Regulations on capital of and capital use by credit institution and foreign bank branch in Vietnam as of July 1, 2024

Regulations on capital of and capital use by credit institution and foreign bank branch in Vietnam as of July 1, 2024 (Internet image) 

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

On January 18, 2024, the National Assembly officially passed the Law on Credit Institutions 2024.

Regulations on capital of and capital use by credit institution and foreign bank branch in Vietnam as of July 1, 2024

Pursuant to Article 144 of the Law on Credit Institutions 2024, regulations on capital of and capital use by credit institution and foreign bank branch in Vietnam as of July 1, 2024 are as follows:

- Capital of a credit institution or foreign bank’s branch includes the owner’s capital, raised capital and other capital as specified by the law.

- The credit institution or foreign bank’s branch may use capital for business in accordance with the Law on Credit Institutions 2024 and other relevant laws.

- The credit institution or foreign bank’s branch may purchase and invest in fixed assets in direct service of its operations, making sure that the remaining value of fixed assets:

+ Does not exceed 50% of its charter capital and additional reserve fund of charter capital as recorded in the accounting book with respect to a commercial bank, cooperative bank, non-bank credit institution and microfinance institution;

+ Does not exceed 100% of its charter capital and additional reserve fund of charter capital as recorded in the accounting book with respect to a people’s credit fund;

+ Does not exceed 50% of its provided capital and additional reserve fund of provided capital as recorded in the accounting book with respect to a foreign bank’s branch;

Regulations on revenues and revenue recognition principles of credit institution and foreign bank branch in Vietnam from July 1, 2024

According to Article 145 of the Law on Credit Institutions 2024, regulations on revenues and revenue recognition principles of credit institution and foreign bank branch in Vietnam are as follows:

- Revenues from business activities of a credit institution or foreign bank’s branch include:

+ Interest income and similar incomes;

+ Income from service activities;

+ Revenues from foreign exchange and gold trade activities;

+ Revenue from securities trade, excluding stocks;

+ Revenues from capital contribution and transfer of stakes and shares;

+ Revenues from other activities;

+ Other incomes as prescribed by law.

- Incomes of the credit institution or foreign bank’s branch shall be determined in accordance with Vietnamese accounting standards and other relevant laws, supported by lawful invoices or receipts and fully recorded as its revenues.

- With regard to accounts receivable which have been recorded as revenues but then are considered unrecoverable or not collected on due dates, the credit institution or foreign bank’s branch shall record them as a decrease in revenue in the same period or as expenses in another period, and monitor them in off-balance sheet to expedite the collection and settlement according to regulations of law. They shall be recorded as revenues, when collected.

- With regard to revenues from credit extension, the credit institution or foreign bank’s branch shall be responsible for evaluating the debt recoverability and classifying debts in accordance with regulations of law to serve as the basis for accounting for interests receivable and record interests receivable from credit extension as revenues under the Government’s regulations.

More details can be found in the Law on Credit Institutions 2024 taking effect on July 1, 2024, except for Clause 3, Article 200 and Clause 15, Article 210 of the Law on Credit Institutions 2024, which takes effect on January 1, 2025. .

The Law on Credit Institutions 2010 expires from the date the Law on Credit Institutions 2024 takes effect, except for the provisions in Clauses 1, 2, 3, 4, 8, 9, 12 and 14, Article 210 of the Law on Credit Institutions 2024.

To Quoc Trinh

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