Vietnam: 07 cases that a financial company must not extend credit to a customer for investment in shares

According to Article 12 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam (SBV), conditions and limits for credit extension for investment in shares are specified as follows:

- A financial company may extend credit with terms of up to 01 (one) year for customers to invest in shares if the following conditions are met:

+ The credit extension comply with the prudential limits and ratios prescribed by law;

+ Bad debt ratio must be below 3%;

+ Risks are properly managed in accordance with regulations of SBV on internal control systems of non-bank credit institutions, regulations on classification of assets, rates of funds set aside for and use of provisions for losses for risk management by credit institutions and foreign bank branches.

- A financial company must not extend credit to a customer for investment in shares in the following cases:

+ The collateral is shares of a credit institution or its subsidiary;

+ The collateral is the shares of an issuing enterprise that the customer borrows for purchase of shares of that enterprise;

+ Credit is used for investment in shares of credit institutions;

+ The customer is one of the organizations and individuals mentioned in Clause 1 Article 126 of the Law on credit institutions (amended) of Vietnam;

+ The client is a related person of any of the organizations or individuals mentioned in Clause 1 and Clause 4 Article 126 of the Law on credit institutions (amended) of Vietnam;

+ The customer is or is related to one of the organizations or individuals mentioned in Clause 1 Article 127 of the Law on credit institutions (amended) of Vietnam;

+ The customer is a subsidiary or associate company of the credit institution.

Note: The total balance of credit extended for investment in shares of a financial company must not exceed 5% of its charter capital.

Lưu ý: Tổng mức dư nợ cấp tín dụng để đầu tư, kinh doanh cổ phiếu của công ty tài chính không được vượt quá 5% vốn điều lệ của công ty tài chính.

More details at the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam, effective from February 14, 2021.

Thuy Tram

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