Financial leasing company is a credit institution that provides capital to customers mainly through the leasing of movable properties. So, how does a financial leasing company work in Vietnam?
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Vietnam: What is a finance leasing company? (Source: internet)
1. What is a financial leasing company?
According to Clause 4, Article 4 of the Law on Credit Institutions (2010), financial leasing companies are as follows:
- Non-bank credit institutions include finance companies, financial leasing companies and other non-bank credit institutions.
- Financial leasing company means a type of finance company whose principal operation is financial leasing under the Law on Credit Institutions 2010.
2. Can a financial leasing company do banking in Vietnam?
According to Article 112 of the Law on Credit Institutions (2010), the banking operations of financial leasing companies include:
- Taking deposits from organizations.
- Issuing deposit certificates, promissory notes, bills and bonds to raise capital from organizations.
- Borrowing loans from domestic and overseas credit institutions and financial institutions according to law; borrowing loans from the State Bank in the form of re-financing under the Law on the State Bank of Vietnam.
- Conducting, financial leasing.
- Providing loans for financial lessees to add to their operating capital.
- Providing operating leases on the condition that the total value of assets under operating leases docs not exceed 30% of their total assets.
- Extending credit in other forms after obtaining the State Bank of Vietnam's approval.
3. Financial leasing operations of financial leasing companies in Vietnam
According to Article 113 of the Law on Credit Institutions (2010), financial leasing activity means the extension of medium- or long-term credit under a financial leasing contract on any of the following conditions:
- Upon the termination of the lease term under contract, the lessee is entitled to ownership right over the leased asset or continue the asset lease as agreed upon by the two parties;
- Upon the termination of the lease term under contract, the lessee is prioritized to purchase the leased asset at a nominal price lower than the actual value of the leased asset at the time of purchase;
- The lease term of an asset is at least equal to 60% of the time required for its depreciation;
- The total rent of an asset prescribed in the financial leasing contract is at least equal to the value of that asset at the time of contract signing.
Thus, a financial leasing company operates with the main purpose of leasing assets while still having a banking function.
Chi Nhan
