Requirements for issuance of licenses for establishment and operation of credit institutions in Vietnam as of July 1, 2024

Requirements for issuance of licenses for establishment and operation of credit institutions in Vietnam as of July 1, 2024 (Internet image)

Regarding this issue, LawNet answers as follows:

1. What is credit institution?

According to Clause 38, Article 4 of the Law on Credit Institutions 2024, credit institution means a business organization that has juridical person and conducts one, some or all banking operations according to regulations of this Law. Credit institutions include banks, non-bank credit institutions, microfinance institutions and people's credit funds.

2. Requirements for issuance of licenses for establishment and operation of credit institutions in Vietnam as of July 1, 2024

(1) A credit institution may obtain a license when fully meeting the following requirements:

- Its charter capital is not smaller than the legal capital;

- Its owner is a single-member limited liability company and its founding shareholders or members are juridical persons that are legally operating and financially capable for capital contribution. Its founding shareholders or members are individuals that have full legal capacity and are financially capable for capital contribution;

- Its managers, executives and members of the Board of Controllers fully meet the criteria and requirements under Article 41 of the Law on Credit Institutions 2024;

- Its Charter complies with the Law on Credit Institutions 2024 and other relevant laws;

- It has an establishment plan and a feasible business plan which neither affect the safety and stability of the credit institution system nor create monopoly or restrict competition or create unfair competition within the credit institution system.

(2) A joint-venture or wholly foreign-owned credit institution may obtain a license when fully meeting the following requirements:

- It fully meets requirements specified in Clause 1 of Article 29 of the Law on Credit Institutions 2024;

- The foreign credit institution may conduct banking operations under the law of the country where it is headquartered;

- Operations to be conducted in Vietnam must be those which the foreign credit institution is issued with license to conduct in the country where it is headquartered;

- The foreign credit institution meets requirements for total assets and financial status under regulations of the Governor of State Bank, and satisfies regulations on assurance of operation safety under regulations of the country where it is headquartered;

- The foreign credit institution shall make a written commitment to provide assistance in finance, technology, governance, administration and operation for the joint-venture or wholly foreign owned credit institution. It guarantees that the joint-venture or wholly foreign-owned credit institution maintains the actual value of its charter capital which is not smaller than the legal capital and observes regulations on assurance of operation safety under the Law on Credit Institutions 2024;

- A competent authority of the country where the foreign credit institution is headquartered has signed an agreement with the State Bank on inspection and supervision of banking operations and exchange of information on banking safety supervision and made a written commitment on consolidated supervision of the foreign credit institution's operations according international practices.

(3) A foreign bank’s branch may obtain a license when fully meeting the following requirements:

- Its provided capital is not smaller than the legal capital;

- It fully meets requirements specified in Points b,c and dd Clause 1 and Points b,c,d and e Clause 2 of Article 29 of the Law on Credit Institutions 2024;

- The foreign bank shall make a written commitment to be liable for all obligations and commitments of its branch in Vietnam, and to ensure that the actual value of the provided capital is not lower than the legal capital and it observes regulations on assurance of operation safety under this Law.

- If it is required to establish the second foreign bank’s branch and subsequent foreign bank branches in Vietnam, the foreign bank shall ensure that the foreign bank's branch which is operating in Vietnam for 03 years preceding the year of the proposal to establish new branches does not commit violations against regulations of law, achieves the minimum safety ratios, and earns profits.

(4) A foreign representative office may obtain a license when fully meeting the following requirements:

- The foreign credit institution or another foreign institution engaged in banking operations is a juridical person that is issued with a license for banking operations overseas;

- Under the law of the country where the foreign credit institution or another foreign institution engaged in banking operations is headquartered, it may set up a foreign representative office in Vietnam.

(5) Requirements applicable to owners of credit institutions that are single-member limited liability companies, founding shareholders, and founding members specified in point b Clause 1 of Article 29 of the Law on Credit Institutions 2024 and those for issuance of licenses to people's credit funds, microfinance institutions shall be prescribed by the Government.

(Article 29 of the Law on Credit Institutions 2024)

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