Is it compulsory for financial companies in Vietnam to meet legal capital requirements to be granted a license?
What is legal capital in Vietnam?
According to current legal regulations, there are no longer regulations explaining the concept of legal capital, however this concept is explained in Clause 7, Article 4 of the Law on Enterprise 2005 as follows:
Legal capital means the minimum amount of capital that is required by law for an enterprise to be established.
And for credit institutions, the requirements for legal capital are specified in Article 19 of the Law on Credit Institutions 2010 as follows:
- The Government shall provide legal capital applicable to each type of credit institutions and foreign bank branches.
- Credit institutions and foreign bank branches shall preserve the actual value of their charter or allocated capital at least equal to their legal capital.
- The State Bank shall specify the handling of cases in which the actual value of credit institutions' charter capital or foreign bank branches' allocated capital is lower than their legal capital.
Is it compulsory for financial companies in Vietnam to meet legal capital requirements to be granted a license?
Is it compulsory for financial companies in Vietnam to meet legal capital requirements to be granted a license?
Pursuant to Clause 1 and Clause 4, Article 4 of the Law on Credit Institutions 2010, it is stated as follows:
Interpretation of terms
In this Law. the terms below are construed as follows:
1. Credit institution means an enterprise conducting one. some or all banking operations. Credit institutions include banks, non-bank credit institutions, microfinance institutions and people's credit funds.
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4. 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.
Accordingly, a financial company is considered a non-banking credit institution and must meet the conditions to establish a credit institution.
And in Clause 1, Article 20 of the Law on Credit Institutions 2010, the conditions for being granted a license to establish a credit institution are as follows:
Licensing conditions
1. A credit institution may obtain a license when fully meeting the following conditions:
a/ Its charter or allocated capital is at least equal to the legal capital;
b/ Its owner is a one-member limited liability company, its founding shareholders or members arc legal entities which arc lawfully operating and financially capable for capital contribution. Its founding shareholders or members arc individuals with full civil act capacity and financially capable for capital contribution.
The State Bank shall provide the conditions for owners of credit institutions being one-member limited liability companies and founding shareholders and members;
c/ Its managers, executives and Control Board members fully meet the criteria and conditions under Article 50 of this Law;
d/ Its charter complies with this Law and other relevant laws;
e/ It has an establishment plan and a feasible business plan which neither affects the safety and stability of the credit institution system nor creates monopoly or restrict competition or create unfair competition within the credit institution system.
As such, a financial company that wants to be granted a license must have a charter capital, which must be granted at least equal to the legal capital level, and at the same time must meet other conditions as prescribed by the law above.
How much is the legal capital level of financial companies in Vietnam according to current regulations?
The legal capital level of credit institutions is specified in Article 2 of Decree 86/2019/ND-CP as follows:
Levels of legal capital
1. Commercial banks: 3,000 billion dong.
2. Policy banks: 5,000 billion dong.
3. Cooperative banks: 3,000 billion dong.
4. Foreign bank branches: 15 million U.S. dollars (USD).
5. Financial companies: 500 billion dong.
6. Financial leasing companies: 150 billion dong.
7. Microfinance institutions: 05 billion dong.
8. People’s credit funds, each of which operates within a commune or town (hereinafter referred to as commune): 0.5 billion dong.
9. People’s credit funds, each of which operates within a ward; people’s credit funds, each of which operates within an inter-commune, commune-ward and inter-ward area: 01 billion dong.
Accordingly, the financial company's current legal capital is 500 billion VND.
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