Circular 35/2024/TT-NHNN renewal of licenses of non-bank credit institutions

CIRCULAR

Prescribing the renewal of licenses, addition of new operations to licenses, organization and operation of non-bank credit institutions

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

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

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

At the request of the Chief Inspector of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam hereby promulgates the Circular prescribing the renewal of licenses, addition of new operations to licenses, organization and operation of non-bank credit institutions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

1. This Circular prescribes the renewal of licenses, addition of new operations to licenses, organization and operation of non-bank credit institutions.

2. Finance lease by general finance companies and finance leasing companies shall comply with the regulations of the Governor of the State Bank.

Article 2. Subjects of application

1. General finance companies.

2. Specialized finance companies.

3. Organizations and individuals involved in renewal of licenses, addition of new operations to licenses, organization and operation of non-bank credit institutions prescribed in this Circular.

Article 3. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Owners include Vietnam’s commercial banks or foreign credit institutions that own entire charter capital of single-member limited liability non-bank credit institutions.

2. Rentals mean an amount of money paid to the lessor by the lessee under the operating lease agreement.

3. Operating lease means the lease mode by which the finance leasing company shall rent an asset to the operating lessee for a specified period of time on the principle that the lessee shall return the asset after the lease duration. Finance leasing company shall be the legal owner of the asset during the lease. The lessee shall have the use of the asset and pay the rents throughout the lease duration as stated in the operating lease agreement.

4. Operating lessee means to a legal entity or individual operating in Vietnam.

For a household, co-operative group and another organization without legal personality engaging in an operating lease relation, the entity establishing or performing civil transactions for such household, co-operative group and the other organization without legal personality shall be a member thereof or a representative authorized by them.

Article 4. Competence for approval of renewal of licenses or addition of new operations to licenses of non-bank credit institutions

1. The Governor of the State Bank shall consider and decide on the renewal of the licenses or the addition of new operations to the licenses together with renewal thereof for non-bank credit institutions.

2. The Chief Inspector of the Banking Supervision Agency shall consider and decide on the addition of new operations to the licenses of non-bank credit institutions.

Chapter II

RENEWAL OF LICENSES, ADDITION OF NEW OPERATION TO LICENSES

Article 5. Principles for renewal of licenses, addition of new operations to licenses

1. The State Bank shall not renew licenses for operations that non-bank credit institutions are not allowed to perform in accordance with the law regulations at the time of renewal.

2. The State Bank shall adjust the titles of permitted operations in accordance with the Law on Credit Institutions and the Appendices to this Circular. New licenses shall supersede all the licenses, written approvals (concerning amendments and supplements made to the licenses) granted by the State Bank to non-bank credit institutions before the time of renewal.

3. New operations regarding foreign exchange and provision of foreign exchange services shall be added to licenses in accordance with separate regulations of the State Bank and other relevant law regulations.

4. Non-bank credit institutions may perform other forms of credit extension and other business operations related to banking operations prescribed in the Appendices to this Circular after obtaining approvals of the State Bank. The procedures for adding such operations to the licenses shall comply with separate regulations of the State Bank and other relevant law regulations.

5. In case a non-bank credit institution requests new operations to be added to the license together with renewing the license, the State Bank shall consider renewing it for a new license containing the additional new operations upon such request, provided that the non-bank credit institution submit a complete dossier as prescribed in Clause 3, Article 7 of this Circular.

Article 6. Principles for preparation of dossiers for renewal of licenses, addition of new operations to licenses

1. A dossier of application for renewal of the license or addition of new operations to the license must be signed by the legal representative or the authorized representative of the non-bank credit institution. In case of authorization, the dossier must contain a power of attorney, which is made in accordance with law regulations.

2. 01 dossier of application for renewal of the license or addition of new operations to the license of a non-bank credit institution shall be made in Vietnamese. Consular legalization in accordance with Vietnamese law is required for components of the dossier involving foreign elements (unless otherwise consular legalization is exempted in accordance with the law regulations on consular legalization). They must also be translated into Vietnamese. Translations from a foreign language into Vietnamese must be notarized or bear the translator’s signature as prescribed by law. In cases where the documents are copies other than authenticated copies or exact copies from the master register or copies with the presentation of originals for collation, the person collating them shall be held accountable for the accuracy of the copies compared to the originals.

3. A list of documents should be included in each dossier.

Article 7. Dossiers of application for renewal of licenses, addition of new operations to licenses

1. In case of renewal of a license:

a) A written application for renewal of the license, which must clearly specify the operations to be performed;

b) A list of operations, enclosed with photocopies of the current license and written approvals.

2. In case of addition of new operations to licenses:

a) A written application for addition of operations to the license specifying operations to be added. If a wholly foreign-invested non-bank credit institution applies for addition of new operations, the written application must include an undertaking that the foreign credit institution, which is the owner or a member contributing the largest ratio of the charter capital in the wholly foreign-invested non-bank credit institution, is currently permitted to perform such operations in the country where such foreign credit institution is headquartered;

b) A resolution adopted by the Board of Directors or the Members' Council of the non-bank credit institution requesting addition of operations to the license;

c) Documentary proof of its satisfaction of the conditions for the operations expected to be performed in Vietnam, which are currently permitted to be performed by the foreign credit institution, which is the owner or a member contributing the largest ratio of the charter capital in the wholly foreign-invested non-bank credit institution, in the country where such foreign credit institution is headquartered;

d) In addition to the dossier components prescribed at Points a, b, and c of this Clause, the non-bank credit institution which applies for addition of the banking operations specifically prescribed in the Law on Credit Institutions and the Appendices to this Circular must add thereto the following additional documents:

(i) Internal regulations, as prescribed by law, for performance of operations to be added;

(ii) An undertaking that it has met the conditions in terms of expertise, staff, facilities and technology to perform the banking operations to be added, in accordance with relevant law regulations.

3. In case of renewal of a license together with addition of new operations thereto:

a) A written application for renewal of the license and addition of new operations thereto, including operations to be performed and added and undertakings as prescribed at Point a, Clause 2 of this Article;

b) Documents as prescribed at Point b, Clause 1, and Points b, c, and d, Clause 2 of this Article.

Article 8. Procedures of application for renewal of licenses, addition of new operations to licenses

1. A non-bank credit institution wishing to have its license renewed or add new operations to its license or have its license renewed together with new operations added thereto shall make a dossier as prescribed in Article 7 of this Circular and send it in person or by post to the State Bank’s headquarters (at the single-window section).

2. Within 40 days after receiving a valid and complete dossier, the State Bank shall renew the license or add new operations to the license or renew the license together with adding new operations thereto for the non-bank credit institution. In case of rejection, the State Bank shall send a written notice specifying reasons.

3. After the licenses are renewed or the new operations are added to the licenses by the State Bank, non-bank credit institutions shall:

a) Announce changes to the license within 07 working days from the date the State Bank renews the license or adds operations to the license on 01 media channel of the State Bank and 01 printed newspaper in 03 consecutive issues or on 01 Vietnamese electronic newspaper;

b) Non-bank credit institutions must amend and supplement their Charters in accordance with the new or supplemented licenses.

Article 9. License renewal fee

1. License renewal fees are prescribed by the law regulations on fees and charges.

2. Within 15 days after the license is renewed, the non-bank credit institution shall pay the license renewal fee to the State Bank.

Article 10. Notification of renewal of licenses, addition of new operations to licenses

Within 05 working days from the date the State Bank renews the license or adds new operations to the license, or adds new operations to the license together with renewing it, the Banking Supervision Agency shall a written notice thereof, enclosed with the Decision to add new operations to the license or the new license to the provincial-level business registration authority in the locality where the non-bank credit institution is located for the recipient to update it to the national information system on business registration.

Chapter III

ORGANIZATION, ADMINISTRATION, MANAGEMENT AND CONTROL

Article 11. Names and head offices of non-bank credit institutions

1. The name of a non-bank credit institution must comply with the Law on Enterprises and relevant legal regulations, aligning with the institution's specific legal form and type, as follows:

a) Proper name + Joint-stock General Finance Company;

b) Proper name + Joint-stock Factoring Finance Company;

c) Proper name + Joint-stock Consumer Credit Finance Company;

d) Proper name + Joint-stock Finance Leasing Company;

dd) Proper name + Single-Member Limited Liability General Finance Company;

e) Proper name + Single-Member Limited Liability Factoring Finance Company;

g) Proper name + Single-Member Limited Liability Consumer Credit Finance Company;

h) Proper name + Single-Member Limited Liability Finance Leasing Company;

i) Proper name + Limited Liability General Finance Company (for multi-member limited liability general finance companies);

k) Proper name + Limited Liability Factoring Finance Company (for multi-member limited liability factoring finance companies);

l) Proper name + Limited Liability Consumer Credit Finance Company (for multi-member limited liability consumer credit finance companies);

m) Proper name + Limited Liability Finance Leasing Company (for multi-member limited liability specialized finance companies).

2. The head office of a non-bank credit institution should meet requirements for a head office of an enterprise as prescribed in the Law on Enterprises and following conditions:

a) It is recorded in the license in accordance with the law regulations. It is the workplace of the Board of Directors or the Members' Council, the Supervisory Board, and the General Director where transactions with customers are allowed;

b) It must be located in the territory of Vietnam, with a specific address including the building’s name (if any) and number, the street name, the commune/ward/township, the urban district/rural district/town/provincial city/municipality-affiliated city, the province/municipality; the phone number (if any), fax number (if any) and email (if any);

c) Transactions with customers shall be convenient there and compliant with the State Bank's regulations on vaults;

d) The head office has a management information system connected online with branches and business departments of the non-bank credit institution, which meets the non-bank credit institution’s requirements on administration and risk management and the State Bank’s requirements on management.

Article 12. Risk Committee and Human Resource Committee

1. The Board of Directors or the Members' Council must establish a Risk Committee and a Human Resources Committee to help it carry out its duties and exercise its powers. The Board of Directors or the Members' Council shall promulgate statues on the organization and operation of such committees. Within 10 days after promulgation thereof, the non-bank credit institution shall deliver such internal regulations to the State Bank (the Banking Supervision Agency).

2. Each committee shall consist of at least three members, including its head, who is a member of the Board of Directors or the Members' Council, and its members appointed by the Board of Directors or the Members' Council in accordance with the Charter of the non-bank credit institution. One member of the Board of Directors or the Members' Council shall act as head of only one committee. For a joint-stock non-bank credit organization, the Risk Committee should consist of at least one member who is an independent member of the Board of Directors.

3. The statutes on organization and operation of the committees comprise at least followings:

a) The working regulations shall at least prescribe: the number of members of the Committees and responsibilities of each member; regular meetings of the Committees; ad-hoc meetings of the Committees; form and percentage of voting on proposals of such Committees;

b) Duties and functions of the Risk Committee:

(i) Give advice to the Board of Directors or the Members' Council on the promulgation of risk management-related processes and policies within competence of the Committee in accordance with law regulations and the Charter of the non-bank credit institution;

(ii) Conduct analysis and provide warnings about the safety level of the non-bank credit institution in the face of potential risks and threats that may affect it, along with preventive measures for such risks in the short and long term;

(iii) Review and assess the conformity and efficiency of then current risk management processes and policies of the non-bank credit institution, thereby making proposals to the Board of Directors or the Members' Council regarding the necessity of changing the applicable processes and policies and the operational strategy;

(iv) Give advice to the Board of Directors or the Members' Council on decision-making regarding investments, relevant contracts and transactions; decision-making regarding risk management policies and supervision of the implementation of risk prevention measures of the non-bank credit institution within the scope of functions and tasks assigned by the Board of Directors of the Members' Council;

c) Duties and functions of the Human Resources Committee:

(i) Give advice to the Board of Directors or the Members' Council on scale and composition of the Board of Directors or the Members' Council and managers in commensurate with the operational scale and development strategy of the non-bank credit institution;

(ii) Give advice to the Board of Directors or the Members' Council on resolution of problems arising in connection with procedures on election, appointment, dismissal, removal from office of members of the Board of Directors or the Members' Council, members of the Supervisory Board and managers of the non-bank credit institution in accordance with the law regulations and the Charter of the non-bank credit institution;

(iii) Study and give advice to the Board of Directors or the Members' Council on the promulgation of internal regulations of the non-bank credit institution within competence of the Board of Directors or the Members' Council on pay, remuneration, bonuses, recruitment, training and other benefits to managers and employees of the non-bank financial institution.

Article 13. Transfer and redemption of capital contributions

1. Transfer or redemption of capital contributions shall be compliant with the Law on Enterprises.

2. Transfer of capital contributions shall be compliant with the regulations on organizational forms of non-bank credit institutions as prescribed in Clause 3 and Clause 4, Article 6 of the Law on Credit Institutions.

3. Founding members may only transfer capital contributions to other founding members within 05 years from the date the license is granted.

4. The transfer of capital contributions must ensure the capital contribution ratio prescribed in Clause 1, Article 77 of the Law on Credit Institutions and the following regulations:

a) The new partner receiving the transfer must meet the conditions prescribed in Clause 5, Article 29 of the Law on Credit Institutions and its guiding documents;

b) The new partner receiving the transfer, which is a foreign credit institution, must meet the conditions prescribed at Points b, d, and dd, Clause 2 and Clause 5, Article 29 of the Law on Credit Institutions and its guiding documents.

5. Redemption of capital contributions:

Limited liability non-bank credit institutions redeeming capital contributions must comply with the following regulations:

a) The conditions for payment and disposal of capital contributions upon capital-contributing members’ requests to redeem capital contributions shall comply with the regulations of the Law on Enterprises on redemption of capital contributions;

b) After paying for all capital contributions they redeem, non-bank credit institutions shall fulfill all liabilities and other asset-related obligations, ensure prudential limits and ratios in banking operations, and make sure that the actual value of the charter capital not smaller than the legal capital;

c) The regulations on risk management and establishment of provisions shall be fully complied with at the time of submission to the State Bank for approval of the redemption of capital contributions;

d) They have been conducting profitable business for 05 consecutive years preceding the year they request to redeem the capital contributions, and incurred no cumulative loss;

dd) They have not been penalized by the State Bank for administrative violations against regulations on currency and banking operations for 05 consecutive years preceding the year they request to redeem the capital contributions, and incurred no cumulative loss.

Article 14. Notification of information about the legal representative

1. Within 10 days from the date of changing the legal representative, the non-bank credit institution must notify the State Bank in writing of information: full name; gender; position; date of birth; ethnic group; nationality; type of personal legal document; number of personal legal document; date of issuance; place of issuance; address of permanent residence; contact address of the legal representative (unless otherwise the non-bank credit institution has announced a change of its legal representative after obtaining an approval by the State Bank of the provisional list of personnel in accordance with regulations).

2. Within 05 working days from the date of receiving the written notice of change of the legal representative from the non-bank credit institution, the Banking Supervision Agency shall notify in writing the information about the legal representative prescribed in Clause 1 of this Article to the provincial-level business registration agency in the locality where the non-bank credit institution is headquartered.

Chapter IV

OPERATION OF NON-BANK CREDIT INSTITUTIONS

Article 15. Operation of finance companies

1. General finance companies are allowed to perform operations prescribed in Articles 115 thru 119 of the Law on Credit Institutions.

2. Specialized finance companies are allowed to perform operations prescribed in Articles 120 thru 124 of the Law on Credit Institutions.

3. Factoring finance companies shall have a factoring outstanding balance of at least 70% of the total credit outstanding balance.

4. Consumer credit finance companies shall have a minimum consumer credit balance of 70% of the total credit outstanding balance.

5. Finance leasing companies shall have a minimum finance leasing outstanding balance of 70% of the total credit outstanding balance.

Article 16. Operating lease operations

1. Operating lease assets include machinery, equipment, means of transport, other movable assets and real estate as prescribed in Clause 2, Article 139 of the Law on Credit Institutions.

2. Finance leasing companies that perform operating lease operations should comply with regulations on lease of assets in the Civil Code and other relevant law regulations.

3. Operating lease agreements:

a) The operating lease agreement is an agreement between the finance leasing company and the lessee for the lease of one or a number of assets as prescribed in Clause 1 of this Article. The operating lease agreement shall take effect from the date agreed upon by the parties therein;

b) The operating lease agreement should comprise at least following information:

(i) Names, addresses and tax identification numbers of the finance leasing company and the lessee;

(ii) Name, type, codes (if any) of the leased asset and necessary identifiable information of the leased asset;

(iii) Lease term;

(iv) Rentals;

(v) Responsibilities of the parties for insurance, maintenance, assessment, repairs, replacement and other responsibilities for the leased asset as agreed during the lease term;

(vi) Rights and obligations of the finance leasing company and the lessee for operating lease operations, early termination of the operating lease agreement in accordance with civil law regulations and relevant law regulations.

Article 17. Scope of insurance agency operations

1. When the license granted by the State Bank to a non-bank credit institution contains insurance agency operations, the non-bank credit institution is allowed to perform insurance agency operations for the following types of insurance in accordance with the Law on Insurance Business.

2. When performing insurance agency operations, non-bank credit institutions must comply with the law regulations on insurance business and relevant law regulations.

Chapter V

RESPONSIBILITIES OF RELEVANT ORGANIZATIONS AND UNITS

Article 18. Responsibilities of subordinates of the State Bank

1. The Banking Supervision Agency shall:

a) Play a central role in receiving and assessing dossiers of application for renewals of licenses and putting forward them to Governor of the State Bank;

b) Play a central role in receiving, assessing and deciding on addition of new operations to licenses;

c) Send notices as prescribed in Article 10 and Clause 2, Article 14 of this Circular.

2. The Finance and Accounting Department shall:

Provide instructions on accounting for non-bank credit institutions as prescribed in this Circular.

3. The Forecasting and Statistics Department shall:

Assume the prime responsibility for developing and providing instructions on statistical reporting on operations of non-bank credit institutions as prescribed in this Circular.

4. The Central Banking Department shall:

a) Instruct non-bank credit institutions to pay license renewal fees;

b) Collect license renewal fees from non-bank credit institutions and pay all funds collected to the State Budget in accordance with the applicable regulations.

Article 19. Non-bank credit institutions shall:

1. Provide complete, accurate and timely information as requested by the State Bank in accordance with Circular and be held accountable to the law for such information.

2. Ensure that conditions are met to carry out the operations they apply for and maintain such conditions in accordance with regulations.

3. Develop and be held accountable for their internal regulations in accordance with the law regulations; perform licensed operations in accordance with the internal procedures they have developed, this Circular and other relevant law regulations.

4. Pay license renewal fees as prescribed in Article 32 of the Law on Credit Institutions.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 20. Effect

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

2. This Circular annuls:

a) Circular No. 30/2015/TT-NHNN dated December 25, 2015 of the Governor of the State Bank of Vietnam defining the licensing, organization and operation of non-bank credit institutions (Circular No. 30/2015/TT-NHNN);

b) Circular No. 15/2016/TT-NHNN dated June 30, 2016 of the Governor of the State Bank of Vietnam amending and supplementing a number of articles of Circular No. 30/2015/TT-NHNN;

c) Circular No. 01/2019/TT-NHNN dated February 1, 2019 of the Governor of the State Bank of Vietnam amending and supplementing a number of articles of Circular No. 30/2015/TT-NHNN;

d) Circular No. 05/2023/TT-NHNN dated June 22, 2023 of the Governor of the State Bank of Vietnam amending and supplementing a number of articles of Circular No. 30/2015/TT-NHNN.

Article 21. Transitional provisions

1. Written applications for renewal of licenses, addition of new operations to the licenses, addition of new operations to the license together with renewal thereof submitted by non-bank credit institutions before the effective date of this Circular shall continue to be considered and processed in accordance with the law regulations applicable at the time of submission.

2. Non-bank credit institutions may continue to collect insurance premiums and gather documents for the purpose of claim settlement and pay-off in accordance with insurance policies and agreements executed before July 1, 2024 under which the non-bank credit institutions act as insurance corporate agents. Amendments, supplements, and renewals of agreements, arrangements under which the non-bank financial institutions act as insurance corporate agents may only be made if such amendments, supplements, and renewals comply with the Law on Credit Institutions and this Circular.

Article 22. Implementation

Chief of Office, Chief Inspector of the Banking Supervision Agency and heads of subordinates of the State Bank, and non-bank credit institutions shall be responsible for implementing this Circular./.

* All Appendices are not translated herein.