Conditions for establishment of branches in country of commercial bank in Vietnam from August 15, 2024

Conditions for establishment of branches in country of commercial bank in Vietnam from August 15, 2024 (Image from Internet)

On June 30, 2024, the Governor of the State Bank of Vietnam issued Circular 32/2024/TT-NHNN regarding the operational network of commercial banks.

Conditions for establishment of branches in country of commercial bank in Vietnam from August 15, 2024

To be permitted to establish branches in country, the commercial bank in Vietnam must meet fully the following conditions:

(1) For commercial banks operating for 12 months or more from the opening day to the time of request:

- The actual value of charter capital at December 31 of the previous year preceding the year of request is not less than the legal capital. The actual value of charter capital is determined based on the Governor of the State Bank's regulations on limits and safety assurance ratios based on the independent audited financial reports of the preceding year to the year of request;

- Profitable business operations according to consolidated financial reports and independently audited financial reports of the previous year to the year of request;

- Comply with safety restrictions in the operations of credit institutions stipulated in Articles 134, 135, 136, 137; Clause 1 Article 138 and Article 142 of the Law on Credit Institutions 2024 and the State Bank’s guidelines for these regulations for the continuous 12 months preceding the month of request;

- Fully and accurately implement provisions on the classification of assets, the rate of extraction, the method of risk provisioning, and the use of provisions to handle risks in operations according to legal regulations in the quarter preceding the time of request;

- The bad debt ratio, according to the State Bank’s regulations on the classification of assets at December 31 of the previous year to the year of request, and on the last day of the previous month to the time of request, does not exceed 3% or another ratio determined by the Governor of the State Bank periodically;

- At the time of request, the Board of Directors, Members' Council, and the Supervisory Board have the number and structure in conformance with the law, without vacancy in the General Director position;

- At the time of request, the commercial bank has an internal audit department and an internal control system ensuring compliance with Articles 57, 58 of the Law on Credit Institutions 2024 and relevant legal regulations;

- Not subject to administrative penalties for violations regarding organization, management, operation (except for breaches on internal regulations); credit granting; safety assurance ratios; classification of assets, off-balance sheet commitments, provision extraction, and provision use to handle risks according to the legal regulations on administrative penalties in the monetary and banking sectors for 12 months preceding the time of request;

- Not subject to measures prohibiting the expansion of the network;

- Meeting the conditions on the number of branches allowed to be established according to Articles 7 and 8 of Circular 32/2024/TT-NHNN;

- In case of requesting to establish branches in areas other than rural areas, the commercial bank must be ranked A or B according to the latest ranking results notified by the State Bank at the time of request and at the time of approval (except commercial banks that are not subject to ranking according to the Governor’s regulations on ranking of credit institutions and branches of foreign banks);

- At the time of request, units in the domestic network of the commercial bank approved for establishment in the previous year to the request year have already opened for operations.

(2) For commercial banks operating for less than 12 months from the opening day to the time of request:

- The actual value of charter capital at the preceding month to the time of request is determined according to the Governor of the State Bank's regulations on limits and safety assurance ratios is not less than the legal capital;

- Profitable business operations up to the preceding month of the request time;

- Continuously complying with the safety restrictions in the operations of credit institutions stipulated in Articles 134, 135, 136, 137; Clause 1 Article 138 and Article 142 of the Law on Credit Institutions 2024 and the guidance of the State Bank from the start of operations day up to the request time;

- Fully and accurately implementing provisions on the classification of assets, the rate of extraction, the method of risk provisioning, and the use of provisions to handle risks in operations according to legal regulations in the quarter preceding the request time; the bad debt ratio, according to the Governor of the State Bank’s regulations on asset classification, does not exceed 3% at the last day of the preceding month to the request time or another ratio determined by the Governor periodically;

- Adhering to the provisions at points e, g, h, i, k, m Clause 1 Article 6 of Circular 32/2024/TT-NHNN.

More details can be found in Circular 32/2024/TT-NHNN which will take effect in Vietnam from August 15, 2024.

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