Circular No. 07/2007/TT-NHNN dated November 29, 2007 of the State Bank of Vietnam guiding the implementation of a number of contents of the Government’s Decree No. 69/2007/ND-CP dated April 20, 2007, on purchase of shares of Vietnamese commercial banks by foreign investors

CIRCULAR

GUIDING THE IMPLEMENTATION OF A NUMBER OF CONTENTS OF THE GOVERNMENT’S DECREE NO. 69/2007/ND-CP DATED APRIL 20, 2007 ON PURCHASE OF SHARES OF VIETNAMESE COMMERCIAL BANKS BY FOREIGN INVESTORS

Pursuant to the Government's Decree No. 69/2007/ND-CP dated April 20, 2007(below referred to as the Decree), on purchase of shares of Vietnamese commercial banks by foreign investors, the State Bank of Vietnam guides the implementation of this Decree as follows:

1. Scope of regulation

This Circular guides a number of contents of the Decree on purchase of shares of unlisted Vietnamese commercial banks by foreign investors.

2. Conditions for a Vietnamese commercial bank to sell shares to foreign investors

2.1. It must have a charter capital of at least Vietnamese dong one trillion.

2.2. It has a non-performing debt ratio of 3% or less by the time it requests the State Bank of Vietnam to consider and permit the sale of shares to foreign investors.

2.3. Its business operation in the year preceding the year of sale of shares to foreign investors was profitable.

2.4. The membership and structure of its Board of Directors and Control Board are in accordance with law and members of its Board of Directors and Control Board and its executive officers have committed no serious violation of regulations on bank management, control and administration during their term in office.

2.5. Its inspection, control and internal audit systems perform their duties in strict compliance with the State Bank of Vietnam's regulations.

2.6. It has not been administratively sanctioned with a fine of VND 5 million or more for a violation of the State Bank of Vietnam’s regulations on safety ratios, classification of debts, or setting up and use of reserves to offset credit risks in banking operations over the last 24 months (for Vietnamese commercial banks having been in operation for 24 months or more) or during the period from the date it commenced its operation to the date of its request for the _ State Bank of Vietnam's consideration and approval for sale of shares to foreign investors (or those having been in operation for less than 24 months).

3. Transfer of shares by foreign investors

The transfer of Vietnamese commercial bank shares by foreign investors shall comply with the provisions of Article 13 of the Decree and the State Bank of Vietnam's regulations on transfer of shares by domestic shareholders.

4. Dossiers for purchase of shares of Vietnamese commercial banks by foreign investors

4.1. For organizations, a dossier comprises:

a) An application for share purchase permission, signed by an authorized person, made according to the form set in Appendix l (not printed herein);

b) Legal documents on establishment and operation of the organization applicant (copies certified by a competent authority of the country of origin);

c) Its charter;

d) Financial statement of the year preceding the year of share purchase already audited by an independent audit organization;

e) Written power of attorney by the representative at law to the person representing the stockholding in the Vietnamese commercial bank;

f) Written powers of attorney by the representative at law to other persons to sign documents related to the share purchase dossier (if the representative at law does not sign these documents);

g) For a foreign credit institution, there must be an international credit rating agency's written certification of its latest rating (within one year from the date of filling the application for share purchase permission). For a foreign strategic investor, there must be its written commitment to assisting the Vietnamese commercial bank in developing banking products and services, improving management and administration capacity and applying modern technology;

h) Curricula vitae of the representative at law and the person authorized to represent the foreign organization's shareholding in the Vietnamese commercial bank, made according to the form in Appendix 3 (not printed herein), and copies of their passports or other personal identifications.

4.2. For individuals, a dossier comprises:

a) An application for share purchase permission, made according to the form set in Appendix 2 (not printed herein);

b) A copy of the applicant's passport or other lawful personal identification;

c) Curriculum vitae of the applicant, made according to the form in Appendix 3 (not printed herein);

d) Documents evidencing lawful financial sources.

Except for the application for share purchase permission and written certification of an international credit rating agency, all documents specified in this Clause must be legalized by consular offices or certified by competent authorities.

4.3. A dossier mentioned in this Clause must be made in two sets: One set in Vietnamese (notarized by a Vietnamese notary public) and another in a foreign language (English, French or Chinese).

5. A Vietnamese commercial bank's dossier of application for approval of sale of shares to foreign investors comprises:

5.1. A written request of the chairman of the Board of Directors for the State Bank of Vietnam Governor’s approval of sale of shares to foreign investors or proposal on sale of shares to foreign investors to be submitted to the Prime Minister for approval, for the cases specified at Point 8.4, Clause 8 of this Circular. This written request must clearly state that the foreign investors and the Vietnamese commercial bank have (or have not yet) satisfied all the conditions specified in Article 12 of the Decree and Clauses 2 and 3 of this Circular.

5.2. A minutes of the Shareholder General Meeting adopting the plan on charter capital increase (for joint-stock commercial banks) or the Prime Minister's written approval of the equitization plan (for state commercial banks) specified at Point 5.3 of this Clause.

5.3. The charter capital increase plan or the equitization plan of the Vietnamese commercial bank, in which the following principal details on the sale of shares to foreign investors must be stated:

a) Mode and expected time of selling shares to foreign investors.

b) Criteria for selecting foreign strategic investors.

5.4. A list of foreign investors expected to purchase shares, clearly stating at least the following contents:

a) Full names, addresses of permanent residence, nationalities, numbers of identity cards or passports or other lawful personal identifications of individual investors (including foreign investors being individuals, their individual affiliates or representatives at law and persons representing shareholdings of foreign investors being organizations in the commercial bank);

b) Names and addresses of head offices, numbers of establishment decisions or business registration numbers, for organizations (including foreign investors being organizations and their institutional affiliates);

c) Quantity and total par value of shares, types of shares registered for purchase, ratio of this equity capital of each investor and his/her/its affiliates to the bank's charter capital.

5.5. Written agreements on share purchase and sale between the Vietnamese commercial bank and foreign investors.

For a foreign strategic investor, such a written agreement must contain written commitments to assisting the Vietnamese commercial bank in developing banking products and services, improving management and administration capacity and applying modem technology. Each commitments of the foreign strategic investor must clearly indicate its implementation schedule and targets.

5.6. Financial statement of the year preceding the year of sale of shares to foreign investors, already audited by an independent audit organization. If the bank has not yet obtained audit results as required, it shall submit its financial statement inspected by a competent authority defined in Article 25 of the Government's Decree No. 129/2004/ND-CP dated May 31, 2004, detailing and guiding the implementation of a number of articles of the Accounting Law applicable to business activities.

5.7. A copy of the business registration certificate (certified by a competent authority) evidencing the satisfaction of the condition on charter capital specified at Point 2.1, Clause 2 of this Circular.

5.8. Share purchase dossiers of foreign investors specified in Clause 4 of this Circular.

5.9. If a foreign investor that is not yet a shareholder of the Vietnamese commercial bank receives shares transferred by a shareholder of the Vietnamese commercial bank, the dossier must comprise the documents specified at Points 5.1, 5.4, 5.5, 5.6, 5.7 and 5.8 and a written resolution of the Board of Directors approving the share transfer between a shareholder of the Vietnamese commercial bank and a foreign investor.

6. Rights of foreign investors

Apart from the rights provided for in Article 14, Section 3, Chapter II of the Decree, foreign investors may enjoy the following rights: 6.1. For existing foreign shareholders:

For existing foreign shareholders already permitted to purchase shares on a pro rata basis:

(i) If their current share holding rate is equal to or higher than that specified in Article 4 of the Decree, existing foreign shareholders may continue maintaining this rate;

(ii) If their current shareholding rate is lower than the ceiling rate specified in Article 4 of the Decree, existing foreign shareholders may increase such holding rate up to the rate specified in Article 4 of the Decree.

b) For foreign investors that have obtained approval to purchase shares of a Vietnamese commercial bank in specific sums of money: These sums would be expressed in percentages of that bank’s charter capital at the time the Decree took effect and those foreign investors may enjoy the rights provided for at Point 6.1.a of this Clause.

6.2. Shareholders that are foreigners bearing Vietnamese nationality may exercise the rights like domestic shareholders.

7. Obligations of foreign investors

Apart from the obligations specified in Clauses 1 and 2, Article 15 of the Decree, foreign investors have the following obligations:

7.1. To compile and send dossiers specified in Clause 4 of this Circular to Vietnamese commercial banks of which they intend to purchase shares.

7.2. Within 30 working days after obtaining the State Bank of Vietnam Governor's written approval of purchase of shares of Vietnamese commercial bank by foreign investors, to transfer full sums of money registered for share purchase into Vietnam-dong indirect investment accounts opened at payment service-providing organizations operating in Vietnam.

7.3. Shareholders that are foreigners bearing Vietnamese nationality shall perform the obligations like domestic investors.

7.4. To notify Vietnamese commercial banks of which they intend to purchase shares of the change of their representatives, addresses, names, nationalities and other relevant contents within 15 days after such change is effected.

8. Vietnamese commercial banks shall:

8.1. Receive and examine dossiers of foreign investors under this Circular.

8.2. For each foreign investor, to make three dossier sets according to the provisions of Clause 5 of this Circular, then send them to the State Bank of Vietnam (including one original and two copies).

8.3. Request the State Bank of Vietnam Governor to approve the sale of shares to foreign investors if they and these foreign investors satisfy the specified conditions and make dossiers under the Decree and this Circular.

8.4. Request the State Bank of Vietnam Governor to consider and submit to the Prime Minister for decision:

a) Cases in which foreign strategic investors and their affiliates purchase shares exceeding 15% of their charter capital as specified in Clause 4, Article 4 of the Decree;

b) Cases in which they fail to satisfy the conditions for sale of shares to foreign investors as specified in Clause 2, Article 11 of the Decree.

8.5. Approve the transfer of shares by foreign investors according to their charters and relevant provisions of law.

8.6. Convert on a pro rata basis shares of existing shareholders according to the provisions of Point 6.1.b, Clause 6 of this Circular.

8.7. Post the State Bank of Vietnam Governor's written approvals of purchase of their shares by foreign investors on their online bulletins or websites or central newspapers within 10 working days after receiving those written approvals.

8.8. Notify the State Bank of Vietnam (the Department for Banks and Non-Bank Credit Institutions and the State Bank of Vietnam’s branches in provinces or cities where they are headquartered) of changes in the foreign investors' shareholding rates and the contents specified at Point 7.4, Clause 7 of this Circular within 15 days after such changes are made.

9. The Department for Banks and Non-Bank Credit Institutions (below referred to the Department for Banks) shall:

9. 1. Receive and examine foreign investors' dossiers for purchase of shares of a Vietnamese commercial bank:

a) Within five working days after receiving complete dossiers as specified in Clause 5 of this Circular, it shall send these dossiers enclosed with its written comments to the State Bank Inspectorate and the State Bank's branch in the province or city where the Vietnamese commercial bank is headquartered, requesting the latter to give their opinions on the satisfaction of the conditions specified in Clause 2 of this Circular by the Vietnamese commercial bank.

b) Within five working days after receiving all opinions of concerned units specified at Point 9.1.a, Clause 9 of this Circular, it shall synthesize these opinions and propose the State Bank of Vietnam Governor to:

i) Approve in writing the purchase of shares of the Vietnamese commercial bank by foreign investors; or,

ii) Disapprove in writing the purchase of shares of the Vietnamese commercial bank by foreign investors and request the Vietnamese commercial bank to supplement its dossier under this Circular; or,

iii) Disapprove in writing the purchase of shares of the Vietnamese commercial bank by foreign investors and clearly state the reason;

iv) Propose in writing the Prime Minister to consider and decide on the cases specified in Clause 4, Article 4 and Clause 2, Article 11 of the Decree.

9.2. Propose measures to solve problems related to the purchase of shares of Vietnamese commercial banks by foreign investors.

10. The State Bank Inspectorate

Within seven working days after receiving written requests of the Department for Banks, the State Bank Inspectorate shall send to the Department for Banks its written opinions on the satisfaction of the conditions specified in Clause 2 of this Circular by Vietnamese commercial banks.

11. The State Bank’s branches in provinces or cities where Vietnamese commercial banks are headquartered

Within seven working days after receiving written requests of the Department for Banks, the State Bank’s branches in provinces or cities where Vietnamese commercial banks are headquartered shall send their written opinions to the Department for Banks on the satisfaction of the conditions specified in Clause 2 of this Circular by Vietnamese commercial banks.

12. This Circular takes effect 15 days after its publication in CONG BAO. The State Bank's Decision No. 228/QD-NH5 dated December 2, 1993, permitting Vietnamese credit institutions to raise capital from foreign shareholders ceases to be effective.

13. All acts of violation of this Circular shall, depending on their nature, be handled in accordance with law.

14. The director of the Office of the State Bank of Vietnam, the director of the Department for Banks and Non-Bank Credit Institutions, heads of concerned units under the State Bank of Vietnam, directors of the State Bank of Vietnam, directors of the State Bank of Vietnam’s branches in provinces or centrally run cities, chairmen of the Board of Directors and general directors of Vietnamese commercial banks shall implement this Circular.