REGULATIONS AND PROCEDURES ON ESTABLISHING FOREIGN BANK BRANCHES IN VIETNAM

by Admin

01/12/2023

Documentation & Knowledge

REGULATIONS AND PROCEDURES ON ESTABLISHING FOREIGN BANK BRANCHES IN VIETNAM

 

In the context of global integration, Foreign banks found that Vietnam is also a member of the international banking market. The expansion of the network in Vietnam can increase profits and effectively support their country’s enterprises for doing business there. Therefore, in recent years, foreign banks have expanded their network of operations in Vietnam by opening more branches, transaction offices and in the future, more foreign banks will also aim at this purpose.

Therefore, in this periodicals, Dai Ha Thanh Law Firm mentions regulations and procedures on establishing foreign bank branches in Vietnam in accordance with Vietnamese law.

I. Regulations on establishing foreign bank branches in Vietnam:

According to Clause 9, Article 4 of Law on Credit Institutions 2010, amended and supplemented in 2017: "A foreign bank branch is a dependent unit of a foreign bank, has no legal status, guaranteed by a foreign bank to be responsible for all obligations and commitments of the foreign bank branch in Vietnam ”.  

1.   Commitments to establishment of foreign bank branches in Vietnam

According to Schedule of commitments No. 318/WTO/CK on banking and other financial services, Vietnam commits to allow foreign commercial banks to set up their branches in Vietnam. However, foreign commercial bank branches will not be allowed to open transaction offices other than its branch headquarts. Moreover, when establishing a foreign commercial bank branch in Vietnam, the Bank must satisfy the condition of total assets of over US$20 billion at the end of the year immediately preceding the time of applying for a branch and comply with other technical conditions prescribed by Vietnamese law.

2.   Conditions for foreign bank branch’s establishment

According to the provisions of Clause 3, Article 20 Credit Institutions Law 2010; amended and supplemented in 2017, Article 11 Consolidated Document No. 20/VBHN-NHNN dated December 12, 2018 Circular Regulations on licensing and organization and operation of commercial banks, foreign bank branches, representative offices of foreign credit institutions and other foreign organizations with banking activities in Vietnam, a foreign bank branch must fully meet the following conditions to be issued the establishment license of foreign bank branch:

(1) Charter capital, allocated capital is at least equal to 15 million US dollars (USD). Foreign bank branches have to maintain the real value of their charter capital or allocated capital at least equal to the legal capital.

(2) The owner of a credit institution is a single-member limited liability company, founding partner, founding members are legal entities that are legally operating and having full financial capacity to contribute capital; founding partners or founding members are individuals with full civil act capacity and full financial capacity to contribute capital. The conditions of owner's credit institutions which is single-member limited liability companies, founding shareholders and founding members shall be stipulated by the State Bank;

(3) Managers, executives and members of the Control Board fully meet the standards and conditions prescribed by Article 50 of the Law on Credit Institutions 2010 and Clauses 10 and 11, Article 1 of the amended Law on Credit Institutions 2017;

(4) Having project for the establishment, feasibility business plans, which do not affect the safety and stability of the credit institution system; not to create a monopoly or restraint of competition or unfair competition in the credit institution system;

(5) The foreign credit institution is allowed to conduct banking activities in accordance with the laws of the country where the foreign credit institution's head office is located;

(6) The scheduled activities permitted to be carry out in Vietnam must be the activities that the foreign credit institution is currently permitted to carry out in the country where the foreign credit institution's head office is located;

(7) Foreign credit institutions must have legal operations, meet the conditions of total assets, financial situation and safety ratios as prescribed by the State Bank;

(8) The competent authority of the foreign country has signed an agreement with the State Bank on inspection and supervision of banking activities, exchange information on supervision of bank safety and has a written commitment to consolidated supervision in accordance with international practices for the operation of the foreign credit institution.

(9) The foreign bank must have a letter of guarantee to take responsibility for all obligations and commitments of the foreign bank branch in Vietnam; ensure to maintain the real value of the allocated capital not to be lower than the legal capital level and comply with the provisions on safety assurance of the Law on Credit Institutions 2010.

(10) In addition, the Bank must also meet the following conditions: (i) Not seriously violating regulations on banking operations and other legal regulations of the original country within 05 consecutive years preceding the year of submitting the application for a license and up to the time of issuing the license; (ii) Having experience in international operations, rated being stable or higher by faith international credit, be capable of fulfilling financial commitments and normal operations even when the economic situation and conditions change in an unfavorable direction; (iii) Being profitable for 05 consecutive years preceding the year submitting the application for a license and up to the time for issuing the license; (iv) Be assessed by the competent authority of the country of origin to ensure the capital adequacy ratio and other safety ratios, fully comply with regulations on risk management and make adequate provisions as prescribed by the country of origin in the preceding the year submitting the application for a license and up to the time for issuing the license; (v) The Bank has total assets equivalent to at least 20 billion USD in the year preceding the year in which the license application is submitted and up to the time for issuing the license.

II.   Procedures on establishing foreign bank branches

AUTHORITY

Vietnam State Bank

PROCESSES

Stage 1: Prepare documents for establishing foreign bank branch

(Point a Clause 1 Article 5 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

Preparatory Committee (A group of people, with at least 02 members, one of which is the Head of the Board, set up by founding partners, capital-contributing members, selected by owners, the Bank, on behalf of founding partners, capital-contributing members,, owners, the Bank, carries out works related to the application for a license (Clause 18 Article 2 Consolidated Document No. 20/VBHN-NHNN)

Documents

(Clause 1 Article 13, Article 17 Consolidated Document No. 20/VBHN-NHNN)

(1) An application for a license to establish foreign bank branch shall be signed by the legal representative of the foreign bank;

(2) Scheme on establishment of foreign bank branch;

(3) Charter of the Bank;

(4) The curriculum vitae of the expected general director (director) of the foreign bank branch is certified by the Bank, criminal record (or equivalent document) as prescribed by law; diplomas and certificates proving competence, professional qualifications and documents proving that the expected General Director (Director) meets the conditions and standards prescribed by law; 

(5) A copy of establishment and operation license of the Bank or equivalent documents issued by the competent authority of the original country;

(6) A document about the Bank’s information issued by the competent authority of the country of origin;

(7) A document on committing to ensure the ability to supervise the entire operation of the Bank (including the operation of foreign bank branch in Vietnam) on a consolidated basis in accordance with international practices issued by the competent authority of the original country ;

(8) Auditor’s report for 05 years preceding the year  submitting the application for a license;

(9) Documents of the international credit rating agency on  credit rating to the Bank within 06 months before applying;

(10) The Bank's document guarantees full responsibility for all obligations and commitments of the foreign branch in Vietnam; ensure the real value of the branch's allocated capital which is not lower than the legal capital level and fully meets regulations on safety operation as prescribed by the State Bank;

(11) Report on the process of the Bank’s establishment, operation and development orientation up to the time submitting the application for a license;

(12) A document on the appointment of the Preparatory Committee and authorizing the Head of the Preparatory Committee signed by the legal representative of the Bank; 

Note: Documents in the dossier of application for establishing foreign bank branch license must be signed by the Head of the Preparatory Committee, unless otherwise prescribed by law. The documents signed by the Head of the Preparatory Committee must be titled “Preparatory Committee and Name of Commercial Bank and Foreign Bank Branch”.

Quantity

(Clause 1 Article 13 Consolidated Document No. 20/VBHN-NHNN)

02 original sets (one set in Vietnamese and one set in English) Note: English dossiers must be legalized by consular in accordance with the provisions of law, except for the following documents: (i) Documents sent directly to the State Bank by the competent authority of the original country; (ii) Auditor’s report prepared directly in English (iii) Translations from English to Vietnamese must be certified the translator's signature in accordance with the provisions of Vietnamese law; (iv) The translation of auditor’s report  must be certified by organizations or individuals licensed to notarize translation in accordance with the provisions of law; (v) Vietnamese documents that are original (or copied from the original Vietnamese) do not need to be translated into English.

Stage 2: Submit the dossier for establishment of a foreign bank branch and amend, supplement documents in the the dossier as required (if any)

(Point a Clause 1 Article 15 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

Preparatory Committee

How to do
  1. send to the post office
  2. submit directly in State Bank

Estimate time according to the law

The State Bank shall appraise the dossier within 60 days from the day receiving the dossier of application for a license

Results 

Confirmation letter receiving sufficient valid documents for consideration and acceptance of the principle 

Note: In case the dossier of application for a license is incomplete, the State Bank shall send a letter of request to the Preparatory Committee requiring to amend.   

Stage 3: Issue a written approval in principle for the establishment of foreign bank branch

(Point b Clause 1 Article 5 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

State Bank

Estimate time according to the law

90 days from the date sending confirmation letter receiving  full and valid documents

Results

Written approval in principle for the establishment of a foreign bank branch 

Note: In case of disapproval, the State Bank shall issue a letter of response to the Preparatory Committee, clearly stating the reasons for disapproval;

Stage 4: Supplement documents after receiving the written approval in principle for the establishment of foreign bank branch

(Point c Clause 1 Article 5 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

Preparatory Committee

Documents

(1) A letter of appointing the general director (director) of the foreign bank branch shall be signed by the legal representative of the Bank;  

(2) A document proving the legal right to use the headquarters of foreign bank branch  

(3) The internal regulations on organization and operation of foreign bank branch about the internal control and audit system specified at Point g, Clause 2, Article 17 of Circular 40/2011/TT-NHNN approved by the Bank;   

(4) A document which evaluates that the Bank meets the conditions issued by the competent authority of the original country specified at Points a, c and dd, Clause 2, Article 10, Point b, Clause 2, Article 11 of Circular 40/2011/TT-NHNN from the time submitting the application for a license to the time submitting additional documents.

Quantity

01 set

How to do
  1. send to the post office
  2. submit directly in State Bank

Estimate time according to the law 

60 days from the day of receiving the approval letter in principle of establishing a foreign bank branch. 

Note: After the above-mentioned term, if the State Bank does not receive or does not fully receive the above-mentioned documents, the approval letter is no longer valid;

Stage 5: Issue foreign bank branch establishment license

(Point c Clause 1 Article 5 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

State Bank

Estimate time according to the law 

(*) 02 days from the day of receiving full and valid supplementary documents

(**) 30 days from the day of receiving full and valid supplementary documents

Results 

(*) The receipt of full supplementary documents 

(**) License for establishment of foreign bank branch

Note: In case of refusal, the State Bank shall issue a letter of response to the Preparatory Committee, clearly stating the reasons for refusing to grant the license 

The operation term of foreign bank branch stated in the license shall not exceed 99 years

Stage 6: Pay the fee

(Article 6 Consolidated Document No. 20/VBHN-NHNN)

Subjects of implementation

Licensed Foreign Bank Branch

How to do

Pay the license fee at the State Bank (Transaction office)

Processing time according to the law

15 days from the date of issuing the license

Fee

1,000,000 VND/01 license

The above cost is based on the provisions of Clause 1 Article 4 of Circular 150/2016/TT-BTC dated October 14, 2016. In fact, there will be changes depending on the registration time. You can contact DHT Law Firm for the most accurate and fastest service quote.

Stage 7: Disclosure Information 

(Article 25 Credit Institutions Law 2010; amended and supplemented in 2017)

Subjects of implementation

Foreign Bank Branch

How to do

Announce on the media of the State Bank and in a daily newspaper in 03 consecutive issues or online newspapers of Vietnam. 

Processing time according to the law

At least 30 days before the scheduled opening date

Some branches of foreign banks in Vietnam

The above are the basic legal issues related to the establishment of foreign bank branches in Vietnam. Dai Ha Thanh Law Firm with a team of lawyers and legal advisors with extensive professional knowledge and practical experience is committed to provide professional legal services to clients. In case you have any questions regarding this matter, please contact us for professional and effective legal advice.