Vietnam – New Circular On Capital Contribution Or Share Purchase Of Credit Institutions.

On 31 December 2018 the State Bank of Vietnam (SBV) issued Circular No. 51/2018/TT-NHNN (Circular 51) regulating the conditions, application, order and procedures for a credit institution to make a capital contribution or to purchase shares. Below are some highlights of the key provisions under Circular 51:

(i) Transactions requiring SBV consent

Commercial banks and finance companies (hereinafter both abbreviated as Credit Institutions) need to apply for the consent of the SBV in order to make capital contributions or to purchase shares in entities operating in certain sensitive sectors. In particular the SBV consent is necessary for:

• A commercial bank contributing capital to or purchasing shares in order to establish or acquire a domestic subsidiary or affiliated company operating in the following sectors: securities underwriting or securities brokerage, management and distribution of securities investment funds, management of securities investment portfolios and purchase of shares, insurance, debt management and asset exploitation, remittances, forex and gold trading, intermediary payment services or credit information;

• A commercial bank contributing capital to or purchasing shares in order to acquire a domestic subsidiary or affiliated company operating in the following sectors: finance leasing, factoring, consumer credit or credit card issuance;

• A commercial bank contributing capital to or purchasing shares in another domestic enterprise operating outside the sectors of insurance, securities, remittances, forex trading, gold trading, factoring, credit card issuance, consumer credit, intermediary payment services or credit information;

• A finance company contributing capital or purchasing shares in order to establish or acquire a domestic subsidiary or affiliated company operating in the following sectors: insurance, securities, debt management and asset exploitation;

A commercial bank or finance company converting debts into a capital contribution in a domestic enterprise operating outside the sectors of insurance, securities, remittances, forex trading, gold trading, factoring, credit card issuance, consumer credit, payment intermediary services or credit information in order to settle bad debts.

Circular 51 does not apply to commercial banks’ contributing capital or purchasing shares in order to establish a Credit Institution.

(ii) Timeline for obtaining the SBV consent

The Banking Supervisory Agency (BSA)1 shall review the application, seek the opinions of the relevant authorities, and submit its opinion to the SBV within 31 days after receiving a completed and valid application dossier.

Afterwards, the SBV, within 45 days since the date receiving a completed and valid application dossier, shall provide its written consent to the capital contribution or share purchase (or shall specify the reasons why the consent is not granted)

The Credit Institution must complete the capital contribution, share purchase or conversion of debt into capital contribution, within 12 months after receiving the written consent from the SBV. After this time, the consent of the SBV shall not longer be effective, and must be re-obtained.