Hanoi, Vietnam: Conditions for Credit institution's capital contribution or share purchase from July 01, 2024

Conditions for Credit institution's capital contribution or share purchase in Vietnam from July 01, 2024 (Internet image)

On June 28, 2024, the Governor of the State Bank of Vietnam issued Circular 25/2024/TT-NHNN regulating the conditions, dossiers, order, and procedures for approving the Credit institution's capital contribution or share purchase.

Conditions for Credit institution's capital contribution or share purchase in Vietnam from July 01, 2024

Article 5 of Circular 25/2024/TT-NHNN stipulates the conditions for Credit institution's capital contribution or share purchase in Vietnam as follows:

- Conditions for capital contribution to establish and purchase subsidiaries as prescribed in points a and c, clause 1, Article 1 of Circular 25/2024/TT-NHNN (excluding subsidiaries that operate in the field of debt management and asset exploitation):

+ The operation license of the credit institution includes the activities of capital contribution and share purchase;

+ Ensuring the minimum capital adequacy ratio as prescribed in point b, clause 1, Article 138 of the Law on Credit Institutions 2024 in the 24 consecutive months preceding the month of the request and at the time of completing the capital contribution and share purchase;

+ Ensuring compliance with the capital contribution and share purchase limits as prescribed in Article 137 of the Law on Credit Institutions 2024 in the 24 consecutive months preceding the month of the request and at the time of completing the capital contribution and share purchase;

+ The actual value of charter capital at the time of request and at the time of completing the capital contribution and share purchase is not lower than the legal capital;

+ Positive business results according to the audited financial statements of the year immediately preceding the request by an independent auditing organization;

+ No administrative sanctions for violations regarding debt classification, provisioning for and using reserves to handle risks, capital contribution, and share purchase in the 12 consecutive months preceding the request;

+ Having a non-performing loan ratio as prescribed by the Governor of the State Bank regarding the asset classification in the operation of credit institutions and foreign bank branches of less than 3% in the 12 consecutive months preceding the request;

+ Ensuring the management structure; number of members, structure, term of the Board of Directors, Members' Council, Control Board, General Director (Director) complies with the provisions of the Law on Credit Institutions 2024 at the time of request.

- Conditions for capital contribution to form and purchase affiliates as prescribed in points a and c, clause 1, Article 1, Circular 25/2024/TT-NHNN (excluding affiliates that operate in the field of debt management and asset exploitation):

+ Conditions prescribed in points a, d, d, e, g, h, clause 1, Article 5 of Circular 25/2024/TT-NHNN;

+ Ensuring the minimum capital adequacy ratio as prescribed in point b, clause 1, Article 138 of the Law on Credit Institutions 2024 in the 12 consecutive months preceding the month of the request and at the time of completing the capital contribution and share purchase;

+ Ensuring compliance with the capital contribution and share purchase limits as prescribed in Article 137 of the Law on Credit Institutions 2024 in the 12 consecutive months preceding the month of the request and at the time of completing the capital contribution and share purchase.

- Conditions for capital contribution to establish and purchase subsidiaries, affiliates operating in debt management and asset exploitation:

+ Conditions prescribed in points a, d, clause 1, Article 5 of Circular 25/2024/TT-NHNN;

+ Ensuring compliance with the capital contribution and share purchase limits as prescribed in Article 137 of the Law on Credit Institutions 2024 at the time of the request and at the time of completing the capital contribution and share purchase;

+ Ensuring the minimum capital adequacy ratio as prescribed in point b, clause 1, Article 138 of the Law on Credit Institutions 2024 at the time of the request and at the time of completing the capital contribution and share purchase.

- Conditions for capital contribution, share purchase of another enterprise operating in the fields prescribed in point b, clause 1, Article 1, Circular 25/2024/TT-NHNN:

+ Conditions prescribed in clause 1, Article 5 of Circular 25/2024/TT-NHNN;

+ Ensuring the maximum ratio of short-term funds used for medium-term and long-term loans as prescribed by the Governor of the State Bank regarding the limits and safety ratios in the operation of banks and foreign bank branches in the 24 consecutive months preceding the month of the request and at the time of completing the capital contribution and share purchase.

- Conditions for converting debt into capital contribution, share capital as prescribed in point d, clause 1, Article 1, Circular 25/2024/TT-NHNN:

+ Conditions prescribed in points a, b, c, d, d, e, h, clause 1, Article 5 of Circular 25/2024/TT-NHNN;

+ The debt converted into capital contribution or share capital must be bad debt, and the conversion is to handle the bad debt. Bad debt is determined according to the regulations of the Governor of the State Bank.

More details can be found in Circular 25/2024/TT-NHNN, effective from July 01, 2024.

Circular 51/2018/TT-NHNN regulating the conditions, dossiers, order, and procedures for approving the Credit institution's capital contribution or share purchase will cease to be effective from the date Circular 25/2024/TT-NHNN takes effect in Vietnam.

To Quoc Trinh

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