Decision No. 01/2008/QD-NHNN dated January 09, 2008 of the State Bank on the issuance of Regulation on the opening and termination of operation of branches, representative offices of non-banking credit institutions

DECISION

ON THE ISSUANCE OF REGULATION ON THE OPENING  AND TERMINATION OF OPERATION OF BRANCHES, REPRESENTATIVE OFFICES OF NON-BANKING CREDIT INSTITUTIONS

THE GOVERNOR OF THE STATE BANK

- Pursuant to the Law on the State Bank of Vietnam issued in 1997 and the Law on the amendment, supplement of several articles of the Law on the State Bank of Vietnam issued in 2003;

- Pursuant to the Law on Credit Institutions issued in 1997 and the Law on the amendment, supplement of several articles of the Law on Credit Institutions issued in 2004;

- Pursuant to the Law on Enterprises issued in 2005;

-Pursuant to the Decree No.52/2003/ND-CP dated 19/5/2003 of the Government providing for the function, assignment, authority and organizational structure of the State Bank of Vietnam;

- Pursuant to the Decree No. 16/2001/ND-CP dated 2 May 2001 of the Government on the organization and operation of finance leasing companies and the Decree No. 65/2005/ND-CP dated 19 May 2005 of the Government providing for the amendment, supplement of several articles of the Decree No. 16/2001/ND-CP dated 2 May 2001 of the Government on the organization and operation of finance leasing companies;

- Pursuant to the Decree No. 79/2002/ND-CP dated 4 October 2002 of the Government on the organization and operation of finance companies;

Upon the proposal of the Director of Banks and Non-banking Credit Institutions Department,

DECIDES:

Article 1. To issue in conjunction with this Decision the Regulation on the opening and termination of operation of branches, representative offices of non-banking credit institutions.

Article 2. This Decision shall be effective after 15 days since its publication in the Official Gazette and replace the Decision No. 24/2003/QD-NHNN dated 7 January 2003 of the Governor of the State Bank on the issuance of the Regulation on the opening and termination of operation of branches, representative offices of non-banking credit institutions.

Article 3. The Director of Administrative Department, Director of Banks and Non-banking Credit Institutions Department, Heads of units of the State Bank, Managers of the State Bank branches in provinces, cities under the central Government's management, the Chairman and members of the Board of Directors, Chief and members of Controllers Committee and General Directors (Directors) of non-banking credit institutions shall be responsible for the implementation of this Decision.

REGULATION

ON THE OPENING AND TERMINATION OF OPERATION OF BRANCHES, REPRESENTATIVE OFFICES OF NON-BANKING CREDIT INSTITUTIONS
(issued in conjunction with the Decision No. 01/2008/QD-NHNN dated 09 January 2008 of the Governor of the State Bank)

Chapter I

GENERAL PROVISIONS

Article 1. Subjects and scope of governing

This Regulation shall govern the opening and termination of operation of branches, representative offices of non-banking credit institutions operating in Vietnam.

Article 2. Interpretation

In this Regulation, following terms shall be construed as follows:

1. Non-banking credit institutions are finance companies, finance leasing companies and other non-banking credit institutions in accordance with provisions of the State Bank of Vietnam.

2. Branch of non-banking credit institution is a dependent unit, which has its own seal, is entitled to perform several functions, assignments of non-banking credit institution in accordance with its authorization.

3. Representative office of non-banking credit institution is a dependent unit, which has its own seal and performs representative duty under the authorization of the respective non-banking credit institution. Representative office shall not perform any business activity.

4. Transaction office is a unit subject to direct management of head office or branch of a non-banking credit institution, performing the dependent accounting and having its own seal.

5. Management system in the information network shall be the connection of information system between the head office and the information system at branches of non-banking credit institutions in order to update daily information, report of the performance by branches at the head office of non-banking credit institutions.

Article 3. Requirements of management and operation

1. Non-banking credit institutions shall be required to issue internal regulations on the management to branches’ activities, including:

a) Regulation on management system in the information network among the head office and branches of the non-banking credit institution;

b) Regulation on prudence in transactions, treasury activity, money transfer, management and keeping of documents, requirements of fire prevention and fighting for branches in accordance with provisions of applicable laws;

c) Regulation on internal inspection, control of branches;

d) Regulation on risk management during the branch’s operation;

e) Regulation on the regime of Liabilities – Assets management for the branch;

f) Regulation on organization model, function, assignment and operating scope of branches, on conditions, standards for Directors, Deputy Directors, leaders of divisions and internal inspection, control apparatus at the branch;

g) Other provisions in accordance with requirements of management, supervision of each non-banking credit institution.

2. Non-banking credit institutions shall be required to issue internal regulations on operation management of their representative offices, including:

a) Regulation on functions, assignments, contents of operation and financial regime of representative offices; authority, standards for chief and managerial officers of representative office;

b) Other provisions in accordance with requirements on operation management for representative offices.

Chapter II

SPECIFIC PROVISIONS

Section 1. OPENING OF DOMESTIC BRANCHES, REPRESENTATIVE OFFICES

Article 4. Conditions for the opening of branches, representative offices by a Non-banking Credit Institution

1. Condition for the opening of a branch:

1.1. Non-banking credit institution may open a branch after 01 (one) year of operation, provided that following conditions are satisfied:

a) Their chapter capital is enough for opening branch in accordance with applicable provisions;

b) Ensuring prudential ratios in operation at the application time for opening of branch and months of the application year for opening of branch;

c) Issuing fully internal regulations on operation management of the branch as stipulated in paragraph 1, Article 3 of this Regulation;

d) Earnings before taxes, resulted from the business operation of the year prior to the year planned to open branch, over the owner’s capital are not less than 20% on an average;

dd) Administration, executive apparatus; internal inspection, control and internal audit system satisfies applicable provisions of the State Bank of Vietnam and does not violate provisions of applicable law on operation;

e) For number of branches: The number of branches to be opened shall be calculated under the following formula:

Of which: * n is the number of branches to be opened (including the number of branches that were already opened), taking only the integer;

* C is the existing chapter capital (unit: billion dong);

* Co is the minimum legal capital level in billion dong required to a non-banking credit institution at the application time for opening the branch in accordance with applicable provisions.

g) Area planned to open the branch must correspond with operation demand of the non-banking Credit Institution and it is required to prove economic efficiency after opening the branch;

h) The ratio of non-performing loans (NPL) as at the time of opening the branch:

- Under 3% of total outstanding loans for finance leasing companies.

- Under 2% of total outstanding loans for finance companies.

1.2. Non-banking credit institutions engaging in consumer credit area, not mobilizing individual deposits shall not be limited in operation time for the opening of branch if conditions stipulated in point a, b, c, d, e, f, g and h of paragraph 1.1 of this Article are satisfied.

2. Conditions for the opening of representative offices:

a) Having been operating for at least 01 (one) year;

b) Having a demand for opening representative office to popularize operation, seek and manage customers;

c) Having healthy financial situation, well complying with provisions on prudence in operation;

d) Administration, executive apparatus; internal inspection, control system does not violate provisions of applicable law on operation;

dd) Issuing fully internal regulations on operation management of the representative office as stipulated in paragraph 2, Article 3 of this Regulation;

Article 5. Application file for opening branches, representative offices

In order to open a branch or a representative office, non-banking credit institution shall have to submit 2 (two) sets of application file to the State Bank of Vietnam, including:

1. A written application, made by the Chairman of the Board of Directors or his authorized person, for the opening of branch, representative office, which briefly states the need of operation, name, location, scope and contents of operation of the branch or representative office; reports operation situation and number of existing branches, representative offices, at the same time affirms to have fully satisfied conditions for opening branch or representative office in accordance with provisions at Article 4 of this Regulation;

2. A letter of attorney by the Chairman of Board of Directors (in case of authorization);

3. Resolution and minutes of meeting of the Board of Directors on the opening of branch or representative office;

4. Project of the opening of branch or representative office, which clearly states the need of operation; the expected organizational apparatus; the contents, scope and plan of operation in the first 3 years;

5. Related written documents as provided for in Article 3 and written evidence of the satisfaction of conditions as provided for in Article 4 of this Regulation;

6. A written approval of the People’s Committee of Province, City permitting the non-banking credit institution to locate its branch or representative office in the locality;

7. A written document by the General Manager of the State Bank branch in the province, city under the central Government’s management where the non-banking credit institution plans to locate its branch office or representative office of the necessity, the need of operation, operation area of the branch or representative office of the non-banking credit institution;

8. A written confirmation of the legal ownership or legal use right of the headquarter of the branch or the representative office.

Article 6. Opening of operation

1. Within a period of 06 (six) months since the receipt of written approval by the State Bank of Vietnam, of the opening of branch office or representative office, the non-banking credit institution shall have to open the operation of branch office or representative office.

2. In order to be entitled to open and operate, branch or representative office has to complete business registration procedures and place an advertisement in a Central and local newspaper in 03 (three) consecutive editions, implement provisions of the State Bank of Vietnam on the opening of operation and send to the State Bank of Vietnam (Banks and Non-banking Credit Institutions Department):

a) Editions of Central and local newspaper where the advertisement of operation opening is published;

b) A notarized copy of business registration certificate;

c) A written report on the completion of procedures and operation opening;

3. Upon the expiry of the prescribed time, if the non-banking credit institution does not bring its branch or representative office into operation, the State Bank of Vietnam shall revoke the written approval of the opening of branch office or representative office. In case where the non-banking credit institution has a demand for reopening a branch or representative office, they shall be obliged to complete procedures, file as provided for in this Regulation.

Article 7. Transaction office

The opening of a transaction office by the non-banking credit institutions must comply with the following provisions:

1. The transaction office shall only be permitted to be opened in the province, city where the head office or branch of the non-banking credit institution is located;

2. Availability of specific provisions on the contents of operation, functions, assignments and clear decentralized administration for the transaction office;

3. The permission of maintenance of cash balance and cash balance norm shall be subject to the competence of the Board of Directors, General Director (Director) of the non-banking credit institution, provided that provisions on prudence in transactions, treasury activity, money transfer and requirements on fire prevention and fighting are correctly complied with;

4. The lending or leasing limit for a single customer shall not be in excess of 300 million dong;

5. General Director (Director) of the non-banking credit institution or Director of branch of the non-banking credit institution shall be responsible for the operation of transaction office belonging to the head office or the branch and be responsible to register with the State Bank branch in province, city under the central Government's management where the transaction office is opened and make report to the State Bank of Vietnam (Banks and Non-banking Credit Institutions Department) in accordance with attached appendix before official operation;

6. In case of termination of operation of a transaction office, it is required to send a written notice to the State Bank branch in province, city under the central Government's management where the transaction office is located and to make public announcement in location where the transaction office is terminated its operation, to publish in local newspaper prior to 15 (fifteen) days since the estimated date of operation termination of the transaction office, including the transfer of obligations and rights of the transaction office, of related subjects for settlement.

Section 2. TERMINATION OF OPERATION OF DOMESTIC BRANCHES, REPRESENTATIVE OFFICES

Article 8. Cases of operation termination of branches, representative offices

1. The written approval of the opening of branch or representative offices granted to the non-banking credit institution is revoked by the State Bank of Vietnam because of the lack of conditions for opening operation in the prescribed time or the serious violation of provisions of applicable laws during the operation.

2. To voluntarily apply for the close of branch or representative office because they have no demand for operation any more.

3. Non-banking credit institution has branch or representative office to be bankrupt, dissolved in accordance with provisions of applicable laws.

Article 9. Termination of operation of branches, representative offices

1. In case where the written approval of the opening of branch or representative office is revoked by the State Bank of Vietnam as provided for in paragraph 1, Article 8 of this Regulation, the State Bank of Vietnam shall publicly announce the reasons and stipulate sequences, procedures of operation termination for the branch, representative office and responsibilities of related units.

2. In case of voluntarily applying for the close of branch, representative office as provided for in paragraph 2, Article 8 of this Regulation, the non-banking credit institution shall send 02 (two) sets of application file to the State Bank of Vietnam, which include:

a. A written application, made by the Chairman of the Board of Directors or his authorized person, for the operation termination of branch or representative office, which briefly states name, location, operation situation and the reasons for voluntarily applying for the close of the branch, representative office, responsibilities and sequences of the operation termination of the branch or representative office;

b. A letter of attorney by the Chairman of Board of Directors (in case of authorization);

c. Resolution and minutes of meeting of the Board of Directors on the operation termination of the branch or representative office;

d. Opinion of Manager of the State Bank branch in province, city under the central Government's management on the application for the operation termination of branch, or representative office at the locality by the non-banking credit institution;

dd. Settlement plan upon the operation termination of the branch  or representative office, which states clearly the financial situation of the branch or representative office and settlement plan of shortcomings concerning the organization, operation of the branch or representative office.

3. In the event where the non-bank credit institution is dissolved, goes bankrupt as provided for in paragraph 3, Article 8 of this Regulation, the State Bank of Vietnam shall provide for the operation termination of branches, representative offices in the decision on the revocation of operation and establishment license.

Article 10. Sequences, procedures of the voluntary termination of operation of branches, representative offices

1. Within a period of 30 working days from the receipt of the State Bank’s written approval, the Chairman of Board of Directors of the non-banking credit institution shall make decision on the operation termination of branch or representative office.

2. The Decision on the operation termination shall contain following main contents:

a. Name, address of the terminated branch, representative office;

b. Reason for the operation termination of the branch, representative office;

c. Date of operation termination;

d. Responsibility of the non-banking credit institution for creditors.

3. Decision on the operation termination of branch, representative office of the non-banking credit institution shall be submitted to the State Bank of Vietnam and the State Bank branch in provinces, cities under the central Government's management where the head office and branch or representative office of the non-banking credit institution is located; at the same time publicly post that decision at the head office of the terminated branch or terminated representative office; place an advertisement on the central and local newspaper in 03 (three) consecutive editions 15 (fifteen) days before the operation termination.

4. Non-banking credit institution with the branch or representative office to be terminated shall be responsible remains in accordance with provisions of applicable laws.

Section 3. OPENING AND TERMINATION OF OPERATION OF OVERSEA BRANCHES, REPRESENTATIVE OFFICES OF NON-BANKING CREDIT INSTITUTIONS

Article 11. Conditions for opening an oversea branch, representative office

In order to open an oversea branch or representative office, in additions to the conditions stipulated in Article 4 of this Regulation, the non-banking credit institution shall:

1. Have been operating for at least 03 (three) years;

2. Have a feasible oversea operation plan, which demonstrates the need of opening an oversea branch, representative office;

3. Open only in countries, territories which entered into an agreement with Vietnam on the inspection, supervision of operation;

4. Undertake to comply with procedures relating to the opening of branches, representative offices in accordance with applicable provisions of countries or territories where the non- bank credit institution plans to locate its branch or representative office.

Article 12. Procedures to apply for the opening of oversea branches, representative offices

1. The non-banking credit institution having a demand for opening an oversea branch or representative office shall prepare 02 (two) sets of application files and send to the State Bank of Vietnam:

a) A written application, made by the Chairman of the Board of Directors or his authorized person, for the opening of an oversea branch, representative office, which briefly states the need of operation, name, expected location, expected contents of operation;

b) A letter of attorney by the Chairman of Board of Directors (in case of authorization);

c) Resolution and minutes of meeting of the Board of Directors, Resolution and minutes of Shareholders’ General meeting (for non-banking joint stock credit institution) on the opening of an oversea branch or representative office;

d) Written evidences of the satisfaction of the conditions stipulated in Article 11 of this Regulation;

e) A written request for the opinion of the State Bank of Vietnam to management agency to supervise operation of the oversea branch, representative office if required;

f) Documents relating to the opening of oversea branch, representative office in accordance with applicable provisions of countries or territories where the non-banking credit institution plans to locate its branch or representative office;

2. A written approval of the opening of oversea branch, representative office granted by the State bank of Vietnam, effective for a period of 24 (twenty four) months. In the event of expiry of above period, if non-banking credit institution still has the demand for opening a branch or representative office, but they have not obtained the approval yet from foreign countries or territories, they shall make a written report to the State Bank of Vietnam and ask for an extension.

Article 13. Reporting

1. Within a period of 30 (thirty) working days from the date of receiving the approval of the opening of an branch or representative office from foreign countries or territories, the non-banking credit institution shall make a written report and send the copy of the written approval of the opening of oversea branch, representative office to the State Bank of Vietnam (the Banks and Non-banking Credit Institutions Department, the State Bank Inspectorate);

2. In the process of operation, the non-banking credit institutions shall be obliged to make report on the organization and operation situation of their oversea branch or representative office to the State Bank of Vietnam on every 06 (six) and 12 (twelve) month basis.

Article 14. Termination of operation of oversea branches, representative offices

The termination of operation of oversea branch or representative office of the non-banking credit institutions shall comply with provisions of applicable laws of countries or territories where non-banking credit institutions locate their branch or representative office and make report to the State Bank of Vietnam.

Section 4. RESPONSIBILITIES OF THE STATE BANK OF VIETNAM

Article 15. Responsibilities of the Banks and Non-banking Credit Institutions Department

1. To receive the application file for opening branches, representative offices or application file for the approval of voluntary close of branches, representative offices by Non-banking credit institutions.

2. Within the maximum period of 10 (ten) working days from the full receipt of application file for the opening or termination of operation of branch or representative office from the non-banking credit institution, the Banks and Non-banking Credit Institutions Department shall be responsible for sending it to the State Bank branch in province, city under the central Government's management where the Non-banking credit institution applying for the opening or termination of operation of its branch or representative office locates its head office and the State Bank Inspectorate for suggestions;

3. Within the maximum period of 15 (fifteen) working days from the full receipt of suggestions of related units, the Banks and Non-banking Credit Institutions Department shall summary and submit to the Governor of the State Bank for singing a written approval or written non-approval, permitting the Non-banking credit institution:

a) To open or terminate operation of domestic branch, representative office;

b) To open oversea branch, representative office.

Article 16. Responsibilities of the State Bank Inspectorate

1. Within the maximum period of 07 (seven) working days from the receipt of request from the Banks and Non-banking Credit Institutions Department, the State Bank Inspectorate shall give out its assessment opinion of operation situation and satisfaction of conditions by the non-banking credit institution as provided for in points b, c and h, paragraph 1.1, Article 4 of this Regulation on the opening of branch or provisions in points c, d and e, paragraph 2, Article 4 of this Regulation on the opening of representative office;

2. After 30 (thirty) days since the operation opening of the branch, the Inspectorate of the State Bank branch in province, city under the central Government's management shall perform the examination for the compliance with provisions of this Regulation, provisions of applicable laws and internal regulations on operation management of branches, representative offices of the Non-banking credit institutions by domestic branches, representative offices.

Article 17. Responsibilities of the State Bank branches in provinces, cities under the central Government's management

1. Where Non-banking credit institutions open their branches, representative offices:

a) To supervise the opening of operation, manage the operation of branches, representative offices of Non-banking credit institutions in the locality. To report unusual changes in organization and operation of branches, representative offices of Non-banking credit institutions in the locality for the timely settlement of the State Bank of Vietnam;

b) To examine, inspect operation of branches, representative offices of Non-banking credit institutions in the locality;

c) Within the maximum period of 07 (seven) working days from the receipt of application for the opening of branch, representative office from Non-banking credit institutions in the locality, the State Bank branch in provinces, cities under the central Government's management shall provide written opinion of the need of banking operation in the locality, approval or disapproval of the opening of branches, representative offices by Non-banking credit institutions in the locality. In case of disapproval, the reasons thereof should be clearly stated.

2. Where non-banking credit institutions locate their head office: Within the maximum period of 07 (seven) working days from the receipt of request of the State Bank on the application for opening branches, representative offices from Non-banking credit institutions, the State Bank branches in provinces, cities under the central Government's management shall provide written assessment on conditions stipulated in Article 4 of this Regulation and opinion on the application of Non-banking credit institutions. In case of disapproval, the reasons thereof should be clearly stated.

Chapter III

IMPLEMENTING PROVISIONS

Article 18. Period of adjustment

1. Within a period of 01 (one) year since the effectiveness of this Regulation, Non-banking credit institutions shall be obliged to check entire system of their branches, representative offices, transaction offices in order to adjust by themselves the number of branches, representative offices, transaction offices; to issue internal regulations on operation management of branches, representative offices, transaction offices in order to operate in accordance with provisions of this Regulation;

2. Non-banking credit institutions which currently have the number of branches that is higher than that permitted to open in accordance with provisions of point e, paragraph 1.1, Article 4 of this Regulation shall be obliged to rearrange or terminate operation of branches, transaction offices and shall not be entitled to additionally open new branches.

Article 19. Dealing with violation

Non-banking credit institutions that violate provisions in this Regulation shall, depending on the nature, seriousness of violation, be subject to punishment in accordance with provisions of applicable laws.

APPENDIX

APPLICATION FOR OPENING TRANSACTION OFFICE

To: The State Bank branch in province, city ………
(where Non-banking credit institution plans to open transaction office)

1. Name of Non-banking credit institution:

2. Business license No.:

3. Location of head office:

4. Chapter capital:

5. Legal representative:………………………………… - Position:

6. Authorized person of legal representative:………………………… - Position:

7. Name of branch of Non-banking credit institution:

8. Location of branch:

9. Representative:………………………………….. - Position:

Register to open transaction office as follows:

1. Name of transaction office:

2. Decision on the opening of transaction office No.:… /date ...... /of Chairman of Board of Directors (or of authorized person).

3. Location of transaction office:

4. Representative:……………………………………. - Position:

5. Contents of operation:

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