Circular No. 51/2018/TT-NHNN dated December 31, 2018 of the State Bank of Vietnam on prescribing the conditions, dossiers, order and procedures for approving capital contribution and share purchase by credit institutions

CIRCULAR

Prescribing the conditions, dossiers, order and
procedures for approving capital contribution and share purchase by credit institutions^[1]

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

Pursuant to June 16, 2010 Law No. 47/2010/QH12 on Credit Institutions; and November 20, 2017 Law No. 17/2017/QH14 Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 16/2017/ND-CP of February 17, 2017, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Chief Inspector of the Bank Inspection and Supervision Agency;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing the conditions, dossiers, order and procedures for approving capital contribution and share purchase by credit institutions.

Article 1.Scope of regulation

This Circular prescribes the conditions, dossiers, order and procedures for approving capital contribution and share purchase by credit institutions, including:

a/ Commercial banks contributing capital or purchasing shares in order to: (i) establish or acquire domestic subsidiaries or affiliated companies operating in the fields of securities issuance underwriting, and securities brokerage; management and distribution of securities investment fund certificates; securities investment portfolio management and stock trading; insurance; debt management and asset exploitation; inbound remittance services; foreign exchange trading, gold trading; intermediary payment services and credit information; (ii) acquire domestic subsidiaries or affiliated companies operating in the fields of financial leasing; factoring; consumer credit; and issuance of credit cards;

b/ Commercial banks contributing capital to, or purchasing shares from,
domestic enterprises operating outside the fields of insurance, securities, inbound remittance services, foreign exchange trading, gold trading, factoring, issuance of credit cards, consumer cards, intermediary payment services and credit information;

c/ Finance companies contributing capital or purchasing shares in order to establish or acquire domestic subsidiaries or affiliated companies operating in the fields of insurance, securities, debt management and asset exploitation;

d/ Conversion of debts into capital contribution portions for resolving non-performing loans of commercial banks in domestic enterprises operating outside the fields of insurance, securities,  inbound remittance services, foreign exchange trading, gold trading, factoring, issue of credit cards, consumer cards, intermediary payment services and credit information.

2. This Circular does not apply to capital contribution or share purchase by commercial banks to establish credit institutions.

Article 2.Subjects of application

1. Commercial banks and finance companies (below collectively referred to as credit institutions).

2. Organizations and individuals involved in capital contribution, share purchase or conversion of debts into capital contribution portions by credit institutions.

Article 3. Principles of making and sending dossiers

1. A dossier of a credit institution shall be made on the following principles:

a/ A dossier shall be made in Vietnamese. Documents granted, notarized or certified by competent foreign agencies or organizations shall be consularly legalized in accordance with Vietnam’s law (except the case of exemption from consular legalization in accordance with the regulations on consular legalization) and translated into Vietnamese.

b/ Vietnamese translations of foreign-language documents shall be notarized or signatures of translators shall be authenticated in accordance with law.

c/ Documents in a dossier shall be the originals or duplicates made from master registers or notarized copies or copies enclosed with original documents for comparison. In case a credit institution submits copies enclosed with original documents for comparison, the person checking the documents shall give his/her signature in such copies and take responsibility for the truthfulness of copies to original documents.

d/ A written request for approval by the State Bank of Vietnam (below referred to as the State Bank) shall be signed by the at-law representative or authorized representative (below referred to as the lawful representative). In case of authorized signing, the dossier must have a document of authorization made in accordance with law.

2. A credit institution’s dossier shall be submitted directly or sent by post to the State Bank.

Chapter II

CONDITIONS, DOSSIERS, ORDER AND PROCEDURES FOR APPROVING CAPITAL CONTRIBUTION AND SHARE PURCHASE

Article 4.Conditions for capital contribution or share purchase by a credit institution

1. Conditions for capital contribution or share purchase aimed to establish or acquire subsidiaries specified at Points a and c, Clause 1, Article 1 of this Circular (except subsidiaries operating in the field of debt management and asset exploitation):

a/ Capital contribution or share purchase is specified in the establishment and operation license of the credit institution;

b/ The capital adequacy ratio specified at Point b, Clause 1, Article 130 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

c/ The level of capital contribution or share purchase specified in Article 129 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

d/ The real value of the charter capital at the time of completing capital contribution or share purchase is not lower than the legal capital;

dd/ Business activities stated in the financial statement of the year preceding the year of requesting capital contribution or share purchase, which has been audited by an independent audit firm, are profitable;

e/ No sanction is imposed for administrative violations in the debt classification, setting aside and use of risk provisions to offset credit risks, capital contribution or share purchase during the period of 12 months prior to the month of requesting capital contribution or share purchase;

g/ The ratio of non-performing loans to total outstanding loans is below 3% during the period of 12 months prior to the month of requesting capital contribution or share purchase;

h/ There are an organizational structure, the Board of Directors, Members’ Council, Control Board, and Director General (Director) in accordance with the Law on Credit Institutions and the State Bank’s regulations.

2. Conditions for capital contribution or share purchase to establish or acquire affiliated companiesspecified at Points a and c, Clause 1, Article 1 of this Circular (except those operating in the field of debt management and asset exploitation):

a/ The conditions prescribed at Points a, d, dd, e, g and h, Clause 1 of this Article;

b/ The capital adequacy ratio specified at Point b, Clause 1, Article 130 of the Law on Credit Institutions is ensured during the period of 12 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

c/ The level of capital contribution or share purchase specified in Article 129 of the Law on Credit Institutions is ensured during the period of 12 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval.

3. Conditions for capital contribution or share purchase to establish or acquire subsidiaries or affiliated companies operating in the field of debt management and asset exploitation:

a/ The condition prescribed at Point a, Clause 1 of this Article;

b/ The level of capital contribution or share purchase specified in Article 129 of the Law on Credit Institutions is ensured at the time of completing capital contribution or share purchase under the State Bank’s approval;

c/ The ratio of non-performing loans to total outstanding loans is below 3% during the period of 12 months prior to the month of requesting capital contribution or share purchase.

4. Conditions for contributing capital to, or purchasing shares from, other enterprises operating in the fields specified at Point b, Clause 1, Article 1 of this Circular:

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

b/ The maximum ratio of short-term funds for the provision of medium-term and long-term loans specified at Point c, Clause 1, Article 130 of the Law on Credit Institutions and the State Bank’s regulations is ensured during the period of 24 months prior to the month of requesting capital contribution or share purchase.

5. Conditions for conversion of debts into capital contribution portions specified at Point d, Clause 1, Article 1 of this Circular:

a/ The conditions prescribed at Points a, b, c, d, dd, e and h, Clause 1 of this Article;

b/ Debts to be converted into capital contribution portions are non-performing loans and the conversion thereof into capital contribution portions aims to resolve such non-performing loans. Non-performing loans shall be identified under the State Bank’s regulations on the classification of assets, the level and method of setting aside risk provisions and the use of risk provisions in operations of credit institutions and foreign bank branches.

Article 5.Dossiers of request for approval of capital contribution or share purchase by credit institutions

1. A dossier of request for approval of capital contribution or share purchase to establish or acquire subsidiaries or affiliated companiesspecified at Points a and c, Clause 1, Article 1 of this Circular (except subsidiaries and affiliated companiesoperating in the field of debt management and asset exploitation) must comprise:

a/ The credit institution’s written request for approval of capital contribution or share purchase, made according to the form provided in the Appendix to this Circular;

b/ The competent authority of the credit institution’s written approval of capital contribution or share purchase;

c/ The credit institution’s plan on capital contribution or share purchase, which must have at least the following contents:

(i) Name (in Vietnamese and a foreign language) and head office address of the credit institution making capital contribution or share purchase;

(ii) Name (in Vietnamese and a foreign language), head office address, contents and duration of operation of the enterprise receiving capital contribution or selling shares;

(iii) Reason(s) for, and necessity of, capital contribution and share purchase;

(iv) Expected amount and level of capital contribution; expected number of shares and the holding rate in the enterprise receiving capital contribution or selling shares;

(v) Charter capital of the credit institution and its real value before making capital contribution or share purchase;

(vi) Expected charter capital of the credit institution making capital contribution or share purchase and its real value at the time of completing capital contribution and share purchase;

(vii) Ratio of non-performing loans to total outstanding loans for each month during the period of 12 months prior to the month of requesting capital contribution or share purchase.

(viii) Observance of regulations on debt classification, setting aside and use of risk provisions to offset credit risks, capital contribution or share purchase during the period of 12 months prior to the month of requesting capital contribution or share purchase;

(ix) Capital adequacy ratio during the period of 12 months (for capital contribution or share purchase to establish or acquire affiliated companies), or 24 months (for capital contribution or share purchase to establish or acquire subsidiaries) prior to the month of requesting capital contribution or share purchase and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(x) Level of capital contribution or share purchaseduring the period of 12 months (for capital contribution or share purchase to establish or acquire affiliated companies), or 24 months (for capital contribution or share purchase to establish or acquire subsidiaries) prior to the month of requesting capital contribution or share purchase and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(xi) Organizational structure of the credit institution; organizational structure, functions, tasks and powers of the Board of Directors,  Members’ Council, Control Board, and Director General (Director) in accordance with the Law on Credit Institutions and the State Bank’s regulations;

(xii) Major shareholders of subsidiaries and affiliated companies after being established and acquired by the credit institution in accordance with the Law on Credit Institutions and the State Bank’s regulations and their affiliated persons;

(xiii) Assessment of impacts of the capital contribution or share purchase on the financial status, management, administration and operation of the credit institution;

d/ The independently audited financial statement of the year preceding the year of requesting capital contribution or share purchase;

dd/ A copy of the enterprise registration certificate of the enterprise receiving capital contribution or selling shares.

2. A dossier of request for approval of capital contribution or share purchase to establish or acquire subsidiaries and affiliated companies operating in the field of debt management and asset exploitation must comprise:

a/ The documents specified at Points a, b and dd, Clause 1 of this Article;

b/ The credit institution’s plan on capital contribution or share purchase, which must have at least the contents specified at Points c(i), c(ii), c(iii), c(iv) and c(vii), Clause 1 of this Article and the level of capital contribution or share purchase at the time of completing capital contribution or share purchase under the State Bank’s approval.

3. A dossiers of request for approval of capital contribution to, or share purchase from, enterprises operating in the fields specified at Point b, Clause 1, Article 1 of this Circular must comprise:

a/ The documents specified at Points a, b, d and dd, Clause 1 of this Article;

b/ The credit institution’s plan on capital contribution or share purchase, which must have at least the contents specified at Points c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(vii), c(viii), c(ix), c(xii) and c(xiii), Clause 1 of this Article and the following contents:

(i) The capital adequacy ratio during the period of 24 months prior to the month of requesting capital contribution or share purchase and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(ii) The level of capital contribution or share purchaseduring the period of 24 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(iii) The maximum ratio of short-term funds used for the provision of medium-term and long-term loans during the period of 24 months prior to the month of requesting capital contribution or share purchase.

4. A dossier of request for approval of the conversion of debts into capital contribution portions specified at Point d, Clause 1, Article 1 of this Circular must comprise:

a/ The documents specified at Points a and b, Clause 1 of this Article;

b/ A copy of the enterprise registration certificate of the enterprise having debts converted into capital contribution portions;

c/ The credit institution’s plan on capital contribution or share purchase, which must have at least the contents specified at Points c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(viii), c(ix), c(xii) and c(xiii), Clause 1 of this Article and the following contents:

(i) The capital adequacy ratio during the period of 24 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(ii) The level of capital contribution or share purchaseduring the period of 24 months prior to the month of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase under the State Bank’s approval;

(iii) Information about the debt to be converted into a capital contribution portion, including: the status of the debt to be converted into a capital contribution portion (the balance of the debt, classified group of debt, and recoverability); the amount and level of capital contribution or the number of shares and holding rate arising from the conversion of debt into a capital contribution portion.

Article 6.Order and procedures for approving capital contribution and share purchase by credit institutions

1. A credit institution shall make 2 sets of dossier prescribed in Article 5 of this Circular and send them to the State Bank (via the Bank Inspection and Supervision Agency). In case such dossier is incomplete and invalid, within 7 working days after receiving it, the Bank Inspection and Supervision Agency shall request in writing the credit institution to supplement and complete it;

2. Within 7 days after receiving a complete and valid dossier, the Bank Inspection and Supervision Agency shall enclose a written request with such dossier for collection of opinions from:

a/ The State Bank’s provincial-level branch in the locality where the credit institution is headquartered on the satisfaction of the conditions prescribed in this Circular;

b/ The units of the State Bank, on the capital contribution, share purchase or conversion of debt into a capital contribution portion by the credit institution (when necessary).

3. Within 10 days after receiving the Bank Inspection and Supervision Agency’s written request for the collection of opinions, the units specified in Clause 2 of this Article shall send their written opinions on what in need of opinions to the Bank Inspection and Supervision Agency.

4. Within 14 days after receiving opinions of the related units, the Bank Inspection and Supervision Agency shall appraise the dossier and submit it to the State Bank Governor for consideration, approval or disapproval of capital contribution, share purchase or conversion of debt into a capital contribution portion at the request of the credit institution.

5. Within 45 days after receiving a complete and valid dossier, the State Bank shall issue a written approval or disapproval of capital contribution, share purchase or conversion of debt into a capital contribution portion by the credit institution. In case of disapproval, the State Bank shall reply in writing, clearly stating the reason.

6. Within 12 months after the State Bank issues a written approval, a credit institution shall complete the capital contribution, share purchase, or conversion of debt into a capital contribution portion. Past this time limit, the State Bank’s written approval shall automatically become invalid.

Chapter III

IMPLEMENTATION PROVISIONS

Article 7.Effect

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

2. The following regulations cease to be effective as of the effective date of this Circular:

a/ The Governor of the State Bank’s Circular No. 04/1999/TT-NHNN5 of November 2, 1999, guiding the establishment of securities companies of commercial banks;

b/ The Governor of the State Bank’s Decision No. 1389/2001/QD-NHNN of November 7, 2001, on the establishment of debt management and asset exploitation companies under commercial banks;

c/ The Governor of the State Bank’s Decision No. 951/2003/QD-NHNN of August 18, 2003, promulgating the Regulation on the establishment and operation of companies providing inbound remittance services under State-run and people’s joint-stock commercial banks;

d/ The Governor of the State Bank’s Circular No. 24/2011/TT-NHNN of August 31, 2011, on implementation of the plan to simplify the administrative procedures for establishment and operation of banks under the Government’s resolutions on simplification of administrative procedures under the state management by the State Bank of Vietnam;

dd/ Article 2 of the Governor of the State Bank’s Circular No. 29/2015/TT-NHNN of December 22, 2015, amending and supplementing a number of legal documents of the State Bank of Vietnam on documents in dossiers which are notarized copies.

Article 8.Organization of implementation

The Chief of the Office, the Chief Inspector of the Bank Inspection and Supervision Agency, heads of units of the State Bank, directors of the State Bank’s provincial-level branches, chairpersons of the Boards of Directors or Members’ Councils, heads of Control Boards and directors general (directors) of credit institutions shall implement this Circular.-

For the State Bank Governor
Deputy Governor
DOAN THAI SON