Decision No. 888/2005/QD-NHNN on the establishment, opening, and termination of operations of trading offices, branches, representative offices, and non-profit units of commercial banks

DECISION OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Issuing regulations on establishing, opening, and terminating operations of trading offices, branches, representative offices, and non-business units of commercial banks.

Based on the Law on the State Bank of Vietnam 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;

______________________

GOVERNOR OF THE STATE BANK OF VIETNAM

At the proposal of the Director of the Department of Banks and Non-Bank Financial Institutions,

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;

Issued along with this Decision are "Regulations on Establishing, Opening, and Terminating Operations of Trading Offices, Branches, Representative Offices, and Non-Business Units of Commercial Banks".

DECISION:

Article 1. This Decision shall take effect fifteen days from the date of publication in the Official Gazette. The following documents shall cease to be effective:

Article 2. 1. Decision No. 90/2001/QĐ-NHNN dated February 7, 2001 of the Governor of the State Bank of Vietnam promulgating Regulations on Establishing, Opening, and Terminating Operations of Trading Offices, Branches, Representative Offices, and Non-Business Units of Commercial Banks;

2. Directive No. 05/2001/CT-NHNN dated June 20, 2001 of the Governor of the State Bank of Vietnam on lending outside the jurisdiction of Vietnamese credit institutions.

The Head of the Office, Directors of the Department of Banks and Non-Bank Financial Institutions, Heads of relevant units under the State Bank of Vietnam, Governors of the State Bank of Vietnam Branches in provinces and centrally-administered cities, and Chairmen of the Management Boards, General Managers (Directors) of commercial banks are responsible for implementing this Decision.

Article 3. On establishing, opening, and terminating operations of trading offices, branches, representative offices, and non-business units of commercial banks

REGULATIONS

(Issued pursuant to Decision No. 888/2005/QĐ-NHNN

dated June 16, 2005 of the Governor of the State Bank of Vietnam)

These provisions apply to commercial banks operating in Vietnam, including:

State-owned commercial banks.

PART I

GENERAL PROVISIONS

Article 1. Joint-stock commercial banks.

1. Trading offices and branches of commercial banks are dependent units, having seals, and performing certain banking functions and tasks according to the authorization of commercial banks.

2. Representative offices of commercial banks are dependent units, having seals, and performing representative tasks according to the authorization of commercial banks. Representative offices are not allowed to engage in business activities.

Article 2. In these regulations, the following terms are understood as follows:

3. Non-business units of commercial banks are dependent units, having seals, and performing research and application of banking technology, training and upgrading skills for bank employees, and other tasks assigned by commercial banks in accordance with the law.

Commercial banks must establish and issue internal management regulations regarding the operation of trading offices and branches that are appropriate to the scale of organization and operation of the commercial banks. The contents of these regulations must ensure the following basic principles:

a. Establishing an online management system between the headquarters and trading offices, branches based on ensuring safety, accuracy, and efficiency for transaction activities and updating information reports on the operational status of dependent units, as well as requirements for management and supervision work.

Article 3.

1. b. Regulations on ensuring safety in transactions, vaults, and money transfers, managing and storing documents, fire prevention and firefighting requirements as stipulated by the State Bank of Vietnam and current related regulations.

c. Specifically defining the internal control regulations of commercial banks to meet the requirements of internal control over all activities of trading offices and branches.

d. Specifically defining the risk management information system to ensure that the headquarters of commercial banks can control various risks in the operations of trading offices and branches.

e. Defining clearly the functions, tasks, scope of authorization, and standards for managers and internal controllers at trading offices and branches.

g. Other regulations according to the management and supervision requirements of each commercial bank.

Commercial banks decide on branch classification themselves but must comply with the basic principles stipulated in Clause 1 of this Article to ensure safe and efficient branch operations.

e. Specify clearly the functions, duties, scope of authority delegated, and standards for the operators and internal controllers at the trading office and branch.

g. Other provisions as required by the management and supervision needs of each commercial bank.

2. Commercial banks shall independently determine the classification of branches but must comply with the basic principles stipulated in Clause 1 of this Article to ensure the safe and effective operation of the branches.

PART II

SPECIFIC PROVISIONS

PART I

Establishing domestic branches, representative offices, and setting up public service units

Commercial banks may establish branches, representative offices when they meet the following conditions:

Article 4. 1. The conditions stipulated in Clause 1 of Article 33 of the Law on Credit Institutions;

2. Having at least one year of operation (except for the case of a branch located at the main office);

3. The number of branches that can be established is calculated according to the following formula:

           C - Co

n = -------------

            20 billion

- n is the number of branches that can be established (including those already established), only counting whole numbers;

Where:

- C is the current charter capital of the commercial bank in billions of dong;

- Co is the minimum statutory capital required for joint-stock commercial banks according to regulations at the time of application to establish a branch, in billions of dong;

- 20 billion dong is the additional capital required to open one branch.

This provision does not apply to the establishment of representative offices by commercial banks.

4. Being ranked as category A by the State Bank of Vietnam (hereinafter referred to as the State Bank) (for joint-stock commercial banks) or being assessed as meeting the safety conditions for banking operations (for state-owned commercial banks) in the year prior to establishing branches, representative offices; the non-performing loan ratio (NPL) at the time of opening branches, representative offices must be below 5% of total outstanding loans.

5. Not having been administratively fined a total of more than five million dong for violations related to safety regulations in banking operations within one year from the date of applying to establish branches, representative offices.

6. Having internal management regulations regarding branch operations as prescribed in Article 3 of this Regulation.

To

Article 5. establish branches, representative offices, commercial banks must submit to the State Bank (Department of Banks and Non-Bank Financial Institutions) one set of documents, including: 1. A letter from the Chairman of the Board of Directors requesting to establish branches, representative offices; summarizing the necessity, name, location, content, scope of activities of the branches, representative offices, and affirming compliance with the conditions for establishing branches, representative offices;

2. A resolution of the Board of Directors on the establishment of branches, representative offices.

Within six months from the date of receiving the approval document from the State Bank, the commercial bank must complete all necessary procedures under the law to put the branches, representative offices into operation. Prior to the inauguration and commencement of operations of the branches, representative offices, the commercial bank must publish notices in accordance with the law; simultaneously submitting a report to the State Bank (Department of Banks and Non-Bank Financial Institutions) along with certified copies of business registration certificates and documents confirming ownership or lawful possession of the premises of the branches, representative offices.

Article 6. Any change in the location of branches, representative offices of commercial banks must be approved by the State Bank Branch in the province or city where the commercial bank has its branches, representative offices.

Article 7. Branches of commercial banks may establish transaction rooms, savings funds, transaction points, credit groups in accordance with specific provisions as follows:

Article 8. 1. Transaction Rooms, Savings Funds, Transaction Points

a) They are subordinate departments, accounting separately and having their own seals. The commercial bank specifies the content of their operations (within the permitted operations of the branches), functions, and responsibilities.

Savings funds do not engage in lending activities. Transaction rooms and transaction points may lend through the following methods:

+ Pledging with their own savings books, government bonds, and treasury bills, with the maximum lending amount determined by the authorization of the managing branch.

+ Other forms: the maximum lending amount to one customer is limited to five hundred million dong as specified by the commercial bank.

b) May only be established in the province or centrally-administered city where the branch is located or in a province or city sharing a border with the province or city where the branch is located.

c) Must ensure safety in transactions, vaults, and money transfers, and comply with fire prevention and firefighting requirements.

2. Credit Groups

a) May only be established in a province or city sharing a border with the province or city where the branch is located;

b) Can only conduct research, customer identification, and introduction; accepting loan applications, disbursing loans, and collecting debts according to credit contracts signed by the branch.

Branches of commercial banks are responsible for registering with the State Bank Branch in the province or city where the transaction rooms, savings funds, transaction points, credit groups are established according to Appendix 1 (attached).

3. To establish a public service unit, commercial banks must submit to the State Bank (Department of Banks and Non-Bank Financial Institutions) one set of documents, including:

Article 9. establish branches, representative offices, commercial banks must submit to the State Bank (Department of Banks and Non-Bank Financial Institutions) one set of documents, including: 1. A letter from the Chairman of the Board of Directors requesting to establish a public service unit; summarizing the necessity, name, location, content, scope of activities of the public service unit suitable for the activities of the commercial bank;

2. A resolution of the Board of Directors on the establishment of a public service unit;

3. A proposal for establishing a public service unit;

4. Bylaws and internal management regulations for the public service unit.

Within six months from the date of receiving the approval document from the State Bank, the commercial bank must complete all necessary procedures under the law for the public service unit to commence operations.

Within six months from the date of receiving the approval document from the State Bank, commercial banks must complete all necessary procedures in accordance with the law for the public service unit to commence operations.

PART II

Establishing Branches and Representative Offices Abroad

Article 10. To establish branches and representative offices abroad, commercial banks shall submit one set of documents to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions) including:

1. A document from the Chairman of the Board of Directors regarding the establishment of branches and representative offices abroad, which includes a summary of the necessity, name, and proposed location for the headquarters.

2. The Resolution of the Board of Directors (for state-owned commercial banks) or the Resolution of the Shareholders' Meeting (for joint-stock commercial banks) on establishing branches and representative offices abroad.

3. A proposal for establishing branches and representative offices abroad, which clearly states the necessity, name, and proposed location for the headquarters; organizational structure, content, and scope of operations; and a three-year operational plan.

PART III

Terminating Operations of Trading Departments, Branches, Domestic Representative Offices, and Public Service Units

To terminate the operations of trading departments, branches, domestic representative offices, and public service units, commercial banks shall submit one set of documents to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions) including:

Article 11. 1. A document from the Chairman of the Board of Directors regarding the termination of operations of trading departments, branches, representative offices, and public service units, which clearly states the reasons, names, and addresses of the trading departments, branches, representative offices, and public service units whose operations will be terminated.

2. The Resolution of the Board of Directors on terminating the operations of trading departments, branches, representative offices, and public service units.

3. A plan for handling the termination of operations of trading departments, branches, representative offices, and public service units.

Within thirty 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 commercial bank must issue a decision to terminate the operations of trading departments, branches, representative offices, and public service units.

Article 12.

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

a) The name and address of the trading department, branch, representative office, or public service unit whose operations are being terminated;

b) The reason for terminating the operations of the trading department, branch, representative office, or public service unit;

c) The date of termination of operations;

d) The responsibility of the commercial bank towards creditors.

The decision to terminate operations of trading departments, branches, representative offices, and public service units of commercial banks must be sent to the State Bank of Vietnam (Department of Banks and Non-Bank Credit Institutions; Banking Inspection Agency; State Bank of Vietnam Branch in the province or city where the commercial bank has trading departments, branches, representative offices, or public service units); relevant organizations and individuals with rights and obligations; publicly posted at the headquarters of the commercial bank and the location of the trading departments, branches, representative offices, or public service units whose operations are being terminated; and published in central and local newspapers according to the provisions of the law.

3. Commercial banks with trading departments, branches, representative offices, or public service units whose operations are being terminated have the responsibility to settle debts to creditors and resolve other related issues in accordance with the law.

Article 13. Commercial banks with trading offices, branches, representative offices, and public service units that cease operations shall be responsible for settling obligations towards creditors and resolving other related issues in accordance with the law.

PART IV

Responsibilities of the State Bank

Article 14. Responsibilities of the Department of Commercial Banks and Non-Bank Financial Institutions:

Within a maximum period of thirty working days from the date of receipt of all documents submitted by commercial banks requesting to open, establish, or cease operations of trading offices, branches, representative offices, or units of public service, the Department of Commercial Banks and Non-Bank Financial Institutions shall be responsible for soliciting opinions from relevant units (Provincial and Municipal Branches of the State Bank, Banking Inspection), and submitting to the Governor of the State Bank for signing the approval or non-approval document for the commercial bank:

1. Opening, establishing, or ceasing operations of trading offices, branches, representative offices within the country, or units of public service.

2. Opening branches or representative offices abroad.

Article 15. Responsibilities of Banking Inspection:

1. Within a maximum period of five working days from the date of receipt of the request from the Department of Commercial Banks and Non-Bank Financial Institutions, Banking Inspection shall provide an evaluation opinion on the conditions ensuring when commercial banks open trading offices, branches, or representative offices.

2. Thirty days after the trading office or branch commences operations, Banking Inspection shall conduct inspections regarding compliance with this Regulation, current laws, and internal management regulations concerning the operation of trading offices and branches of commercial banks.

Article 16. Responsibilities of Provincial and Municipal Branches of the State Bank:

1. At locations where commercial banks open trading offices, branches, representative offices, or units of public service:

a) Managing and supervising the organization of the opening, operation, and cessation of activities of trading offices, branches, representative offices, or units of public service of commercial banks in the area. Reporting any unusual changes in the activities of trading offices, branches, representative offices, or units of public service of commercial banks in the area to the State Bank of Vietnam for timely handling;

b) Within a maximum period of five working days from the date of receipt of the request from the State Bank (Department of Commercial Banks and Non-Bank Financial Institutions) regarding commercial banks opening trading offices, branches, representative offices, or ceasing their operations, providing an opinion to the State Bank (Department of Commercial Banks and Non-Bank Financial Institutions) recommending approval or non-approval for commercial banks to open trading offices, branches, representative offices, or cease their operations; if not approving, the reasons must be clearly stated;

c) Within a maximum period of ten working days from the date of receipt of the request from commercial banks regarding the relocation of trading offices, branches, representative offices, or units of public service, providing an opinion approving or disapproving the relocation of trading offices, branches, representative offices, or units of public service by commercial banks; if not approving, the reasons must be clearly stated;

d) Advising the Governor of the State Bank on the need for developing the banking network in the area.

2. At the location where joint-stock commercial banks have their headquarters: Within a maximum period of five working days from the date of receipt of the request from the State Bank (Department of Commercial Banks and Non-Bank Financial Institutions) regarding joint-stock commercial banks opening, establishing, or ceasing operations of trading offices, branches, representative offices, or units of public service, providing an opinion to the State Bank (Department of Commercial Banks and Non-Bank Financial Institutions) recommending approval or non-approval for joint-stock commercial banks to open, establish, or cease operations of trading offices, branches, representative offices, or units of public service; if not approving, the reasons must be clearly stated.

CHAPTER III

IMPLEMENTING PROVISIONS

Article 17. Within one year from the date this Regulation takes effect, all commercial banks must review their entire system of trading offices, branches, representative offices, or units of public service to self-adjust in order to ensure compliance with the provisions of this Regulation.

Article 18. Commercial banks currently having more trading offices and branches than allowed under Clause 3, Article 4 of this Regulation will not be permitted to open new trading offices or branches.

Article 19. Commercial banks that violate this Regulation may be subject to legal penalties depending on the nature and severity of the violation.

Article 20. Any amendments or supplements to the Articles or Clauses in this Regulation shall be decided by the Governor of the State Bank./.