What are regulations of operations of general finance companies in Vietnam?

Regarding this matter, LawNet would like to answer as follows:

What is a general finance company?

Pursuant to Clause 13, Article 4 of the Law on Credit Institutions 2024 (effective from July 1, 2024), "General finance company means a type of non-bank credit institution that carries out activities as prescribed in Section 3 Chapter V of this Law".

Thus, it can be understood that general finance company means a type of non-bank credit institution that carries out activities as prescribed in Section 3 Chapter V of of the Law on Credit Institutions 2024.

What are regulations of operations of general finance companies in Vietnam?

According to Section 3, Chapter V of the Law on Credit Institutions 2024 on operations of general finance companies in Vietnam:

(1) Banking operations of general finance companies in accordance with Article 115 of the Law on Credit Institutions 2024

- Receipt of demand deposits and term deposits of organizations/institutions.

- Issuance of deposit certificates with a view to raising capital from organizations/ institutions.

- Lending.

- Bank guarantee.

- Discounting or re-discounting.

- Issuance of credit cards, factoring, financial leasing.

- Other forms of credit extension according to regulations of the Governor of the State Bank.

(2) Borrowing and depositing money, purchasing and selling valuable papers by general finance companies in accordance with Article 116 of the Law on Credit Institutions 2024

- General finance companies may borrow loans from the State Bank in the form of re-financing under the Law on State Bank of Vietnam 2010.

- General finance companies may purchase and sell valuable papers from/to the State Bank under the Law on State Bank of Vietnam 2010.

- General finance companies may grant and borrow loans, make and receive deposits, purchase and sell valuable papers on a definite term from/to credit institutions and foreign bank branches in accordance with regulations of the Governor of the State Bank.

- General finance companies may borrow loans from foreign countries in accordance with regulations of law.

(3) Opening accounts in accordance with Article 117 of the Law on Credit Institutions 2024

- A general finance company involved in deposit receipt shall open a payment account at the State Bank and maintain a compulsory reserve amount on this account.

- A general finance company may open a payment account at a commercial bank or a foreign bank’s branch.

- A general finance company licensed to issue credit cards may open an account at a foreign bank under the law on foreign exchange.

- A general finance company may open deposit accounts and loan management accounts and provide such accounts for clients.

(4) Capital contribution and share purchase in accordance with Article 118 of the Law on Credit Institutions 2024

- General finance companies may only use their charter capital and reserve funds to contribute capital or purchase shares under Clauses 2 and 3 of Article 118 of the Law on Credit Institutions 2024

- General finance companies may only contribute capital to or purchase shares of enterprises and investment funds.

- General finance companies may only establish or acquire subsidiaries or associate companies operating in fields, including insurance, securities, debt management and asset utilization, after obtaining written approval from the State Bank.

- General finance companies shall establish subsidiaries or associate companies according to regulations of the Law on Credit Institutions 2024 and other relevant laws.

(5) Other business activities of general finance companies in accordance with Article 119 of the Law on Credit Institutions 2024

- General finance companies may carry out other business activities in accordance with regulations of the Governor of State Bank. To be specific:

+ Receiving capital under entrustment by organizations and individuals for permissible credit extension; entrusting capital to other credit institutions for credit extension of such general finance companies;

+ Purchasing and selling the State Bank’s bills and corporate bonds; purchasing and selling other valuable papers, except for the valuable papers specified at Point a, Clause 2 of Article 119 of the Law on Credit Institutions 2024;

+ Trading foreign exchange and providing foreign exchange services;

+ Providing asset preservation services for clients;

+ Other services related to factoring;

+ Giving advice on banking operations and other business activities specified in licenses.

- General finance companies may carry out other business activities in accordance with regulations of relevant laws. To be specific:

+ Purchasing and selling debt instruments of the Government, government-backed bonds, and local government bonds;

+ Issuing bonds to raise capital from organizations/institutions;

+ Acting as insurance agents in accordance with the law on insurance business within the scope of insurance agency activities as specified by the Governor of State Bank.

- General finance companies are entitled to carry out other business activities related to banking operations other than those specified in Clause 1 and Clause 2 of Article 119 of the Law on Credit Institutions 2024 according to regulations of the Governor of the State Bank and other relevant laws.

Best regards!

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