What are regulations on actual value of charter capital of a non-bank credit institution in Vietnam?

1. What are regulations on actual value of charter capital of a non-bank credit institution in Vietnam?

Pursuant to Article 6 of Circular 23/2020/TT-NHNN, actual value of charter capital of a non-banking credit institution is specified as follows:

1. Actual value of charter capital of a non-bank credit institution is the remaining value of the charter capital determined according to Clause 2 and is calculated according to the formula stipulated in Clause 3 of this Article.

2. Rules for determination of actual value of charter capital:

A non-bank credit institution shall determine the remaining value of charter capital when:

a) Provisions for losses are sufficient as prescribed by law;

b) Revenues and expenses are fully accounted for to determine business performance.

3. Formula for calculation of actual value of charter capital:

Actual value of charter capital equals (=) charter capital plus (+) share premium ± undistributed cumulative profit (untreated accumulative loss) on accounting book.

4. A non-bank credit institution shall regularly monitor and assess the actual value of its charter capital and submit periodic reports on such value to SBV (Bank Supervision and Inspection Agency) as follows:

a) If the fiscal year of the non-bank credit institution ends on December 31:

The report on actual value of charter capital at the end of June 30 and December 31 shall be submitted by July 15 and January 15 at the latest, respectively;

b) If the fiscal year of the bank or FBB does not end on December 31:

The report on actual value of charter capital at the end of the last day of the previous quarter shall be submitted by the 15^th of the first months of the first quarter and the third quarter at the latest;

c) In case the actual value of charter capital mentioned in Point a and Point b of this Clause does not include adjustments by independent auditors (if any), they may be added to the next financial statement.

2. What are regulations on handling when the actual value of charter capital falls below legal capital in Vietnam? 

Pursuant to Article 7 of Circular 23/2020/TT-NHNN, what to do when the actual value of charter capital falls below legal capital is regulated as follows:

1. When the actual value of charter capital falls below legal capital, the non-bank credit institution shall:

a) Develop and implement a plan to make sure the actual value of charter capital is not smaller than legal capital;

b) Within 30 days after the actual value of charter capital falls below the legal capital, send a written document on a response plan and commitment to executing the plan directly or by post to SBV (Bank Supervision and Inspection Agency). Such plan and commitment must include but not limited to:

(i) The actual value of charter capital prescribed in Article 6 of this Circular;

(ii) The reasons why it falls below legal capital;

(iii) Measures for ensuring the actual value of charter capital is equal to or greater than the legal capital and maintaining prudential ratios;

c) Organize the implementation of the corrective measures at the SBV’s request (if any).

2. Whenever the charter capital of a non-bank credit institution falls below the legal capital, SBV shall:

a) Carry out an assessment, inspection or request the non-bank credit institution to undergo independent audit for determination of actual value of charter capital in the response plan reported by the non-bank credit institution according to Clause 1 of this Article;

b) Request changes or completion of the corrective measures to be implemented by the non-bank credit institution when the actual value of charter capital falls below the legal capital stated in the plan prescribed in clause 1 of this Article where necessary;

c) Supervise and inspect the implementation of the response plan, including the corrective measures requested by SBV;

d) SBV shall, depending on level of the decrease in actual value of charter capital compared to the legal capital, decide on the following corrective measures applicable to each non-bank credit institution:

(i) The measures specified in Clause 2 of Article 59 of the Law on the State Bank shall be applied when the actual value of charter capital is below 80% of legal capital;

(ii) Apply restructuring measures prescribed by law; revoke the license if the non-bank credit institution’s charter capital is below 50% of legal capital or is below legal capital for 6 consecutive months despite implementation of the measures mentioned in Clause 1 of this Article.

Best Regards!