Circular 25/2024/TT-NHNN conditions 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

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Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the January 18, 2024 Law on Credit Institutions;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022 defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Chief Inspector of the Banking 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.

Chapter I

GENERAL PROVISIONS

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, gold trading, factoring, issuance of credit cards, consumer cards, intermediary payment services and credit information;

c) General finance companies contributing capital or purchasing shares in order to establish or acquire subsidiaries or affiliated companies operating in the fields of insurance, securities, debt management and asset exploitation; specialized finance companies contributing capital or purchasing shares in order to establish or acquire subsidiaries or affiliated companies operating in the fields of debt management and asset exploitation;

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

2. This Circular does not apply to:

a) Capital contribution or share purchase by commercial banks to establish credit institutions;

b) Commercial banks purchasing or holding shares of another credit institution;

c) Capital contribution or share purchase of the mandatory transferee at the commercial bank that is mandatorily transferred.

3. The capital increase in subsidiaries or affiliated companies of credit institutions in the cases specified at Points a and c, Clause 1 of this Article must ensure the conditions as prescribed in Article 8 of this Circular.

Article 2. Subjects of application

This circular applies to:

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

2. Organizations and individuals involved in the capital contribution, share purchase or conversion of debt into contributed or share capital portions of credit institutions.

Article 3. Principles of making dossiers

1. 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 law regulations on consular legalization) and translated into Vietnamese.

2. Vietnamese translations of foreign-language documents shall be notarized or signatures of translators shall be authenticated in accordance with law regulations;

3. 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.

4. 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 regulations.

Article 4. Authority to approve the capital contribution and share purchase by credit institutions

1. The Governor of the State Bank shall consider and approve the capital contribution and share purchase in other enterprises operating in the fields specified at Point b, Clause 1, Article 1 of this Circular, and the conversion of debt into contributed or share capital portions as prescribed at Point d, Clause 1, Article 1 of this Circular.

2. The Chief Inspector of Banking Supervision Agency shall consider and approve the capital contribution and share purchase to establish or acquire subsidiaries or affiliated companies as prescribed at Points a and c, Clause 1, Article 1 of this Circular.

Chapter II

CONDITIONS, DOSSIERS, ORDER AND PROCEDURES FOR APPROVING CAPITAL CONTRIBUTION AND SHARE PURCHASE; CONDITIONS FOR INCREASING CAPITAL IN SUBSIDIARIES AND AFFILIATED COMPANIES OF CREDIT INSTITUTIONS

Article 5. 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 138 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;

c) The compliance with the limits on capital contribution and share purchase as stipulated in Article 137 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month of the proposal and at the time of completing the capital contribution and share purchase;

d) The real value of the charter capital at the time of proposing and 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 as prescribed by the Governor of the State Bank regarding the classification of assets in the operations of credit institutions and foreign bank branches is below 3% during the period of 12 months prior to the month of requesting capital contribution or share purchase;

h) Ensuring that there is an organizational management structure; the number of members, structure, and term of the Board of Directors, Members’ Council, Control Board, and Director General (Director) in accordance with the provisions of the Law on Credit Institutions at the time of the proposal.

2. Conditions for capital contribution or share purchase to establish or acquire affiliated companies specified 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 138 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;

c) The compliance with the limits on capital contribution or share purchase specified in Article 137 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.

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 Points a, d Clause 1 of this Article;

b) The compliance with the limits on capital contribution or share purchase specified in Article 137 of the Law on Credit Institutions is ensured at the time of requesting capital contribution or share purchase, and at the time of completing capital contribution or share purchase;

c) The capital adequacy ratio specified at Point b, Clause 1, Article 138 of the Law on Credit Institutions is ensured at the time of requesting capital contribution or share purchase, and at the time of completing 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 in accordance with the regulations of the Governor of the State Bank on limits and safety ratios in the operations of banks and foreign bank branches 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.

5. Conditions for conversion of debts into contributed or share capital 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 contributed or share capital portions are non-performing loans and the conversion thereof into contributed or share capital portions aims to resolve such non-performing loans. Non-performing loans shall be identified under the State Bank Governor’s regulations on the classification of assets in operations of credit institutions and foreign bank branches.

Article 6. 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 companies specified at Points a and c, Clause 1, Article 1 of this Circular (except subsidiaries and affiliated companies operating 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 issued with this Circular;

b) The competent authority of the credit institution’s written document approving the plan 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 purchasing 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 purchasing shares;

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

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

(vii) Ratio of non-performing 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 handle 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;

(x) Information about the compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions 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;

(xi) The organizational management structure of the credit institution; the number of members, structure, and term of the Board of Directors, Members’ Council, Control Board, and Director General (Director) in accordance with the Law on Credit Institutions at the time of requesting capital contribution or share purchase;

(xii) Major shareholders and their affiliated persons 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;

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

d) Credit institution’s financial statements of the year prior to  the year of requesting capital contribution or share purchase, audited by an independent auditing firm;

dd) A copy of the enterprise registration certificate of the enterprise receiving capital contribution or share purchase.

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), c(v) and c(vi), Clause 1 of this Article and the minimum capital adequacy ratio and the compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions at the time of requesting capital contribution or share purchase and at the time of completing capital contribution or share purchase.

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;

(ii) Information about the compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions 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;

(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, and at the time of completing capital contribution or share purchase.

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

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

b) A copy of the enterprise registration certificate of the enterprise having debts converted into contributed or share capital 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;

(ii) Information about the compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions 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;

(iii) Information about the debt to be converted into a contributed or share capital portion, including: the status of the debt to be converted into a contributed or share capital 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 contributed or share capital portion.

Article 7. Order and procedures for approving capital contribution and share purchase by credit institutions

1. A credit institution shall make 01 set of dossiers prescribed in Article 6 of this Circular and send it directly or via postal service to the headquarter of the State Bank (single window section). In case such dossier is incomplete and invalid, within 10 working days after receiving it, the State Bank shall request in writing the credit institution to supplement and complete it;

2. Within 45 days after receiving a complete and valid dossier, the State Bank or the Banking Supervision Agency shall issue a document approving or disapproving the capital contribution, share purchase, or conversion of debt into contributed or share capital portions of the credit institution. In case of disapproval, the State Bank or the Banking Supervision Agency shall reply in writing, clearly stating the reason.

3. Within 12 months from the date of the approval document, the credit institution shall complete the capital contribution, share purchase, or conversion of debt into contributed or share capital portions. Past this time limit, if the credit institution does not complete the capital contribution, share purchase, or conversion of debt into contributed or share capital portions, the written approval of the State Bank or the Banking Supervision Agency shall automatically become invalid.

Article 8. Conditions for capital increase in subsidiaries and affiliated companies of credit institutions

1. Conditions for capital increase in subsidiaries specified at Points a and c, Clause 1, Article 1 of this Circular (except for subsidiaries that operate in the field of debt management and asset exploitation):

a) For credit institutions implementing a capital increase:

(i) The minimum capital adequacy ratio as stipulated at Point b, Clause 1, Article 138 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month in which the credit institution issues a written approval of the capital increase and at the time of completing the capital increase;

(ii) The compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month in which the credit institution issues a written approval of the capital increase and at the time of completing the capital increase;

(iii) The real value of the charter capital at the time the credit institution issues a written approval of the capital increase and at the time of completing the capital increase is not lower than the legal capital;

(iv) Business activities stated in the financial statement of the year preceding the year in which the credit institution issues a written approval of the capital increase, which has been audited by an independent audit firm, are profitable;

(v) No sanction is imposed for administrative violations in the debt classification, setting aside and use of risk provisions to handle risks, capital contribution or share purchase during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase;

(vi) The ratio of non-performing loans, in accordance with the State Bank Governor’s regulations on asset classification in the operations of credit institutions and foreign bank branches, is below 3% during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase;

(vii) The number of members, structure, and term of the Board of Directors, Members’ Council, Control Board, and Director General (Director) in accordance with the Law on Credit Institutions are ensured at the time the credit institution issues a written approval of the capital increase.

b) For subsidiaries of credit institutions (except for subsidiaries that are early intervened credit institutions or credit institutions under special control):

(i) The business performance results, according to the financial statements in the period of 3 years prior to the year in which the credit institution issues a written approval of the capital increase (for subsidiaries that have been in operation for 3 years or more) or according to the financial statements from the time of establishment to the time the credit institution issues a written approval of the capital increase (for subsidiaries that have been in operation for less than 3 years), audited by an independent audit firm, are profitable and have no accumulated losses at the time the credit institution issues a written approval of the capital increase;

(ii) No sanction is imposed for administrative violations in the operation fields of subsidiaries during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase.

2. Conditions for capital increase in affiliated companies specified at Points a and c, Clause 1, Article 1 of this Circular (except for affiliated companies that operate in the field of debt management and asset exploitation):

a) For credit institutions implementing a capital increase:

(i) The minimum capital adequacy ratio as prescribed at Point b, Clause 1, Article 138 of the Law on Credit Institutions is ensured during the period of 24 months prior to the month in which the credit institution issues a written approval of the capital increase and at the time of completing the capital increase;

(ii) The compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions is ensured during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase and at the time of completing the capital increase;

(iii) Meeting the conditions specified at Points a(iii), a(iv), a(v), a(vi), and a(vii) of Clause 1 of this Article.

b) For affiliated companies of credit institutions (except for affiliated companies that are early intervened credit institutions or credit institutions under special control):

(i) The business performance results, according to the financial statements in the period of 3 years prior to the year in which the credit institution issues a written approval of the capital increase (for affiliated companies that have been in operation for 3 years or more) or according to the financial statements from the time of establishment to the time the credit institution issues a written approval of the capital increase (for affiliated companies that have been in operation for less than 3 years), audited by an independent audit firm, are profitable and have no accumulated losses at the time the credit institution issues a written approval of the capital increase;

(ii) No sanction is imposed for administrative violations in the operation fields of affiliated companies during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase.

3. Conditions for capital increase in subsidiaries and affiliated companies operating in the field of debt management and asset exploitation:

a) For credit institutions implementing a capital increase:

(i) Meeting the condition specified at Point a(iii) of Clause 1 of this Article;

(ii) The minimum capital adequacy ratio as stipulated at Point b, Clause 1, Article 138 of the Law on Credit Institutions is ensured at the time the credit institution issues a written approval of the capital increase and at the time of completing the capital increase;

(iii) The compliance with the limits on capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions is ensured at the time the credit institution issues a written approval of the capital increase and at the time of completing the capital increase.

b) For subsidiaries and affiliated companies of credit institutions:

No sanction is imposed for administrative violations in the any field of operation of subsidiaries or affiliated companies during the period of 12 months prior to the month in which the credit institution issues a written approval of the capital increase.

Article 9. Responsibilities of credit institutions

1. Take the responsibilities before the law for the accuracy, completeness, and honesty of the information provided in the dossier requesting approval for capital contribution and share purchase as prescribed in Article 6 of this Circular and for meeting the conditions for capital increase in subsidiaries and affiliated companies as prescribed in Article 8 of this Circular.

2. Report to the State Bank (through the Banking Supervision Agency) on the implementation of the capital increase in subsidiaries and affiliated companies within 5 days from the date that the new charter capital is recorded in the Enterprise Registration Certificate of the subsidiaries or affiliated companies, clearly stating the fulfillment of the conditions for the capital increase in subsidiaries and affiliated companies as prescribed in Article 8 of this Circular.

Chapter III

IMPLEMENTATION PROVISIONS

Article 10. Effect

1. This Circular takes effect on July 1, 2024.

2. The State Bank Governor’s Circular No. 51/2018/TT-NHNN of December 31, 2018, prescribing the conditions, dossiers, order and procedures for approving capital contribution and share purchase by credit institutions shall cease to be effective from the date this Circular takes effect.

Article 11. Organization of implementation

The Chief of the Office, the Chief Inspector of the Banking Supervision Agency, heads of units of the State Bank, credit institutions shall implement this Circular./.