CIRCULAR

PRESCRIBING CONDITIONS, NECESSARY DOCUMENTS, ORDER AND PROCEDURES FOR APPROVING CONTRIBUTION OF CAPITAL TO AND PURCHASE OF SHARES OF CREDIT INSTITUTIONS

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

Pursuant to the Law on credit institutions No. 47/2010/QH12 dated June 16, 2010 and the Law No. 17/2017/QH14 dated November 20, 2017 on amendments to the Law on credit institutions;

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

At the request of the Head of the Bank Supervision and Inspection Agency;

The Governor of the State Bank of Vietnam promulgates a Circular prescribing conditions, necessary documents, order and procedures for approving the contribution of capital to and purchase of shares of credit institutions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

1. This Circular provides for the conditions, necessary documents, order and procedures for approving the contribution of capital to and purchase of shares of credit institutions, including:

a) The contribution of capital or purchase of shares by commercial banks for the purposes of: (i) establishing or acquiring subsidiaries or associate companies domestically operating in securities underwriting and/or securities brokerage; management and distribution of securities investment fund certificates; management of securities investment portfolios, and the selling/ buying of stocks; insurance; debt and asset management; remittance; foreign exchange and gold trading; intermediary payment services; credit information provision; (ii) acquiring subsidiaries or associate companies domestically operating in finance lease; factoring; consumer credit; or issuance of credit cards;

b) Commercial banks’ contribution of capital to or purchase of shares of other enterprises domestically engaging in business lines other than insurance, securities, remittance, foreign exchange and gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services, and credit information provision;

c) The contribution of capital to or purchase of shares by financial companies for the purposes of establishing or acquiring subsidiaries or associate companies domestically operating in insurance, securities, debt and asset management;

d) Commercial banks’ conversion of debts into contributed capital for settling bad debts incurred by enterprises domestically engaging in business lines other than insurance, securities, remittance, foreign exchange and gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services, and credit information provision.

2. This Circular does not apply to commercial banks’ contribution of capital or purchase of shares for the purpose of establishing credit institutions.

Article 2. Regulated entities

1. Commercial banks and financial companies (hereinafter referred to as “credit institutions”).

2. Organizations and individuals involved in the contribution of capital, purchase of shares and conversion of debts into contributed capital of credit institutions.

Article 3. Rules for preparing and submitting applications

1. An application for approval for the contribution of capital or purchase of shares by a credit institution must be prepared according to the following rules:

a) The application must be presented in Vietnamese. If an application includes the documents which are issued, notarized or certified by foreign authorities, these documents need to be legalized by consulates in accordance with the law of Vietnam (unless they are exempt from consular legalization in accordance with the law on consular legalization) and translated into Vietnamese;

b) Translations from a foreign language into Vietnamese must be notarized or bear the translator’s signature certified in accordance with applicable laws;

c) The documents included in the submitted application must be the originals or the copies from the master register, or the certified true copies or the copies submitted with their originals for verification purpose; If a document is presented with its original for verification purpose, the receiver shall append his/her signature on the copy after consideration and assume responsibility for the accuracy of the copy of document with its original;

d) The application form made by the credit institution for the State Bank of Vietnam (“SBV”)’s approval for its capital contribution or purchase of shares must be signed by its legal representative or authorized representative (hereinafter referred to as "legal representative"). In case the application is signed by an authorized representative, it must be accompanied with the written authorization duly made in accordance with applicable laws.

2. The application shall be submitted to the SBV directly or by post.

Chapter II

CONDITIONS, NECESSARY DOCUMENTS, ORDER AND PROCEDURES FOR APPROVING CONTRIBUTION OF CAPITAL TO AND PURCHASE OF SHARES

Article 4. Conditions for contribution of capital and purchase of shares by credit institutions

1. A credit institution is required to meet the following conditions for contributing capital to or buying shares for the purpose of establishing or acquiring a subsidiary as prescribed in Point a or Point c Clause 1 Article 1 hereof (except subsidiaries operating in debt and asset management):

a) The contribution of capital and/or purchase of shares by the credit institution must be licensed as specified in its License for establishment and operation;

b) The credit institution must meet the capital adequacy ratio as regulated in Point b Clause 1 Article 130 of the Law on credit institutions for a period of 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

c) The credit institution must meet the capital contribution or share purchase ratio as regulated in Article 129 of the Law on credit institutions for a period of 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

d) Its actual charter capital at the date of completion of the capital contribution or share purchase shall not be lower than the legal capital;

dd) It gains profit as shown in its financial statements of the year preceding the year in which the application is submitted. Such financial statements must be audited by an independent auditing firm;

e) It incurs no penalties for administrative violations against regulations on debt classification, setting and utilization of provisions for risk management, capital contribution and share purchase within 12 months before the month in which the application is submitted;

g) Its ratio of bad debts to total outstanding debts is lower than 3% within 12 months preceding the month in which the application is submitted;

h) Its organizational structure, the Board of Directors, the Board of Members, the Board of Comptrollers, and General Director (or Director) must be conformable with the Law on credit institutions and the SBV's regulations.

2. A credit institution is required to meet the following conditions for contributing capital to or buying shares for the purpose of establishing or acquiring an associate company as prescribed in Point a or Point c Clause 1 Article 1 hereof (except associate companies operating in debt and asset management):

a) It must meet the requirements stated in Point a, Point d, Point dd, Point e, Point g, and Point h Clause 1 of this Article;

b) It must meet the capital adequacy ratio as regulated in Point b Clause 1 Article 130 of the Law on credit institutions for a period of 12 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

c) It must meet the capital contribution or share purchase ratio as regulated in Article 129 of the Law on credit institutions for a period of 12 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval.

3. A credit institution is required to meet the following conditions for contributing capital to or buying shares for the purpose of establishing or acquiring a subsidiary or an associate company operating in debt and asset management:

a) It must meet the requirements stated in Point a Clause 1 of this Article;

b) It must meet the capital contribution or share purchase ratio as regulated in Article 129 of the Law on credit institutions at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

c) Its ratio of bad debts to total outstanding debts is higher than 3% within 12 months preceding the month in which the application is submitted.

4. A credit institution is required to meet the following conditions for contributing capital to or buying shares of an enterprise engaging in the business lines specified in Point b Clause 1 Article 1 hereof:

a) It must meet the requirements stated in Clause 1 of this Article;

b) It must meet the ratio of short-term funds used for granting medium- and long-term loans as prescribed in Point c Clause 1 Article 130 of the Law on credit institutions and the SBV's regulations within 24 months preceding the month in which the application is submitted.

5. A credit institution is required to meet the following conditions for conversion of debts into contributed capital as regulated in Point d Clause 1 Article 1 hereof:

a) It must meet the requirements stated in Point a, Point b, Point c, Point d, Point dd, Point e, and Point h Clause 1 of this Article;

b) Debts to be converted into contributed capital must be bad debts and such conversion of debts into contributed capital is made for the purpose of settling bad debts. Bad debts are determined according to the SBV’s regulations on classification of assets, ratio and method of establishment of provisions for credit losses, and utilization of provisions for handling credit losses by credit institutions and foreign banks’ branches.

Article 5. Application for approval for capital contribution and share purchase by credit institutions

1. An application for approval for the capital contribution or purchase of shares for the purpose of establishing or acquiring a subsidiary or an associate company as prescribed in Point a or Point c Clause 1 Article 1 hereof (except subsidiaries and associate companies operating in debt and asset management) includes:

a) The application form for approval for the capital contribution or purchase of shares made by the credit institution according to the form provided in the Appendix enclosed herewith;

b) The written approval for the capital contribution or purchase of shares given by the competent authority of the credit institution;

c) The credit institution’s plan for capital contribution or purchase of shares, which must include the following:

(i) Name (in Vietnamese and in foreign language), headquarters address of the credit institution contributing capital or buying shares;

(ii) Name (in Vietnamese and in foreign language), headquarters address, operations, and operating period of the enterprise receiving capital or selling shares;

(iii) Reasons and necessity of the capital contribution or purchase of shares;

(iv) Planned amounts of capital contributed and contribution percentage; planned amounts of shares purchased and percentage of shares owned at the enterprise receiving capital or selling shares;

(v) The charter capital and actual value of charter capital of the credit institution before contributing capital or buying shares;

(vi) Planned charter capital and actual value of charter capital of the credit institution before contributing capital or buying shares at the date of completion of the capital contribution or purchase of shares;

(vii) The ratio of bad debts to total outstanding debts of each month in the period of 12 months preceding the month in which the application is submitted;

(viii) The credit institution’s compliance with regulations on debt classification, setting and utilization of provisions for risk management, capital contribution and share purchase within 12 months before the month in which the application is submitted;

(ix) The capital adequacy ratio within 12 months (in case of capital contribution or purchase of shares for establishing or acquiring an associate company) or 24 months (in case of capital contribution or purchase of shares for establishing or acquiring a subsidiary) preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(x) The capital contribution or share purchase ratio within 12 months (in case of capital contribution or purchase of shares for establishing or acquiring an associate company) or 24 months (in case of capital contribution or purchase of shares for establishing or acquiring a subsidiary) preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(xi) The organizational structure of the credit institution; the organizational structure, functions, duties and rights of the Board of Directors, the Board of Members, the Board of Comptrollers, and General Director (or Director) as regulated in the Law on credit institutions and the SBV's regulations;

(xii) Major shareholders and their related persons of the subsidiary or associate company that is established or acquired by the credit institution in accordance with the Law on credit institutions and the SBV's regulations;

(xiii) The assessment of impacts of the capital contribution or purchase of shares on the financial status, management and operations of the credit institution;

d) The credit institution's financial statements of the year preceding the year in which the application is submitted. Such financial statements must be audited by an independent auditing firm;

dd) The copy of the Certificate of enterprise registration of the enterprise receiving capital or selling shares.

2. An application for approval for the capital contribution or purchase of shares for the purpose of establishing or acquiring a subsidiary or an associate company operating in debt and asset management includes:

a) The documents specified in Point a, Point b, Point dd Clause 1 of this Article;

b) The credit institution’s plan for capital contribution or purchase of shares, which must include the contents specified in Point c(i), Point c(ii), Point c(iii), Point c(iv) and Point c(vii) Clause 1 of this Article and the information about the capital contribution or share purchase ratio at the date of completion of the capital contribution or purchase of shares with the SBV’s approval.

3. An application for approval for the capital contribution or purchase of shares of an enterprise engaging in the business lines specified in Point b Clause 1 Article 1 hereof includes:

a) The documents specified in Point a, Point b, Point d, Point dd Clause 1 of this Article;

b) The credit institution’s plan for capital contribution or purchase of shares, which must include the contents specified in Points c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(vii), c(viii), c(xi), c(xii) and c(xiii) Clause 1 of this Article and the following:

(i) The capital adequacy ratio within 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(ii) The capital contribution or share purchase ratio within 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(iii) The maximum ratio of short-term funds used for granting medium- and long-term loans within 24 months preceding the month in which the application is submitted.

4. An application for approval for conversion of debts into contributed capital as prescribed in Point d Clause 1 Article 1 hereof includes:

a) The documents specified in Point a, Point b Clause 1 of this Article;

b) The copy of the Certificate of enterprise registration of the enterprise that incurs debts to be converted into contributed capital;

c) The credit institution’s plan for capital contribution or purchase of shares, which must include the contents specified in Points c(i), c(ii), c(iii), c(iv), c(v), c(vi), c(viii), c(xi), c(xii) and c(xiii) Clause 1 of this Article and the following:

(i) The capital adequacy ratio within 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(ii) The capital contribution or share purchase ratio within 24 months preceding the month in which the application is submitted and at the date of completion of the capital contribution or purchase of shares with the SBV’s approval;

(iii) The information about the debt to be converted into the contributed capital, including: The status of the debt to be converted into the contributed capital (the debt amount, the debt group, and ability to recover the debt); the contributed capital amount and contribution percentage or the number of shares and ownership percentage resulted from the conversion of debts into contributed capital.

Article 6. Order and procedures for approving contribution of capital to and purchase of shares of credit institutions

1. The credit institution shall prepare 02 sets of application as regulated in Article 5 hereof and submit them to the SBV (via the Bank Supervision and Inspection Agency). If the application is insufficient or invalid, within 07 business days from the receipt of the application, the Bank Supervision and Inspection Agency shall request the credit institution in writing to complete the application.

2. Within 07 business days from the receipt of the sufficient and valid application, the Bank Supervision and Inspection Agency shall send the written request, which must be accompanied with the application, for collecting opinions from:

a) The SBV’s branch in the province or city where the headquarters of the credit institution is located about the credit institution's satisfaction of corresponding conditions laid down in this Circular;

b) The SBV’s affiliates about the capital contribution, purchase of shares, or conversion of debts into contributed capital of the credit institution (if necessary).

3. Within 10 business days from the receipt of the written request for opinions from the Bank Supervision and Inspection Agency, requested agencies mentioned in Clause 2 of this Article must provide opinions about the requested contents in writing to the Bank Supervision and Inspection Agency.

4. Within 14 business days from the receipt of opinions from relevant agencies, the Bank Supervision and Inspection Agency shall consider and appraise the application, and then submit a report thereof to the SBV's Governor for giving approval or refusing to give approval for the capital contribution, purchase of shares or conversion of debts into contributed capital of the credit institution.

5. Within 45 business days from the receipt of sufficient and valid application, the SBV shall give written approval or refusal to give approval for the capital contribution, purchase of shares or conversion of debts into contributed capital of the credit institution; if an application is refused, the SBV shall provide reasons for such refusal in writing.

6. Within 12 months from the date on which the SBV’s written approval is given, the related credit institution must complete the capital contribution, purchase of shares or conversion of debts into contributed capital as approved. Over this time limit, the SBV’s written approval shall be implicitly invalid.

Chapter III

IMPLEMENTATION PROVISIONS

Article 7. Effect

1. This Circular comes into force from March 01, 2019.

2. From the effective date of this Circular, the following regulations shall be no longer legally valid:

a) The Circular No. 04/1999/TT-NHNN5 dated November 02, 1999 by the Governor of the State Bank of Vietnam;

b) The Decision No. 1389/2001/QD-NHNN dated November 07, 2001 by the Governor of the State Bank of Vietnam;

c) The Decision No. 951/2003/QD-NHNN dated August 18, 2003 by the Governor of the State Bank of Vietnam;

d) The Circular No. 24/2011/TT-NHNN dated August 31, 2011 by the Governor of the State Bank of Vietnam;

dd) Article 2 of the Circular No. 29/2015/TT-NHNN dated December 22, 2015 by the Governor of the State Bank of Vietnam.

Article 8. Implementation organization

The Chief of the Office, the Head of the Bank Supervision and Inspection Agency, heads of relevant entities affiliated to the SBV, Directors of the SBV’s branches in provinces or central-affiliated cities, Chairpersons of the Board of Directors, Chairpersons of the Board of Members, heads of Boards of Comptrollers and General Directors (Directors) of credit institutions shall implement this Circular./.

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