What is commercial bank in Vietnam? Is operation period of commercial banks limited?
What is commercial bank in Vietnam?
According to the provisions of Clause 2, Article 2 of Circular No. 40/2011/TT-NHNN, commercial bank shall mean a type of bank which is entitled to perform all banking operations and other business operations as provided for by the Law on Credit institutions for the purpose of profits, including many forms such as branches, transaction offices, representative offices and public service providers in Vietnam; branches, representative offices, 100% foreign owned bank as prescribed by law.
In which, the forms of banking operations are understood as follows:
- A commercial bank which is established, organized in the form of a joint-stock company is called joint stock commercial bank.
- 100% foreign owned bank shall mean a commercial bank which is established in Vietnam, whose 100% of the charter capital is owned by a foreign credit institution; be a Vietnamese legal entity and whose head office is located in Vietnam. A 100% foreign owned bank shall be established in the form of a one-member limited liability company whose owner is a foreign bank or a limited liability company with two or more members, in which there must be a foreign bank holding 50% of the charter capital.
- Joint venture bank shall be a bank which is established in Vietnam by the capital contribution of Vietnamese party (including one or several Vietnamese banks) and foreign party (including one or several foreign banks) on the basis of a joint venture contract; be Vietnamese legal entity and whose head office is located in Vietnam. A joint venture bank shall be established and organized in the form of a limited liability company with two or more members, providing that the members shall not exceed 05, and in which one member and related persons are not allowed to hold more than 50% the charter capital.
- Foreign bank branch shall be an underlying unit of a foreign bank, have no legal entity and be guaranteed by the foreign bank to take responsibility for all the obligations and commitments of the foreign bank's branch in Vietnam.
- Representative office shall be an underlying unit of a foreign credit institution, other foreign organization having banking operations. A representative office shall not be permitted to conduct business operations in Vietnam.
- Foreign credit institution shall be a credit institution that is established in a foreign country in accordance with provisions of foreign laws.
What is commercial bank in Vietnam? Is operation period of commercial banks limited?
Is operation period of commercial banks limited?
According to the provisions of Article 22 of Circular No. 40/2011/TT-NHNN (some contents are annulled by Clause 2, Clause 4, Article 2 of Circular No. 25/2019/TT-NHNN), operation period of a commercial bank, foreign bank branch as prescribed in the License shall be no more than 99 years; operation period of a representative office shall be no more than 5 years.
What are the operations of commercial banks in Vietnam?
According to the provisions of Section 2, Chapter IV of the 2010 Law on Credit Institutions in Vietnam, the operations of commercial banks include:
- Banking operations of commercial banks
Pursuant to Article 98 of the 2010 Law on Credit Institutions in Vietnam on banking operations of commercial banks, including:
- Taking demand deposits, time deposits, savings deposits and deposits of other types.
- Issuing deposit certificates, promissory notes, treasury bills and bonds to raise capital at home and aboard.
- Extending credit by:
+ Lending;
+ Discounting and re-discounting negotiable instruments and other valuable papers;
+ Providing bank guarantee;
+ Issuing credit cards:
+ Domestic factoring; international factoring for banks licensed for international payment;
+ Other forms of credit after obtaining the State Bank's approval.
- Opening payment accounts for clients.
- Providing payment instruments.
- Providing the following payment services:
+ Domestic payment services, including check, payment order, authorized payment, collection, authorized collection, letter of credit and bank card, and collection and payment services.
+ Providing international payment services and other payment services after obtaining the State Bank's approval.
- Borrowing of loans from the State Bank of Vietnam
According to the provisions of Article 99 of the 2010 Law on Credit Institutions in Vietnam, commercial banks may borrow loans from the State Bank in the form of re-financing under the Law on the State Bank of Vietnam.
- Borrowing of loans from credit institutions and financial institutions
According to the provisions of Article 100 of the 2010 Law on Credit Institutions in Vietnam, commercial banks may borrow loans from domestic and overseas credit institutions and financial institutions under law.
- Opening of accounts
According to the provisions of Article 101 of the 2010 Law on Credit Institutions in Vietnam on opening of accounts of commercial banks as follows:
- A commercial bank shall open a deposit account at the State Bank and must maintain on this account an average balance not lower than the compulsory reserve ratio.
- A commercial bank may open a payment account at another credit institution.
- A commercial bank may open offshore deposit accounts and payment accounts under the foreign exchange law.
- Organization of and participation in payment systems
According to the provisions of Article 102 of the 2010 Law on Credit Institutions in Vietnam, commercial banks may organize their own internal payment systems and participate in the national inter-bank payment system. At the same time, commercial banks may participate in international payment systems after obtaining the State Bank's approval.
- Capital contribution and share purchase
Pursuant to Article 103 of the 2010 Law on Credit Institutions in Vietnam (amended by Clause 18, Article 1 of the 2017 Law on Amendments to some articles of the Law on Credit Institutions) stipulating as follows:
- Commercial banks may only use their charter capital and reserve funds to contribute capital or purchase shares.
- Commercial banks shall establish or acquire subsidiaries or affiliated companies to conduct the following business activities:
+ Securities issue underwriting, and securities brokerage; management and distribution of securities investment fund certificates; and securities investment portfolio management and stock trading;
+ Financial leasing;
+ Insurance.
- Commercial banks may establish or acquire subsidiaries or affiliated companies operating in such areas as management of debts and utilization of assets, local currency exchange for overseas Vietnamese, foreign exchange trading, gold trading, factoring, issuance of credit cards, consumer credit, intermediary payment services and credit information.
- Commercial banks may contribute capital to, or purchase shares from, enterprises operating in the following areas:
+ Insurance, securities, local currency exchange for overseas Vietnamese, foreign exchange trading, gold trading, factoring, issue of credit cards, consumer cards, intermediary payment services and credit information;
- Other areas not specified at Point a of this Clause.
- Commercial banks and their subsidiaries may acquire or hold shares of other credit institutions on the conditions and within the limits provided by the State Bank.
- Participation in the monetary market
Pursuant to Article 104 of the 2010 Law on Credit Institutions in Vietnam, commercial banks may bid for treasury bills and sell and purchase negotiable instruments, government bonds, treasury bills, state bank bills and other valuable papers in the monetary market.
- Dealing in and provision of foreign exchange services and derivative products
According to the provisions of Article 105 of the 2010 Law on Credit Institutions in Vietnam on dealing in and provision of foreign exchange services and derivative products as follows:
- After obtaining the State Bank's written approval, commercial banks may deal in and provide to domestic and overseas clients the following products and services:
+ Foreign exchange;
+ Derivatives regarding exchange rates, interest rates, foreign exchange, currency and other financial products.
- The State Bank shall specify the scope of foreign exchange trading; the conditions, order and procedures for approving foreign exchange trading; and the trading and supply of derivative products by commercial banks.
- Commercial banks' provision of foreign exchange services to clients complies with the foreign exchange law.
- Entrustment and agency
According to the provisions of Article 106 of the 2010 Law on Credit Institutions in Vietnam, commercial banks may entrust, undertake entrustment or act as agents in sectors relating to banking operations, insurance business and asset management according to the State Bank's regulations.
- Other business activities of commercial banks
Article 107 of the 2010 Law on Credit Institutions in Vietnam stipulates other specific activities as follows:
- Provision of such services as cash management, banking and financial consultancy, asset management and preservation, and safe keeping.
- Consultancy of corporate finance, business acquisition, sale, consolidation and merger and investment.
- Trading in government bonds and corporate bonds.
- Monetary brokerage services.
- Securities depository, gold trading and other business activities related to banking operations after obtaining the State Bank's written approval.
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