Decision No. 492/2000/QD-NHNN Regarding the issuance of regulations on capital contribution and share purchase by credit institutions

Pursuant to …;

Issuing Regulations on Capital Contribution and Purchase of Shares by Credit Institutions 

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 and the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997;

Pursuant to the Government Decree No. 15/CP dated March 2, 1993 on the tasks, powers, and responsibilities of state management of ministries and ministerial-level agencies;

Issued herewith are the Regulations on Loan Classification, Provisioning, and Utilization for Credit Risk Management in Banking Activities of Credit Institutions. 

DECISION:

Article 1.

These Regulations are promulgated together with this Decision.

Article 2.

This Decision shall take effect fifteen days from the date of signature. The following provisions on capital contribution and purchase of shares in the below-mentioned documents shall be repealed:

1. Circular on Ensuring Safety in Currency and Credit Business for Credit Institutions issued pursuant to Decision No. 107/QĐ-NH5 dated June 9, 1992 of the Governor of the State Bank of Vietnam.

2. Circular No. 10/TT-NH5 dated July 6, 1992 of the Governor of the State Bank of Vietnam guiding the implementation of the Circular on Ensuring Safety in Currency and Credit Business for Credit Institutions.

3. Directive No. 08-CT/NH5 dated July 23, 1997 of the Governor of the State Bank of Vietnam on Rectifying Joint Venture Investment and Share Purchase Activities of Commercial Banks and the Vietnam Development Bank.

4. Charter on Shareholders, Shares, and Registered Capital of Joint Stock Credit Institutions issued pursuant to Decision No. 275/QĐ-NH5 dated November 7, 1994 of the Governor of the State Bank of Vietnam.

Article 3.

The Director of the Office, Heads of Departments of Commercial Banks and Non-Bank Financial Institutions under the State Bank of Vietnam, Heads of Branches of the State Bank of Vietnam in provinces and centrally-administered cities, Chairmen of Management Boards, General Directors (Directors) of credit institutions are responsible for implementing this Decision./.

 

REGULATIONS ON CAPITAL CONTRIBUTION AND PURCHASE OF SHARES BY CREDIT INSTITUTIONS

(Issued together with Decision No. 492/2000/QĐ-NHNN5 dated November 28, 2000 of the Governor of the State Bank of Vietnam)

 

PART I - GENERAL PROVISIONS

Article 1.

1. Credit institutions of the following types may use their charter capital and reserve funds to contribute capital and purchase shares of enterprises and other credit institutions in accordance with these Regulations and other relevant laws:

a) Banks:

- Commercial banks

- Development banks

- Investment banks

b) Non-bank financial institutions:

- Finance companies

2. Cooperative credit institutions shall contribute capital and purchase shares of enterprises and other credit institutions in accordance with specific regulations of the State Bank of Vietnam. Cooperative credit institutions shall contribute capital and purchase shares of enterprises and other credit institutions in accordance with specific regulations of the State Bank of Vietnam.

 

PART II - SPECIFIC PROVISIONS

Article 2.

Credit institutions may contribute capital and purchase shares of enterprises and other credit institutions as follows:

1. Contributing capital and purchasing shares of enterprises:

a) Contributing capital with foreign investors to establish joint ventures;

b) Purchasing shares of joint stock companies.

2. Contributing capital and purchasing shares of other credit institutions:

a) Contributing capital with foreign credit institutions to establish joint venture credit institutions;

b) Contributing capital and purchasing shares of joint stock credit institutions.

Article 3.

1. The maximum level of capital contribution and share purchase by a credit institution in a single enterprise relative to the charter capital of that enterprise shall not exceed the following ratios:

            a) Banks: 11%

            b) Non-bank financial institutions (Finance companies): 20%

2. In cases where a credit institution contributes capital with foreign investors to establish a joint venture in Vietnam, the level of capital contribution shall comply with the provisions of the Law on Foreign Investment in Vietnam, other relevant laws, and must be approved in writing by the Governor of the State Bank of Vietnam.

3-The total amount of capital contribution and share purchase by a credit institution in all enterprises relative to its charter capital and reserve fund shall not exceed the following ratios:

            a) Banks: 30%

            b) Non-bank financial institutions (Finance companies): 40%

Article 4.

The level of capital contribution and share purchase by a credit institution in another credit institution, and the total amount of capital contribution and share purchase by a credit institution in all other credit institutions shall be stipulated by the credit institution. The total amount of capital invested by a credit institution in another credit institution through capital contribution and share purchase must be deducted from its own capital when calculating the minimum capital adequacy ratio.

In cases where a credit institution contributes capital with a foreign credit institution to establish a joint venture credit institution in Vietnam, the level of capital contribution shall comply with the provisions of Decree No. 13/1999/NĐ-CP dated March 17, 1999 of the Government on the organization and operation of foreign credit institutions and representative offices of foreign credit institutions in Vietnam, and other relevant laws.

Article 5.

The application dossier for the State Bank of Vietnam's approval of joint venture capital contribution with foreign investors as stipulated in Clause 4, Article 3 of these Regulations shall include:

1. A document from the Chairman of the Management Board or his authorized representative requesting the Governor of the State Bank of Vietnam to approve the joint venture capital contribution, including a summary of the necessity of the joint venture capital contribution; the name and address of the foreign investor; the level of capital contribution by each party; the content and scope of joint venture activities.

2. An authorization document from the Chairman of the Management Board (in case of delegation).

3-The draft joint venture plan shall clearly state the necessity and economicefficiency of the joint venture capital contribution; the name and address of theforeign investor; the financial situation of the foreign investor for the last threeyears; the level of capital contribution from each party; the content and scope ofjoint venture activities; the operation plan for the first three years.

 

CHAPTER III - IMPLEMENTATION PROVISIONS

Article 6.

Credit organizations that have contributed capital or purchased shares ofenterprises in accordance with current regulations but now do not fall within thescope of entities allowed to contribute capital or purchase shares, or whose levelof capital contribution or share purchases exceeds the maximum ratios stipulatedin this Regulation, must take measures to self-adjust within two years from thedate this Regulation takes effect to comply with the provisions of this Regulation.

Article 7.

Credit organizations shall report on their capital contributions and sharepurchases of enterprises and other credit organizations as prescribed in thisRegulation according to the accounting and banking statistics reporting systemof the State Bank of Vietnam.

Article 8.

Credit organizations violating the provisions of this Regulation shall bepunished according to the nature and degree of violation as stipulated in DecreeNo. 20/2000/NĐ-CP dated June 15, 2000 of the Government on administrativepenalties for violations in the monetary and banking sectors.

Article 9.

Amendments and supplements to the provisions of this Regulation shall bedecided by the Governor of the State Bank of Vietnam./.