Circular No. 25/2024/TT-NHNN dated June 28, 2024 on prescribing conditions, applications, sequence and procedures for approving contribution of capital to and purchase of shares of credit institutions

CIRCULAR

PRESCRIBING CONDITIONS, APPLICATIONS, SEQUENCE AND PROCEDURES FOR APPROVING CONTRIBUTION OF CAPITAL TO AND PURCHASE OF SHARES OF CREDIT INSTITUTIONS

Pursuant to the Law on 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, tasks, 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 a Circular prescribing conditions, documents, sequence and procedures for approving contribution of capital to and purchase of shares of credit institutions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

1. This Circular provides for conditions, documents, sequence and procedures for approving 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 the field of 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; gold; intermediary payment services; credit information provision;

(ii) acquiring subsidiaries or associate companies domestically operating in the field of finance lease; factoring; consumer credit; issuance of credit cards;

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

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

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

2. This Circular does not apply to:

a) Commercial banks’ contribution of capital or purchase of shares for the purpose of establishing credit institutions;

b) Commercial banks’ purchase of shares or holding of shares of other credit institutions;

c) Contribution of capital or purchase of shares by mandatory transferees at commercial banks subject to mandatory transfer.

3. The increase in capital at subsidiaries or associate companies of credit institutions in the cases specified in points a and c clause 1 of this Article must satisfy the conditions set out in Article 8 of this Circular.

Article 2. Regulated entities

This Circular applies to:

1. Commercial banks, general finance companies and specialized finance 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 and share capital of credit institutions.

Article 3. Principles of preparing applications

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

2. Translations from a foreign language into Vietnamese must be notarized or bear the translator’s signature certified in accordance with regulations of law.

3. 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.

4. 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 enclose the written authorization duly made in accordance with regulations of law.

Article 4. Authority to approve contribution of capital to and purchase of shares of credit institutions

1. SBV’s Governor shall consider and approve the contribution of capital to and purchase of shares of other enterprises operating in the fields specified in point b clause 1 of this Circular and the conversion of debts into contributed capital and share capital specified in point d clause 1 Article 1 of this Circular.

2. The Chief Inspector of the Banking Supervision Agency shall consider and approve the contribution of capital and purchase of shares for the purpose of establishing or acquiring subsidiaries or associate companies specified in points a and c clause 1 Article 1 of this Circular.

Chapter II

CONDITIONS, APPLICATIONS, SEQUENCE AND PROCEDURES FOR APPROVING CONTRIBUTION OF CAPITAL TO AND PURCHASE OF SHARES OF CREDIT INSTITUTIONS; CONDITIONS FOR INCREASING CAPITAL AT SUBSIDIARIES OR ASSOCIATE COMPANIES OF CREDIT INSTITUTIONS

Article 5. Conditions for contribution of capital to and purchase of shares of 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 of this Circular (except subsidiaries operating in the field of debt and asset management):

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

b) The credit institution must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions for a period of 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

c) The credit institution must comply with regulations on limits on capital contribution or share purchase ratio in Article 137 of the Law on Credit Institutions for a period of 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

d) Its actual charter capital at the time of submission of the application and at the time 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 statement of the year preceding the year in which the application is submitted. Such financial statement must be audited by an independent audit organization;

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

g) Its bad debt ratio prescribed by regulations of SBV's Governor on classification of assets in operations of credit institutions and foreign bank branches is lower than 3% within 12 months preceding the month in which the application is submitted;

h) Its organizational structure; number of members, structure and tenure of 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 at the time of submission.

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 of this Circular (except associate companies operating in the field of debt and asset management):

a) It must meet the conditions stated in points a, d, dd, e, g and h clause 1 of this Article;

b) It must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions within 12 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

c) The credit institution must comply with regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions within 12 months preceding the month in which the application is submitted and at the time of completing the capital contribution or purchase of shares.

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 the field of debt and asset management:

a) It must meet the conditions stated in points a and d clause 1 of this Article;

b) It must comply with regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions at the time of submission of the application and at the time of completion of the capital contribution or share purchase;

c) It must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions at the time of submission of the application and at the time of completion of the capital contribution or share purchase.

4. A credit institution is required to meet the following conditions for contributing capital to or buying shares of an enterprise engaging in the fields specified in point b clause 1 Article 1 of this Circular:

a) It must meet the conditions 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 in accordance with regulations of SBV’s Governor on prudential ratios and limits in operations of banks and foreign bank branches within 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or purchase of shares.

5. A credit institution is required to meet the following conditions for conversion of debts into contributed capital or share capital as regulated in point d clause 1 Article 1 of this Circular:

a) It must meet the conditions stated in points a, b, c, d, dd, e and h clause 1 of this Article;

b) Debts to be converted into contributed capital or share capital must be bad debts and such conversion of debts into contributed capital or share capital is made for the purpose of settling bad debts. Bad debts are determined according to the regulations of SBV’s Governor on classification of assets in operations of credit institutions and foreign bank branches.

Article 6. Application for approval of 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 the field of 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 of the plan for capital contribution or purchase of shares given by the competent authority of the credit institution;

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

(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 time of completing the capital contribution or share purchase;

(vii) The bad debt ratio 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, establishment and use 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 time of completing the capital contribution or share purchase;

(x) Information about the compliance with regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions 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 time of completing the capital contribution or share purchase;

(xi) The organizational structure of the credit institution; number of members, structure and tenure 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 at the time of submission;

(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 statement of the year preceding the year in which the application is submitted. Such financial statement must be audited by an independent audit organization;

dd) The copy of the enterprise registration certificate 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 the field of debt and asset management includes:

a) The documents specified in points a, b and dd clause 1 of this Article;

b) The credit institution’s scheme for capital contribution or purchase of shares, which must include at least the details specified in points c(i), c(ii), c(iii), c(iv), c(v) and c(vi) clause 1 of this Article and the information about the capital adequacy ratio and the compliance with regulations on limits on capital contribution or share purchase at the time of submission and at the time of completion of the capital contribution or share purchase.

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 of this Circular includes:

a) The documents specified in points a, b, d and dd clause 1 of this Article;

b) The credit institution’s scheme for capital contribution or purchase of shares, which must include at least the details 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 details:

(i) The capital adequacy ratio within 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

(ii) Information about the compliance with regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions within 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

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

4. An application for approval for conversion of debts into contributed capital or share capital as prescribed in point d clause 1 Article 1 of this Circular includes:

a) The documents specified in points a, b and d clause 1 of this Article;

dd) The copy of the enterprise registration certificate of the enterprise that incurs debts to be converted into contributed capital or share capital;

c) The credit institution’s scheme for capital contribution or purchase of shares, which must include at least the details 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 information:

(i) The capital adequacy ratio within 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

(ii) Information about the compliance with regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions within 24 months preceding the month in which the application is submitted and at the time of completing the capital contribution or share purchase;

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

Article 7. Sequence and procedures for approving contribution of capital to and purchase of shares of credit institutions

1. The credit institution shall prepare 01 set of application as regulated in Article 6 of this Circular and submit it to the SBV’s headquarters (Single Window Section), whether in person or by post. If the application is insufficient or invalid, within 10 days from the receipt of the application, SBV shall request the credit institution in writing to supplement the application.

2. Within 45 days from the receipt of sufficient and valid application, SBV or Banking Supervision Agency shall give written approval or refusal to give approval for the capital contribution, purchase of shares or conversion of debts into contributed capital or share capital of the credit institution; if an application is refused, SBV shall provide written explanation for such refusal.

3. Within 12 months from the date on which the written approval is given, the credit institution must complete the capital contribution, purchase of shares or conversion of debts into contributed capital or share capital. Past this time limit, if the credit institution has yet to complete the capital contribution, purchase of shares or conversion of debts into contributed capital or share capital, the written approval of SBV or Banking Supervision Agency shall be implicitly invalid.

Article 8. Conditions for increase in capital at subsidiaries or associate companies of credit institutions

1. Conditions for increase in capital at a subsidiary prescribed in point a or c clause 1 Article 1 of this Circular (except subsidiaries operating in the field of debt and asset management):

a) For a credit institution increasing capital:

(i) The credit institution must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions for a period of 24 months preceding the month in which the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital;

(ii) The credit institution must comply with the regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions for a period of 24 months preceding the month in which the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital;

(iii) The credit institution’s actual charter capital at the time the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital shall not be lower than the legal capital;

(iv) The credit institution gains profit as shown in its financial statement of the year preceding the year in which the credit institution obtains the written approval for increase in capital. Such financial statement has been audited by an independent audit organization;

(v) The credit institution incurs no penalties for administrative violations against regulations on debt classification, establishment and use of provisions for risk management, capital contribution and share purchase within 12 months before the month in which the credit institution obtains the written approval for increase in capital;

(vi) The credit institution’s bad debt ratio prescribed by regulations of SBV's Governor on classification of assets in operations of credit institutions and foreign bank branches is lower than 3% within 12 months preceding the month in which the credit institution obtains the written approval for increase in capital;

(vii) The number of members, structure and tenure of the Board of Directors, the Board of Members, the Board of Comptrollers, and General Director (or Director) must comply with the regulations enshrined in the Law on Credit Institutions at the time the credit institution obtains the written approval for increase in capital.

b) For a subsidiary of the credit institution (except for the subsidiary being a credit institution subject to early intervention or credit institution placed under special control):

(i) The credit institution gains profit as shown in its financial statement in 03 years preceding the year in which the credit institution obtains the written approval for increase in capital (for the subsidiary that has operated for more than 03 years) or in its financial statement from the date of establishment to the date on which the credit institution obtains the written approval for increase in capital (for the subsidiary that has operated for more than 03 years). Such financial statement has been audited by an independent audit organization and the credit institution incurs no accumulated loss before the date on which the credit institution obtains the written approval for increase in capital;

(ii) The credit institution incurs no penalties for administrative violations arising from the operating field of the subsidiary within 12 months before the month in which the credit institution obtains the written approval for increase in capital.

2. Conditions for increase in capital at an associate company prescribed in point a or c clause 1 Article 1 of this Circular (except associate companies operating in the field of debt and asset management):

a) For a credit institution increasing capital:

(i) The credit institution must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions within 12 months preceding the month in which the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital;

(ii) The credit institution must comply with the regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions within 12 months preceding the month in which the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital;

(iii) The credit institution must meet the conditions stated in points a(iii), a(iv), a(v), a(vi) and a(vii) clause 1 of this Article;

b) For an associate company of the credit institution (except for the associate company being a credit institution subject to early intervention or credit institution placed under special control):

(i) The credit institution gains profit as shown in its financial statement in 03 years preceding the year in which the credit institution obtains the written approval for increase in capital (for the associate company that has operated for more than 03 years) or in its financial statement from the date of establishment to the date on which the credit institution obtains the written approval for increase in capital (for the associate company that has operated for more than 03 years). Such financial statement has been audited by an independent audit organization and the credit institution incurs no accumulated loss before the date on which the credit institution obtains the written approval for increase in capital;

(ii) The credit institution incurs no penalties for administrative violations arising from the operating field of the associate company within 12 months before the month in which the credit institution obtains the written approval for increase in capital.

3. Conditions for increase in capital at a subsidiary or an associate company operating in the field of debt and asset management:

a) For a credit institution increasing capital:

(i) The credit institution must meet the conditions stated in point a(iii) clause 1 of this Article;

(ii) The credit institution must meet the capital adequacy ratio as regulated in point b clause 1 Article 138 of the Law on Credit Institutions at the time the credit institution obtains the written approval for increase in capital and at the time of completing the increase in capital;

(iii) The credit institution must comply with the regulations on limits on capital contribution or share purchase in Article 137 of the Law on Credit Institutions at the credit institution obtaining the written approval for increase in capital and at the time of completing the increase in capital;

b) For a subsidiary or associate company of credit institution:

The credit institution incurs no penalties for administrative violations arising from the operating field of the subsidiary or associate company within 12 months before the month in which the credit institution obtains the written approval for increase in capital.

Article 9. Responsibilities of credit institutions

1. Take legal responsibility for the accuracy, adequacy and truthfulness of the information provided in applications for approval of capital contribution or share purchase as prescribed in Article 6 of this Circular and the satisfaction of conditions for increase in capital at subsidiaries and associate companies in Article 8 of this Circular.

2. Submit to SBV (via Banking Supervision Agency) a report on the total capital at subsidiaries and associate companies within 05 days from the date the new charter capital is specified in the enterprise registration certificate of such subsidiaries and associate companies, which explicitly states the satisfaction of conditions for increase in capital at subsidiaries and associate companies in Article 8 of this Circular.

Chapter III

IMPLEMENTATION CLAUSE

Article 10. Effect

1. This Circular comes into force from July 01, 2024.

2. The Circular No. 51/2018/TT-NHNN dated December 31, 2018 of the SBV’s Governor shall cease to have effect from the effective date of this Circular.

Article 11. Organizing implementation

Chief of Office, Chief Inspector of the Banking Supervision Agency, heads of units affiliated to SBV and credit institutions are responsible for the implementation of this Circular./.