Vietnam: What are the banking operations of commercial banks under the Law on Credit Institutions 2024?
- What are the banking operations of commercial banks in Vietnam under the Law on Credit Institutions 2024?
- What are the regulations on capital contribution and share purchase by commercial banks in Vietnam under the Law on Credit Institutions 2024?
- Under the latest regulations, who is the legal representative of a credit institution in Vietnam?
- On what date will the Law on Credit Institutions 2024 come into force?
What are the banking operations of commercial banks in Vietnam under the Law on Credit Institutions 2024?
Under the provisions of Article 107 of the Law on Credit Institutions 2024, commercial banks in Vietnam may conduct 06 following banking operations:
(1) Receiving demand deposits, term deposits, savings deposits and deposits of other types.
(2) Issuing deposit certificates.
(3) Extending credit by:
+ Lending;
+ Discounting or re-discounting;
+ Bank guarantee;
+ Issuance of credit cards;
+ Domestic or international factoring for banks licensed for international payment;
+ Letter of credit;
+ Other forms of credit extension according to regulations of the Governor of the State Bank;
(4) Opening payment accounts for clients.
(5) Providing payment instruments.
(6) Supplying the following payment services via accounts:
+ Domestic payment services, including check, payment order, collection order, money transfer, bank card, and collection and payment services;
+ International payment services after obtainment of the State Bank's approval and other payment services according to regulations of the Governor of State Bank.
Clause 15, Article 4 of the Law on Credit Institutions 2010 stipulates:
Interpretation of terms
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15. Provision of services of via-account payment means the provision of payment instruments; provision of services of payment by check, payment order, payment authorization, collection, collection authorization, bank card. letter of credit and other payment services for clients via their accounts.
Clause 6, Article 98 of the Law on Credit Institutions 2010 stipulates as follows:
Banking operations of commercial banks
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6. Providing the following payment services:
a/ Domestic payment services, including check, payment order, authorized payment, collection, authorized collection, letter of credit and bank card, and collection and payment services.
b/ Providing international payment services and other payment services after obtaining the State Bank's approval.
Thus, according to the Law on Credit Institutions 2010, letters of credit (L/C) are defined as forms of providing payment services.
Compared to the Law on Credit Institutions 2010, the new regulations have added letters of credit as a type of credit extension.
What are the regulations on capital contribution and share purchase by commercial banks in Vietnam under the Law on Credit Institutions 2024?
Article 111 of the Law on Credit Institutions 2024, each commercial bank may only use its charter capital and reserve fund to contribute capital or purchase shares in the following specific cases:
Case 1
Commercial banks shall establish or acquire subsidiaries or associate companies to conduct the following business activities:
- Securities underwriting and securities brokerage; management and distribution of securities investment fund certificates; and securities investment portfolio management and stock trade;
- Financial leasing;
- Insurance.
Note:
Commercial banks shall establish or acquire subsidiaries or associate companies after obtaining written approval from the State Bank of Vietnam.
Case 2
Commercial banks may establish or acquire subsidiaries or associate companies operating in fields, including management of debts and utilization of assets, remittance, gold trade, factoring, and issuance of credit cards, consumer credit, intermediary payment services and credit information.
Note:
Commercial banks shall establish or acquire subsidiaries or associate companies after obtaining written approval from the State Bank of Vietnam.
Case 3
Commercial banks may contribute capital to, or purchase shares from, enterprises operating in the following fields:
- Insurance, securities, remittance, gold trade, factoring, issuance of credit cards, consumer credit, intermediary payment services and credit information;
- Other fields other than those specified at Point a of this Clause after obtainment of the written approval from the State Bank of Vietnam.
Case 4
Commercial banks and their subsidiaries may purchase or hold shares of other credit institutions under conditions and within the limits provided by the Governor of the State Bank of Vietnam.
Under the latest regulations, who is the legal representative of a credit institution in Vietnam?
Under the provisions of Article 11 of the Law on Credit Institutions 2024, the legal representative of a credit institution is specified in the Charter of such credit institution and must be one of the following persons:
- Chairperson of the Board of Directors or Chairperson of the Board of Members of such credit institution;
- General Director (Director) of such credit institution.
On what date will the Law on Credit Institutions 2024 come into force?
Under Article 209 of the Law on Credit Institutions 2024 as follows:
The Law on Credit Institutions 2024 will come into force from July 1, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024, which will come into force from January 1, 2025.
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