Circular No. 51/2018/TT-NHNN on conditions, documents, procedures, and formalities for approving capital contributions, share purchases by credit institutions

CIRCULAR

Specifies conditions, documents, procedures, and formalities for approving the contribution of capital and purchase of shares by credit institutions.

Approving the contribution of capital and purchase of shares by credit institutions.

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Based on the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010; the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 17/2017/QH14 dated November 20, 2017;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam issues this Circular to stipulate the conditions, documents, procedures, and formalities for approving the contribution of capital and purchase of shares by credit institutions.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular stipulates the conditions, documents, procedures, and formalities for approving the contribution of capital and purchase of shares by credit institutions, including:

a) Commercial banks contribute capital and purchase shares to: (i) Establish, acquire subsidiaries or associated companies within the country operating in the fields of securities issuance guarantee, securities brokerage; management and distribution of investment fund certificates; stock portfolio management and stock trading; insurance; debt management and asset exploitation; remittances; foreign exchange and gold trading; payment intermediary services; credit information; (ii) Acquire subsidiaries or associated companies within the country operating in the fields of financial leasing; factoring; consumer credit; credit card issuance;

b) Commercial banks contribute capital and purchase shares in other domestic enterprises operating outside the fields of insurance, securities, remittances, foreign exchange and gold trading, factoring, credit card issuance, consumer credit, payment intermediary services, credit information;

c) Financial companies contribute capital and purchase shares to establish, acquire subsidiaries or associated companies within the country operating in the fields of insurance, securities, debt management and asset exploitation;

d) Converting bad debts of commercial banks into contributed capital to handle bad debts of domestic enterprises operating outside the fields of insurance, securities, remittances, foreign exchange and gold trading, factoring, credit card issuance, consumer credit, payment intermediary services, credit information.

This Circular does not apply to the case where commercial banks contribute capital and purchase shares to establish credit institutions.

Article 2. Applicability

1. Commercial banks and financial companies (hereinafter referred to collectively as credit institutions).

2. Organizations and individuals related to the contribution of capital, purchase of shares, and conversion of debts into contributed capital by credit institutions.

Article 3. Principles of dossier preparation and submission

1. The documents of credit institutions must be prepared according to the following principles:

a) Documents must be prepared in Vietnamese. In cases where documents are issued, certified, or authenticated by competent authorities of foreign countries, they must be legalized according to Vietnamese law (except in cases exempted from legalization under Vietnamese law on legalization) and translated into Vietnamese;

b) Translations from foreign languages into Vietnamese must be notarized or certified by the translator according to Vietnamese law;

c) Submitted documents must be original copies or certified copies issued from the original books or copies with certification or copies accompanied by presentation of the original for comparison; in cases where credit institutions submit copies accompanied by presentation of the original for comparison, the person comparing must sign and bear responsibility for the accuracy of the copy compared to the original;

d) Documents requesting the State Bank of Vietnam (hereinafter referred to as the State Bank) to approve must be signed by the legal representative or authorized representative (hereinafter referred to as the legal representative). In cases of signing by authorization, the documents must include an authorization document established in accordance with Vietnamese law.

2. Credit institutions send documents to the State Bank either directly or through postal service.

Chapter II

CONDITIONS, DOCUMENTS, PROCEDURES FOR APPROVAL OF CAPITAL CONTRIBUTION AND PURCHASE OF SHARES

Article 4. Conditions for Implementing Capital Contribution and Purchase of Shares by Credit Institutions

1. Conditions for Implementing Capital Contribution and Purchase of Shares to Establish or Acquire Subsidiaries as stipulated in point a and c, Clause 1, Article 1 of this Circular (excluding subsidiaries operating in the field of debt management and asset exploitation):

a) A license for establishment and operation of credit institutions containing the content of capital contribution and share purchase;

b) Ensuring the minimum capital adequacy ratio as prescribed in point b, Clause 1, Article 130 of the Law on Credit Institutions in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

c) Ensuring the capital contribution and share purchase ratio as prescribed in Article 129 of the Law on Credit Institutions in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

d) The actual value of the registered capital at the time of completion of the capital contribution and share purchase shall not be lower than the statutory capital;

đ) Profitable business results according to the financial statements of the year immediately preceding the application year, audited by an independent auditing organization;

e) Not being subject to administrative penalties for classification of debts, provision for risk management, capital contribution, and share purchase in the 12 months immediately preceding the month of application;

g) Having a non-performing loan ratio to total outstanding loans less than 3% in the 12 months immediately preceding the month of application;

h) Having an organizational structure, Board of Directors, Board of Members, Supervisory Board, General Director (Director) in accordance with the Law on Credit Institutions and regulations of the State Bank of Vietnam.

2. Conditions for Implementing Capital Contribution and Purchase of Shares to Establish or Acquire Associated Companies as stipulated in point a and c, Clause 1, Article 1 of this Circular (excluding associated companies operating in the field of debt management and asset exploitation):

a) The conditions prescribed at points a, d, đ, e, g, h Clause 1 of this Article;

b) Ensuring the minimum capital adequacy ratio as prescribed in point b, Clause 1, Article 130 of the Law on Credit Institutions in the 12 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

c) Ensuring the capital contribution and share purchase ratio as prescribed in Article 129 of the Law on Credit Institutions in the 12 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam.

3. Conditions for implementing capital contribution and share purchase to establish, acquire subsidiaries and associated companies operating in asset management and exploitation fields:

a) Conditions prescribed in point a, Clause 1 of this Article;

b) Ensuring the capital contribution and share purchase ratio as prescribed in Article 129 of the Law on Credit Institutions at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

c) Having a non-performing loan ratio to total outstanding loans over 3% in the 12 months immediately preceding the month of application.

4. Conditions for contributing capital, purchasing shares for other enterprises operating in the fields prescribed at point b Clause 1 Article 1 of this Circular:

a) The conditions prescribed in Clause 1 of this Article;

b) Ensuring the maximum proportion of short-term capital used for medium- and long-term lending as prescribed in point c, Clause 1, Article 130 of the Law on Credit Institutions and regulations of the State Bank of Vietnam in the 24 months immediately preceding the month of application.

5. Conditions for Implementing Debt Conversion into Capital Contribution as stipulated in point d, Clause 1, Article 1 of this Circular:

a) The conditions prescribed at points a, b, c, d, đ, e, h Clause 1 of this Article;

b) The debt to be converted into capital contribution must be bad debt, and the conversion of debt into capital contribution is for the purpose of resolving bad debt. Bad debt is debt determined according to the classification of assets, provisioning levels, risk provisioning methods, and the use of risk provisions in the operations of credit institutions and foreign bank branches as prescribed by the State Bank of Vietnam.

Article 5. Documents for Requesting Approval of Capital Contribution and Share Purchase by Credit Institutions

1. Documents for Requesting Approval of Capital Contribution and Share Purchase to Establish or Acquire Subsidiaries and Associated Companies as stipulated in point a and c, Clause 1, Article 1 of this Circular (excluding subsidiaries and associated companies operating in the field of debt management and asset exploitation) include:

a) A document from the credit institution requesting approval of the capital contribution and share purchase as specified in the Appendix attached to this Circular;

b) A document from the competent authority of the credit institution approving the capital contribution and share purchase;

c) The proposal of the credit institution on capital contribution, share purchase, which must minimally include the following contents:

(i) Name (in Vietnamese and foreign language), main office address of the credit organization contributing capital and purchasing shares;

(ii) Name (in Vietnamese and foreign language), main office address, business content, duration of operation of the enterprise receiving capital contribution, share purchase;

(iii) Reason and necessity for the capital contribution and share purchase;

(iv) Estimated amount of capital contribution, proportion of contributed capital; estimated number of shares and proportion of share ownership at the enterprise receiving capital contribution and share purchase;

(v) Registered capital, actual value of registered capital of the credit organization before implementing the capital contribution and share purchase;

(vi) Estimated registered capital, actual value of registered capital of the credit organization after completing the capital contribution and share purchase;

(vii) Non-performing loan ratio to total outstanding loans of each month in the 12 months immediately preceding the month of application;

(viii) Situation regarding compliance with regulations on classification of debts, provision for risk management, capital contribution, and share purchase in the 12 months immediately preceding the month of application;

(ix) Minimum capital adequacy ratio in the 12 months immediately preceding (for the case of capital contribution and share purchase to establish or acquire associated companies) or 24 months immediately preceding (for the case of capital contribution and share purchase to establish or acquire subsidiaries) before the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(x) Capital contribution and share purchase ratio in the 12 months immediately preceding (for the case of capital contribution and share purchase to establish or acquire associated companies) or 24 months immediately preceding (for the case of capital contribution and share purchase to establish or acquire subsidiaries) before the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(xi) Organizational structure of the credit institution; organizational structure, functions, duties, and powers of the Board of Directors, Board of Members, Supervisory Board, General Director (Director) in accordance with the Law on Credit Institutions and regulations of the State Bank of Vietnam;

(xii) Major shareholders and related parties of major shareholders of subsidiaries and associated companies after establishment or acquisition by the credit institution as prescribed by the Law on Credit Institutions and regulations of the State Bank of Vietnam;

(xiii) Assessment of the impact of capital contribution and share purchase on the financial situation, governance, management, and operations of the credit organization;

d) Financial statements of the year immediately preceding the application year of the credit institution, audited by an independent auditing organization;

đ) Copy of the Business Registration Certificate of the enterprise receiving capital contribution, share purchase.

2. The documents for requesting approval of capital contribution and share purchase to establish, acquire subsidiaries and associated companies operating in the field of debt management and asset exploitation shall include:

a) The components of documents prescribed at points a, b, đ Clause 1 of this Article;

b) A proposal from the credit institution regarding the capital contribution and share purchase, which must minimally include the contents prescribed in point c(i), c(ii), c(iii), c(iv), and c(vii), Clause 1 of this Article and information about the capital contribution and share purchase ratio at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam.

3. Documents for requesting approval for contributing capital, purchasing shares for other enterprises operating in the fields prescribed at point b Clause 1 Article 1 of this Circular include:

a) The components of documents prescribed at points a, b, d, đ Clause 1 of this Article;

b) A proposal from the credit institution regarding the capital contribution and share purchase, which must minimally include the contents prescribed in point c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(vii), c(viii), c(xi), c(xii), c(xiii), Clause 1 of this Article and the following contents:

(i) Minimum capital adequacy ratio in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(ii) Capital contribution and share purchase ratio in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(iii) Maximum proportion of short-term capital used for medium- and long-term lending in the 24 months immediately preceding the month of application.

4. Documents for Requesting Approval of Debt Conversion into Capital Contribution as stipulated in point d, Clause 1, Article 1 of this Circular include:

a) The components of documents as specified in point a and b, Clause 1 of this Article;

b) A copy of the Business Registration Certificate of the enterprise with the debt to be converted into capital contribution.

c) The project of the credit institution on contributing capital, purchasing shares, which must include at least the contents specified in points c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(viii), c(xi), c(xii), c(xiii) of Clause 1 of this Article and the following information:

(i) Minimum capital adequacy ratio in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(ii) Capital contribution and share purchase ratio in the 24 months immediately preceding the month of application and at the time of completion of the capital contribution and share purchase according to the approval of the State Bank of Vietnam;

(iii) Information about the debt to be converted into contributed capital, including: The actual status of the debt expected to be converted into contributed capital (the balance of the debt, the loan classification, the recoverability of the debt); The amount of contributed capital, the proportion of contributed capital or the number of shares, the ownership ratio of shares formed from converting debt into contributed capital.

Article 6. Procedures and formalities for approving the contribution of capital and purchase of shares by credit institutions

1. The credit institution shall prepare two sets of files in accordance with Article 5 of this Circular and submit them to the State Bank of Vietnam (through the Banking Inspection and Supervision Authority). In case the file is incomplete or invalid, within seven days from the date of receipt of the file, the Banking Inspection and Supervision Authority shall issue a document requesting the credit institution to supplement the file.

2. Within seven days from the date of receiving complete and valid files, the Banking Inspection and Supervision Authority shall issue a document along with the file to seek opinions:

a) The State Bank of Vietnam branch in the province or city where the credit institution's headquarters is located regarding compliance with the conditions stipulated in this Circular;

b) Relevant units under the State Bank of Vietnam concerning the contribution of capital, purchase of shares, and conversion of debt into contributed capital by the credit institution (if necessary).

3. Within ten days from the date of receiving the document seeking opinions from the Banking Inspection and Supervision Authority, the units requested to provide opinions in Clause 2 of this Article shall issue written opinions and send them to the Banking Inspection and Supervision Authority on the matters sought.

4. Within fourteen days from the date of receiving opinions from relevant units, the Banking Inspection and Supervision Authority shall review the file and submit it to the Governor of the State Bank of Vietnam for examination and approval or disapproval of the contribution of capital, purchase of shares, and conversion of debt into contributed capital as proposed by the credit institution.

5. Within forty-five days from the date of receiving complete and valid files, the State Bank of Vietnam shall issue a document approving or disapproving the contribution of capital, purchase of shares, and conversion of debt into contributed capital by the credit institution; in case of disapproval, the State Bank of Vietnam shall issue a document specifying the reasons.

6. Within twelve months from the date the State Bank of Vietnam issues the approval document, the credit institution must complete the contribution of capital, purchase of shares, and conversion of debt into contributed capital. Beyond this period, the State Bank of Vietnam's approval document shall automatically become ineffective.

Chapter III

IMPLEMENTING PROVISIONS

Article 7. Effective Date

1. This Circular takes effect from March 1, 2019.

2. From the date this Circular takes effect, the following provisions shall cease to be effective:

a) Circular No. 04/1999/TT-NHNN5 dated November 2, 1999 of the Governor of the State Bank of Vietnam guiding the establishment of Securities Companies by Commercial Banks;

b) Decision No. 1389/2001/QD-NHNN dated November 7, 2001 of the Governor of the State Bank of Vietnam on the establishment of Asset Management and Property Exploitation Companies directly under commercial banks;

c) Decision No. 951/2003/QD-NHNNdated August 18, 2003 of the Governor of the State Bank of Vietnam promulgating regulations on the establishment and operation of Remittance Companies directly under state-owned joint-stock commercial banks and people's banks;

For coal-fired thermal power plants where the enterprise holds 100% of the registered capital and uses 100% of its own capital to invest in the project approved by the competent authority, E is determined as 100%;Circular No. 24/2011/TT-NHNN dated August 31, 2011 of the Governor of the State Bank of Vietnam for implementing simplified administrative procedures in the banking sector according to Resolutions on simplifying administrative procedures within the scope of functions of management of the State Bank of Vietnam.

đ)  Article 2 of Circular No. 29/2015/TT-NHNN dated December 22, 2015 of the Governor of the State Bank of Vietnam regarding amendments and supplements to certain normative legal documents of the State Bank of Vietnam on the components of the dossier containing certified copies of documents and papers.

Article 8. Implementation organization

The Director of the Office, the Head of the Inspectorate and Supervision Department, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and cities, Chairmen of the Board of Directors, Members of the Board of Members, Heads of the Supervisory Board, General Directors (Directors) of credit organizations are responsible for implementing this Circular./.