stock Bank must present to the State Bank legal documents proving ownership and value of the assets.

2.4. After the opening date, the Branch of Foreign Bank, Joint Stock Bank may transfer the authorized capital or charter capital from the temporary account (in foreign currency and Vietnamese dong) into their operational accounts at the State Bank, commercial banks in Vietnam, or foreign banks.

The authorized capital of the Branch of Foreign Bank and the charter capital of the Joint Stock Bank must always be fully reflected on the accounts of the Branch of Foreign Bank and Joint Stock Bank.

3. Opening operations:

3.1. Within six months from the date of issuance of the business license by the State Bank, the Branch of Foreign Bank, Joint Stock Bank must complete the business registration procedures, register the opening date, and commence operations.

3.2. In special cases where it is not possible to open operations on time, the Branch of Foreign Bank, Joint Stock Bank may request the State Bank to consider extending the opening date.

Upon expiration of the prescribed period, if operations have not commenced, the State Bank will revoke the issued business license and process the refund of the temporarily held capital (if any), after deducting the prescribed fees.

3.3. At least thirty days prior to the opening date, the Branch of Foreign Bank, Joint Stock Bank must publish notices in five consecutive daily newspapers in Vietnamese (at least one central newspaper and one local newspaper where the headquarters is located), including the following contents:

a) Full name and abbreviation of the Branch of Foreign Bank, name of the Home Bank, or full name and abbreviation of the Joint Stock Bank, names of the participating banks in the joint venture;

c) Authorized capital or charter capital;

d) Scope of activities;

e) Duration of operation;

g) Name, nationality of the branch manager, Chairman of the Board of Directors, and General Director of the Joint Stock Bank;

h) Number and date of the business license issued by the State Bank;

i) Number and date of the business registration certificate, issuing authority;

k) Other characteristics deemed necessary;

l) Opening date.

3.4. The Branch of Foreign Bank, Joint Stock Bank only has legal personality from the date of issuance of the business registration certificate and is only allowed to use its name in transactions from the official opening date.

The duration of operation of the Branch of Foreign Bank, Joint Stock Bank is calculated from the opening date.

4. On the establishment of dependent branches of the Branch of Foreign Bank and branches of the Joint Stock Bank:

4.1. Conditions for consideration of establishment:

a) Having operated for at least thirty-six months from the opening date.

In special cases, due to the need for banking services, the Governor of the State Bank may consider establishing dependent branches of the Branch of Foreign Bank and branches of the Joint Stock Bank earlier than the specified period.

b) Not violating penalties stipulated in Article 47 of the Banking Ordinance, Credit Cooperative, and Financial Company Law.

c) Not violating current laws related to Vietnam.

4.2. Procedures and necessary documents for the Branch of Foreign Bank to establish dependent branches and for the Joint Stock Bank to apply for branch establishment will be guided in writing by the State Bank.

IV. CONTENT AND SCALE OF OPERATIONS

1. Scope and Content of Operations:

1.1 The scope and content of operations of the Branch of Foreign Bank, Joint Stock Bank in Vietnam are defined in the business license issued by the State Bank.

1.2. A foreign bank branch or a joint venture bank may only conduct business operations in foreign currencies and Vietnamese dong as specified in the operating license issued by the State Bank.

1.3. During the course of operation, if there is a need to expand the scope and content of activities, a foreign bank branch or a joint venture bank may submit an application to the State Bank for consideration to supplement such permission.

1.4. In case of a need for Vietnamese dong capital for operations, a foreign bank branch or a joint venture bank may sell foreign currency to the State Bank, commercial banks, or at domestic foreign exchange trading centers upon approval by the State Bank.

Additionally, a foreign bank branch or a joint venture bank may mobilize Vietnamese dong capital within the extent and scope specifically stipulated in the operating license issued by the State Bank.

1.5. The ratio of Vietnamese dong capital mobilization of a foreign bank branch or a joint venture bank is specified in the operating license issued by the State Bank.

2. Opening accounts:

2.1. A foreign bank branch or a joint venture bank may open transaction accounts with the State Bank, Vietnamese commercial banks, or foreign banks.

2.2. A foreign bank branch or a joint venture bank must open a deposit account with the State Bank and maintain therein a minimum required reserve ratio as prescribed by the Governor of the State Bank during each period.

2.3. The total outstanding loans of a foreign bank branch or a joint venture bank to a single customer shall not exceed 10% of the authorized capital (or charter capital) and reserve fund.

The total outstanding loans to the ten largest customers shall not exceed 30% of the total outstanding loans of a foreign bank branch or a joint venture bank.

3. A foreign bank branch or a joint venture bank must comply fully with all relevant provisions recorded in the State Bank Law, Bank Law, Credit Cooperative Law, Financial Company Law, and other regulations promulgated by the Governor of the State Bank of Vietnam.

V. FINANCE, ACCOUNTING AND REPORTING REGIME

1. Fiscal year:

1.1. The fiscal year of a foreign bank branch or a joint venture bank begins on January 1 and ends on December 31 of each calendar year.

1.2. The first fiscal year starts from the date of commencement of operations and ends on December 31 of that year.

1.3. To prepare financial reports for the home country's bank, a foreign bank branch or a joint venture bank may use the fiscal year of the home country's bank.

2. Accounting:

2.1. A foreign bank branch or a joint venture bank must carry out accounting and statistical records in accordance with current Vietnamese accounting and statistical laws and apply the current system of accounts issued by the State Bank.

2.2. A foreign bank branch or a joint venture bank must perform accounting in Vietnamese dong. In cases where accounting is conducted in foreign currency, it must be approved by the State Bank.

3. Reporting:

3.1. A foreign bank branch or a joint venture bank must submit periodic accounting, statistical, and operational reports to the State Bank and the tax authority under the Ministry of Finance as follows:

3.1.1. Monthly report, to be submitted no later than the 15th day of the following month, including:

a) Balance sheet.

b) Statistical reports (in accordance with the statistical regime and types of statistical forms prescribed by the State Bank for non-state-owned credit institutions).

3.1.2. Quarterly report, to be submitted no later than the last day of the first month of the next quarter, including:

a) Reports as specified in point 3.1.1 above.

b) Operational situation report for the quarter (excluding the final quarter of the fiscal year).

3.1.3. Annual report, to be submitted within six months from the end of the fiscal year, including:

a) Asset summary statement;

b) Profit and loss statement and profit distribution statement;

c) Annual operational situation report.

3.2. The asset summary statement and profit and loss statement of a foreign bank branch or a joint venture bank in Vietnam must be verified and confirmed by an accountant auditor.

The accountant auditor must be recognized by the State Bank.

3.3. A foreign bank branch or a joint venture bank must submit the annual report of the home country's bank to the State Bank no later than six months after the end of the fiscal year, including:

a) Asset summary statement;

b) Profit and loss statement;

c) Operational situation report for the fiscal year.

3.4. The reports listed in point 3.1 of this section must be expressed in Vietnamese dong.

3.5. Monthly, quarterly, and annual reports sent to the State Bank must include one copy in Vietnamese and one copy in a foreign language (one of three languages: English, French, or Russian).

4.1. A foreign bank branch or a joint venture bank must fully and promptly fulfill its financial obligations and taxes as prescribed by Vietnamese law.

4.2. After the fiscal year settlement and full and prompt fulfillment of financial obligations as prescribed by Vietnamese law, as well as setting up reserves as stipulated in the Bank Law, Credit Cooperative Law, and Financial Company Law, a foreign bank branch or a foreign bank in a joint venture bank may repatriate its share of profits according to Article 33 of the Foreign Investment Law and Article 73 of Decree No. 28-HĐBT dated February 6, 1991 of the Council of Ministers.

4.3. The transfer of authorized capital and charter capital abroad by a foreign bank branch or a joint venture bank when ceasing operations or being dissolved must be carried out in accordance with the provisions of point 2 of Article 85 of Decree No. 28-HĐBT dated February 6, 1991 of the Council of Ministers.

Specialized internal inspection organizations are responsible for regularly reporting to the State Bank of Vietnam's Inspectorate and the credit institution's Board of Supervisors on internal inspection and auditing programs and key outcomes of inspection activities;

1. A foreign bank branch or a joint venture bank shall have its operating license revoked in the following circumstances:

1.1. Six months after the issuance of the operating license or the expiration of the extension period granted by the State Bank without commencing operations or failing to fully comply with the procedures for commencing operations.

1.2. Conducting business outside the scope and content specified in the operating license.

1.3. Violating the State Bank Law, Bank Law, Credit Cooperative Law, Financial Company Law, and current Vietnamese laws.

1.4. Unilaterally splitting off, merging, or dissolving.

1.5. Ceasing transactions affecting customers without lawful reasons and without prior notice to customers.

1.6. Having the business registration certificate revoked.

1.7. The home country bank of the foreign bank branch being declared bankrupt.

1.8. Transferring the operating license issued by the State Bank.

1.9. Suspension of operations during the validity period of the license.

2. For foreign bank branches and joint venture banks operating in Vietnam under licenses issued before June 15, 1991, within six months from the date this Circular takes effect, they must complete the following procedures for the State Bank to issue new operating licenses.

2.1. Supplementing documents as prescribed in point 2, Section II of this Circular and submitting them to the State Bank.

2.2. Reporting on authorized capital and current charter capital and having sufficient capital as stipulated in Article 4 of the regulations.

2.3. Submitting to the State Bank financial statements, statistical reports, and operational status from the date of establishment to the reporting date (as prescribed in point 3, Section V of this Circular).

2.4. Completing the payment of a fee of 0.2% (two thousandths) of the authorized capital or charter capital to the State Bank, if not paid previously or insufficiently paid, as prescribed in point 1, Section III of this Circular.

3. This Circular takes effect from the date of issuance.

4. Amendments and supplements to this guiding Circular shall be decided by the Governor of the State Bank./.