Are financial companies in Vietnam allowed to provide loans? Can financial companies purchase shares of other enterprises?
Are financial companies in Vietnam allowed to provide loans?
According to the provisions of Clause 4, Article 4 of the Law on Credit Institutions 2010 on non-banking credit institutions as follows:
Non-bank credit institution means a type of credit institution which may conduct one or some banking operations under this Law, except taking deposits of individuals and providing services of payment via client accounts. Non-bank credit institutions include finance companies, financial leasing companies and other non-bank credit institutions.
Financial leasing company means a type of finance company whose principal operation is financial leasing under this Law.
According to Article 108 of the Law on Credit Institutions 2010, the banking activities of financial companies are as follows:
Banking operations of finance companies
1. Finance companies may conduct one or some banking operations below:
a/ Taking deposits of organizations;
b/ Issuing deposit certificates, promissory notes, bills or bonds to raise capital from organizations;
c/ Borrowing loans from domestic and overseas credit institutions and financial institutions under law; borrowing loans from the State Bank in the form of re-financing under the Law on the State Bank of Vietnam;
d/ Providing loans, including amortized loans and consumer loans;
e/ Providing bank guarantee;
f/ Discounting and re-discounting negotiable instruments and other valuable papers;
g/ Issuing credit cards, factoring, financial leasing and other forms of credit extension after obtaining the State Bank's approval.
2. The Government shall specify conditions for finance companies to conduct banking operations prescribed in Clause 1 of this Article.
According to the above provisions, a financial company is a non-banking credit institution and conducts one or several banking activities specified in Clause 1, Article 108 of the Law on Credit Institutions 2010, including activities for get a loan.
Thus, financial companies are allowed to carry out lending activities.
Are financial companies in Vietnam allowed to provide loans? Can financial companies purchase shares of other enterprises?
Can financial companies in Vietnam open payment accounts at commercial banks?
Pursuant to Article 109 of the Law on Credit Institutions 2010, regulations on opening accounts of financial companies are as follows:
Opening of accounts by finance companies
1. A finance company that takes deposits shall open a deposit account at the State Bank and maintain on this account an average credit balance not lower than the compulsory reserve ratio.
2. A finance company may open a payment account at a commercial bank or foreign bank branch.
3. A finance company licensed to issue credit cards may open accounts at foreign banks under the foreign exchange law.
4. A finance company may open deposit accounts and loan accounts for their clients.
Accordingly, a finance company may open a payment account at a commercial bank or foreign bank branch.
In addition, a finance company licensed to issue credit cards may open accounts at foreign banks under the foreign exchange law.
Can financial companies in Vietnam purchase shares of other enterprises?
According to Article 110 of the Law on Credit Institutions 2010 (amended by Clause 18, Article 1 of the Law on amendments to some Articles of the Law on credit institutions 2017), regulations on capital contribution and share purchase by finance companies are as follows:
Capital contribution and share purchase by finance companies
1. Finance companies may only use their charter capital and reserve funds to contribute capital or purchase shares under Clauses 2 and 3 of this Article.
2. Finance companies may contribute capital to. or purchase shares of, enterprises and investment funds.
3. Finance companies may only establish or acquire subsidiaries or affiliated companies operating in insurance, securities and management of debts and utilization of assets after obtaining the State Bank's written approval.
4. The State Bank shall specify the conditions. dossiers, order and procedures for approving the establishment of subsidiaries and affiliated companies of finance companies specified in Clause 3 of this Article.
The conditions, order and procedures for establishing subsidiaries and affiliated companies comply with relevant laws.
Thus, financial companies can only use charter capital and reserve funds can only buy shares of other enterprises.
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