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1. LEGAL DOCUMENTS ARE EFFECTIVE FROM 01/09/2018

1.1. Circular No. 37/2016/TT-NHNN management, operation and use of the national interbank electronic payment system

• Name of legal document: Circular No. 37/2016/TT-NHNN issued on 30/12/2016 by the State Bank of Vietnam management, operation and use of the national interbank electronic payment system (hereinafter referred to as the “Circular No. 37/2016/TT-NHNN”).
• Effective date: 01/09/2018.

Some contents should be noted:

• Firstly, stipulating general provisions on the National interbank electronic payment system (hereinafter referred to as “NIEPS”), include the following contents: Primary modules and functions of the NIEPS; Interbank electronic payment records; Debt payment in the NIEPS;…

Specifically,

• Article 3 of Circular No. 37/2016/TT-NHNN stipulates: “Primary modules and functions of the NIEPS

1. NIEPS is an integrated system that consists of: NPSC, BNPSC, software installed in participants and affiliated participants.
2. Processing modules include: high-value payment module, foreign currency payment module, low-value payment module, checking account processing module.
3. The high-value payment module is meant to process real-time gross settlement for payment orders in VND using high-value payment services.
4. The foreign currency payment module is meant to process real-time gross settlement for payment orders in foreign currencies using foreign currency payment services.
5. The low-value payment module is meant to process low-value payment orders using low-value payment services.
6. The checking account processing module is meant to inspect and process high-value payment orders, foreign currency payment orders, processing results of clearing and net settlement from other systems.”

• Article 4 of Circular No. 37/2016/TT-NHNN stipulates: “Interbank electronic payment records

1. Interbank electronic payment records may be physical or electronic documents prescribed by applicable regulations of law on accounting records.
2. The basis for creation of payment orders is the interbank electronic payment records.
3. Payment orders shall be created electronically according to the template and data standards decided by the Governor of the State bank.”

• Article 5 of Circular No. 37/2016/TT-NHNN stipulates: “Debt payment in the NIEPS

1. A prior authorization contract is required for debt payment among participants other than units of the State bank.
2. A prior authorization contract is required for debt payment among participants other than units of the State bank.
3. Prior authorization contract or a payment agreement

A debt between participants must have the following elements:

– Intraday limit on debt payment between the participants;

– Intraday limit on an unverified debt payment order;

– Effective period of the contract or agreement.”

• Other contents related to general regulations on NIEPS stipulated in Article 1, Article 2, Article 6, Article 7 of Circular No. 37/2016/TT-NHNN.
• Secondly, stipulating management and operation of NIEPS, includes the following contents: Inspection of the NIEPS; Logging and storage of transaction data; Issuance, management and use of electronic signatures on the NIEPS;…

Specifically,

• Article 8 of Circular No. 37/2016/TT-NHNN stipulates: “Inspection of the NIEPS

1. The NIEPS operator shall inspect the NIEPS everyday in terms of balance, threshold and payment data.
2. Information Technology Administration shall inspect the software, equipment and communications network of the NIEPS at the NPSC and BNPSC.
3. The NIEPS operator, participants and affiliated participants shall regularly carry out inspection and supervision to receive and process payment orders during the working time of the NIEPS; ensure continuous and safe operation of the NIEPS.”

• Article 11 of Circular No. 37/2016/TT-NHNN stipulates: “Logging and storage of transaction data

1. The processing of transactions shall be automatically recorded by the NIEPS in the form of electronic data.
2. Electronic data shall be copied to storage devices (magnetic tapes, hard drives) on a daily basis for archiving. Electronic data to be archived include:
3. a) Electronic data about transaction requests and electronic messages containing results of each participant and affiliated participant;
4. b) Electronic data about electronic messages, settlement transactions, data comparison and processing results of the NPSC.
5. Electronic data and documents shall be managed in accordance with regulations of law on archiving. The log shall be produced at the request of competent authorities to serve inspection, control or dispute settlement in a manner that is conformable with regulations of law on confidentiality of clients’ information.”

• Article 12 of Circular No. 37/2016/TT-NHNN stipulates: “Issuance, management and use of electronic signatures on the NIEPS

1. Four types of digital signatures:a) The creator’s digital signature;b) The controller’s digital signature;c) The approver’s digital signature;d) The communicator’s digital signature.
2. Issuance and use of digital signatures:a) Instruments for creation of creators’ and controllers’ digital signatures shall be issued and managed by participants and affiliated participants following their own procedures;b) Private keys for creation of approvers’ and communicators’ digital signatures shall be issued by the State bank in accordance with regulations of the State bank on management and use of digital signatures, digital documents and authentication of digital signatures. The person given a digital signature or private key is responsible for its confidentiality and shall bear legal responsibility if its revelation causes damage.c) The appointment of creators, controllers and approvers of participants and affiliated participants shall be decided by their competent persons as long as creators are independent from controllers and approvers.”

• Other contents related to general regulations on NIEPS stipulated in Article 9, Article 10, Article 13, Article 14, Article 15 of Circular No. 37/2016/TT-NHNN.
• Thirdly, stipulating payment orders in the NIEPS, including the following contents: Creation of a payment order; Inspection of validity of a payment order; Settlement of payment orders at the participants and affiliated; Settlement and processing of payment orders at the transaction center.

Specifically,

• Article 16 of Circular No. 37/2016/TT-NHNN stipulates:

Creation of a payment order

1. Regarding a payment order created from physical records:

a) The creator shall follow these steps:

– Inspect the validity and legitimacy of the client’s transaction documents;

– Determine the type of payment order;

– Compare and check the client’s account balance;

– Enter the following information: the order-creating unit (name, bank code), amount, name, address, account number (if any), ID/passport number or enterprise ID number of the order giver), the unit serving the order giver, the order-receiving unit (name, bank code), name, address, account number (if any), ID/passport number and issuance date of the order recipient, the unit serving the order recipient, payment description and other information relevant to the interbank transaction, payment to state budget, sale of Government bonds and other types of transactions (if any) using Form TTLNH-04;

– Double check the entered data and add the digital signature to the payment order;

– Sign the records; transfer the records and entered data to the controller;

b) The controller shall:

– Verify data about: the order-receiving unit, the unit serving the order giver, the unit serving the order recipient, the amount and payment description.

– Return the order to the creator if any error is found;

– Add the digital signature to the payment order; sign the records and transfer them to the approval if all data are correct;

c) The approver shall:

– Check the consistency between data on original records and electronic data;

– Return the order to the creator or controller if any error is found;

– Add the digital signature to the payment order; sign the records.

2. Regarding a payment order created from electronic records:

In the cases where a payment order is created from electronic records in a participant’s or affiliated participant’s system, the structure and format defined by the State bank must be complied with and the following requirements must be satisfied:

a) If the electronic record is valid but information therein is insufficient according to Clause 1a of this Article, the creator shall provide additional information; the controller and approver shall carry out verification similarly to physical records to ensure the accuracy, and add their digital signatures to the payment order;

b) If the electronic record is valid and information therein is sufficient, the digital signatures may be added manually or automatically to each payment order;

c) If the input electronic records are valid and contain sufficient information and satisfy security and accuracy requirements, the competent person of the unit will decide whether the approver is the only person that needs to add his/her signature to the payment order and will take responsibility for such decision, or follow the instructions in Clause 2a of this Article.

3. After the payment order is sent and the status is successful, it can be printed out.

4. A payment order will be processed by the NIEPS using the participant’s checking account with the same currency as that on the payment order opened at the State bank’s transaction center.”

• Other contents related to general regulations on payment orders in the NIEPS stipulated in Article 17, Article 18, Article 19 of Circular No. 37/2016/TT-NHNN.
• Fourthly, stipulating other contents, such as: clearing settlement among participants and net settlement from other systems (Chapter IV of Circular No. 37/2016/TT-NHNN); settlement of funds insufficiency in interbank electronic payment (Chapter V of Circular No. 37/2016/TT-NHNN); correction of errors (Chapter VI of Circular No. 37/2016/TT-NHNN); reports and processing thereof (Chapter VII of Circular No. 37/2016/TT-NHNN),…
• Fifthly, promulgating forms of official dispatch on registration of participation in NIEPS (Form No. TTLNH-01), official dispatch on withdrawing from NIEPS (Form No. TTLNH-02), official dispatch on registration of member units and indirect members participating in NIEPS (Form No. TTLNH-03) and forms of other documents related to the operation, management and using NIEPS.

1.2. Decision No. 31/2018/QĐ-TTg annulling some legal documents in the field of national defense; finance; banking

• Name of legal document: Decision No. 31/2018/QĐ-TTg issued on 03/8/2018 by the Government Prime Minister annulling some legal documents in the field of national defense; finance; banking (hereinafter referred to as the “Decision No. 31/2018/QĐ-TTg”).
• Effective date: 20/09/2018.

The content should be noted: annulling Decision No. 230/2005/QĐ-TTg issued on 21/9/2005 by the Government Prime Minister on piloting the equitization of the Bank for Foreign Trade of Vietnam.

Specifically, Clause 3, Article 1 of Decision No. 31/2018/QĐ-TTg stipulates: “To annul some legal documents in the field of national defense; finance; banking

3. Decision No. 230/2005/QĐ-TTg issued on 21/9/2005 by the Government Prime Minister on piloting the equitization of the Bank for Foreign Trade of Vietnam.”

2. Legal documents issued in July and August 2018

2.1. Circular No. 16/2018/TT-NHNN amending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN dated 20/11/2014 of the Governor of the State Bank of Vietnam providing for prudential ratios and limits for operations of credit institutions and foreign bank branches

• Name of legal document: Circular No. 16/2018/TT-NHNN issued on 31/7/2018 by the State Bank of Vietnamamending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN dated 20/11/2014 of the Governor of the State Bank of Vietnam providing for prudential ratios and limits for operations of credit institutions and foreign bank branches.

(Circular No. 16/2018/TT-NHNN issued on 31/7/2018 by the State Bank of Vietnam amending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN dated 20/11/2014 of the Governor of the State Bank of Vietnam providing for prudential ratios and limits for operations of credit institutions and foreign bank branches hereinafter referred to as the “Circular No. 16/2018/TT-NHNN”

Circular No. 36/2014/TT-NHNN dated 20/11/2014 of the Governor of the State Bank of Vietnam providing for prudential ratios and limits for operations of credit institutions and foreign bank branches hereinafter referred to as the “Circular No. 36/2014/TT-NHNN”)

• Effective date: 31/7/2018.

Some contents should be noted:

• Firstly, adding words that defined in Article 3 of Circular No. 36/2014/TT-NHNN.

Specifically, Clause 1, Article 1 of Circular No. 16/2018/TT-NHNN stipulates: “Amending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN by:

1. Adding the following Clause 25 to Article 3:

“25. Exchange rate used to calculate prudential ratios and limits prescribed herein are as follows:

a) Exchange rate between a foreign currency and VND:

(i) On working days other than the last working day of a month/ quarter/ year, the exchange rate shall be the one regulated by the State Bank for use in the chart of accounts of credit institutions;

(ii) On the last working day of a month/ quarter/ year, the exchange rate shall be the one regulated by the State Bank for converting the monthly/ quarterly/ annual balance sheet prepared in a foreign currency into the one in VND if a credit institution/ foreign bank branch uses VND as its accounting currency, or the one for converting financial statements prepared in a foreign currency into VND if a credit institution/ foreign bank branch uses a foreign currency as its accounting currency in the chart of accounts of credit institutions and financial reporting policies applicable to credit institutions;

b) The exchange rate between a foreign currency and USD shall be decided by credit institutions/ foreign bank branches.””

• Secondly, amending and supplementing the formula for determining the liquidity reserve ratio prescribed at Point b, Point c, Clause 2, Article 15 of Circular No. 36/2014/TT-NHNN.

Specifically, Clause 2, Article 1 of Circular No. 16/2018/TT-NHNN stipulates: “2. Amending and supplementing Point b and Point c Clause 2 Article 15 as follows:

“b) The calculation of liquid reserve ratio is based on the following formula:

Liquid reserve ratio (%)	=	Assets of high liquidity	x	100
		Total Liability

Where:

– Highly liquid assets are determined according to the Appendix 3 hereof;

– Total liability denotes total liability entry on a balance sheet minus:

+ Refinanced loans made by the State Bank through discount on valuable papers, loans pledged by valuable papers (minus the refinanced loans made by the State Bank based on bonds issued by Vietnam Asset Management Company); overnight loans made through the interbank electronic payment system; forward sale of valuable papers through open market operations of the State Bank; forward sale of valuable papers through open market operations of the State Bank.

+ Credit extensions of other credit institutions and foreign bank branches through forward sale, discount, re-discount and pledged loans:  (i) valuable papers used in the State Bank’s transactions; (ii) bonds or treasury bills issued by or issued under the guarantee by the Governments or Central Banks of countries rated at least “AA” by an international credit rating agency (Standard & Poor’s, or Fitch Rating) or other corresponding rank of other independent credit rating organizations.

c) Highly liquid assets and total liability are calculated in VND, including VND and other freely convertible foreign currencies converted into VND according to the exchange rate prescribed in Point a Clause 25 Article 3 hereof.””

• Thirdly, amending and supplementing the provisions on subjects which are calculated and maintained the solvency ratio by the credit institution, foreign bank branch.

Specifically, Clause 3, Article 1 of Circular No. 16/2018/TT-NHNN stipulates: “3. Amending and supplementing Point a Clause 3 Article 15 as follows:

“a) Credit institutions/ foreign bank branches must calculate and maintain the solvency ratio within 30 days regarding VND[1] and the solvency ratio within 30 days regarding foreign currencies (including USD and other foreign currencies converted into USD according to the exchange rate prescribed in Point b Clause 25 Article 3 hereof);””

• Fourthly, amending and supplementing other contents, such as: the maximum ratio of short-term fund used for granting medium and long-term loans stipulated in Article 17 of Circular No. 36/2014/TT-NHNN (Clause 4, Article 1 of Circular No. 16/2018/TT-NHNN); the content relating to the formula for determining the maximum loan-to-deposit ratios stipulated in Clause 1, Article 21 of Circular No. 36/2014/TT-NHNN (Clause 5, Article 1 of Circular No. 16/2018/TT-NHNN).
• Fifthly, abolishing a number of provisions on amendments and/or supplements to the contents relating to formula for determining the liquidity reserve ratio; subjects which are calculated and maintained the solvency ratio by the credit institution, foreign bank branch; the maximum ratio of short-term fund used for granting medium and long-term loans; the content relating to the formula for determining the maximum loan-to-deposit ratios. They are specified respectively in Clause 15, Clause 16, Clause 17 and Clause 22, Article 1 of Circular No. 19/2017/TT-NHNN issued on 28/12/2017 by the State Bank of Vietnam amending and supplementing a number of articles of Circular No. 36/2014/TT-NHNN.

Specifically, Clause 2, Article 3 of Circular No. 16/2018/TT-NHNN stipulates: “2. Clause 15, Clause 16, Clause 17 and Clause 22 Article 1 of the Circular No. 19/2017/TT-NHNN dated December 28, 2017 by the State Bank’s Governor are abrogated.”

2.2. Directive No. 04/CT-NHNN continuing to effectively implement the key tasks and solutions of the banking sector in the last 6 months of 2018

• Name of legal document: Directive No. 04/CT-NHNN issued on 02/8/2018 by the State Bank of Vietnam continuing to effectively implement the key tasks and solutions of the banking sector in the last 6 months of 2018 (hereinafter referred to as the “Directive No. 04/CT-NHNN”).
• Effective date: 02/8/2018.

Some contents should be noted: Setting out the solutions and tasks that credit institutions should implement in the last 6 months of 2018.

Specifically, Point c, Clause 2, Section I of Directive No. 04/CT-NHNN has the following contents: “c) Credit institutions:

– Controlling the credit growth rate according to the credit growth target of 2018, which has been announced, ensuring the focus on the production and business domains, priority fields under the Government’s undertakings; taking the initiative in analyzing and evaluating the situation so as to control the quality, ensure the safety of lending activities, handle old bad debts and control newly arising bad debts. Strictly controlling the growth rate and quality of credit for potentially risky areas such as credit for investment, real estate, securities and credit sectors for clients/large client groups, credit for BOT, BT transport projects… Strictly controlling of consumer credit, especially consumer credit related to real estate; strictly abiding by the provisions of law on loans for life and consumer credit and the provisions on the use of non-cash payment instruments for disbursement. Strictly controlling of the purpose of using loans.

– Organizing drastically and efficiently implementing contents and solutions in the restructuring plan in association with the handling of bad debts up to 2020, which have been approved and ensured according to the timetable. Organizing the comprehensive application of measures prescribed in Resolution No. 42/2017/QH14 to speed up the handling of bad debts and security assets of bad debts, ensuring the fulfillment of the objectives of handling bad debts according to the approved plans; reviewing the classification of debts, ensuring that loan quality is accurately reflected and mandatory loan loss provision is implemented according to law.

– Seriously and drastically implementing Directive No. 07/CT-NHNN dated 11/10/2017 on enhancing the prevention, control and prevention of law violations in the monetary and banking sector, contributing to stabilizing the currency, banking, focuses on ensuring safety in deposit transactions, payment activities, consumer credit activities, and serving the living needs of credit institutions. Tightening discipline and sense of law observance in the system so as to ensure that officials and employees comply with regulations and internal procedures, provisions of law, minimize moral hazard and strictly dealing with violations in banking activities.

– Closely coordinating with the SBV’s units to timely handle and well implement the communication on monetary and banking activities, ensuring the stability of the system and raising the public’s confidence in the banking system. Promoting propaganda, warnings and instructions to clients know the procedures and procedures of transactions, types of risks, tricks fraud in electronic payment, card payment.”

2.3. Decision No. 986/2018/QĐ-TTg approving the development strategy of Vietnam’s banking sector up to 2025, with orientation to 2030

• Name of legal document: Decision No. 986/2018/QĐ-TTg issued on 08/8/2018 by the Government Prime Minister approving the development strategy of Vietnam’s banking sector up to 2025 with orientation to 2030 (hereinafter referred to as the “Decision No. 986/2018/QĐ-TTg”).
• Effective date: 08/8/2018.

Some contents should be noted:

• Firstly, setting specific targets for the development of Vietnam’s banking sector by 2025, with orientation to 2030.

Specifically, Point b, Clause 2, Section I, Article 1 of Decision No. 986/2018/QĐ-TTg stipulates: “Specific targets

– Increasing the independence, taking initiative and accountability of the State Bank for the purpose of administering monetary policy and controlling inflation at a compatible level with the socio-economic development orientations in each period, supporting macroeconomic stability, promoting the goal of sustainable economic growth.

Decreasing the ratio of credit in foreign currency/total credit, making efforts to the ratio of foreign currency deposits/total of payment method achieved below 7,5% in 2020 and 5% in 2030; progressing to interrupt for foreign currency loans to by the end of 2030, overcoming basically the dollarization situation in the economy.

– Strengthening the institutional capacity, effectiveness and efficiency of banking inspection and supervision by the State Bank; expanding the scope of inspection and supervision to financial corporations in the form of parent-child companies, of which the parent company is a credit institution; by the end of 2025, banking inspection and supervision will abide by most of the principles of effective banking supervision in Basel.

– Promoting the development of non-cash payment, ATM and POS network optimization. by the end of 2020, the ratio of cash on total of payment method will be under 10%; by the end of 2025, the ratio will be under 8%.

– Increasing the number of enterprises and people accessing to financial and banking services provided by credit institutions. Focusing on developing appropriate types of services for population groups which access little or none to traditional banking services in rural, remote or socio-economic difficulty-hit areas.

– Developing the system of credit institutions suitable to socio-economic conditions and the actual state of the system in each period:

2018 – 2020:

+ Continue to restructuring the system of credit institutions with the focus on basically dealing with bad debts and weak credit institutions in appropriate forms according to the market mechanism on the principle of prudence, ensuring the interests of depositors and maintaining the stability and safety of the system; reducing the number of weak credit institutions so that there is a number of appropriate and credit institutions and they operate in a healthy manner;

+ Continue to improve the financial situation, raising the managerial capacity of credit institutions in accordance with law and in accordance with international practice; step by step handling and eliminating the situation of cross-investment, cross-ownership and ownership of manipulation and dominance in related credit institutions; Promote divestment outside the sector of commercial banks.

+ Striving by the end of 2020:

Commercial banks have their equity capital accordance with Basel II, of which there are at least from 12 to 15 commercial banks successfully applying standard method of Basel II; There are at least from 1 to 2 commercial banks in the top 100 largest banks (basing on total assets) in Asia;

Raising income of non-credit services in total commercial banks’ income about 12-13%; completing the listing of shares of joint stock commercial banks on Vietnam’s stock market; raising the legal capital for people’s credit funds;

Decreasing bad debt ratio in the credit institutions, bad debt sold by VAMC and debts that have implemented debt classification measures under 3% (not including weak commercial banks which have handling plan approved by the Government).

2021 – 2025:

+ Further enhancing competitiveness, increasing transparency and adhere to good international standards and practicing in the management and operation of credit institutions;

+ Striving by the end of 2020:

There are at least from 2 to 3 commercial banks in the top 100 largest banks (basing on total assets) in Asia and from 3 to 5 listed banks in foreign stock markets;

All commercial banks apply Basel II in accordance with the standard method, implementing pilot application of Basel II under the advanced method at State-owned commercial banks holding dominant shares and good quality joint stock commercial banks which have successfully implemented Basel II under the standard method;

Increasing the proportion of income from non-credit services in total income of commercial banks about 16-17%;

Bad debt of the entire system of credit institutions is less than 3%.

– Increasing the efficiency of allocating credit capital for socio-economic development; accelerating the development of “green credit”, “green bank” to contribute to the transformation of the economy into green growth, low carbon emissions, adaptation to climate change; increasing the proportion of bank credit capital invested in renewable energy, clean energy, low carbon production and consumption. Integrating sustainable development, climate change and green growth in credit programs and projects.

– Step by step raising the position of Vietnam in international banking forums and organizations, serving for the development of the banking sector, in line with the requirements of international integration.”

• Secondly, setting out the tasks and solutions to develop the Vietnamese banking sector by 2025, with orientation to 2030, including legal solutions.

Specifically, Clause 1, Section II, Article 1 of Decision No. 986/2018/QĐ-TTg stipulates: “1. Completing the legal framework on monetary and banking policies on the basis of fully observing the laws of the market economy in line with international practices and meeting the requirements of integration.

– Reviewing and finalizing the Law on the State Bank of Vietnam and related regulations on the tasks and powers of the State Bank, ensuring that the State Bank has strengthened its independence and initiative in administration currency policy, while ensuring its role as a government agency; consolidating and enhancing the banking sector’s capability, ensuring that after 2020, the banking market shall operate on the market principle basically;

– Reviewing and evaluating the impact and effectiveness, then amending, supplementing and promulgating regulations related to monetary stability in the direction: ensuring the implementation of monetary policy in accordance with the objectives of controlling inflation, effectively coordinating between monetary policy and fiscal policy and other policies. Operating interest rates in line with macroeconomic developments, inflation and monetary market. Operating the exchange rate in a flexible manner, in line with market developments, monetary balances of macroeconomic, monetary and monetary policy objectives;

– Setting up the system of standard index to assess the stability and safety of the monetary market;

– Summarizing and evaluating the implementation of the Ordinance on Foreign Exchange 2005 and the Ordinance on Amendment of the Ordinance on Foreign Exchange in 2013; basing on this, continue to complete the legal framework on foreign exchange management for capital transactions, current transactions and other economic relations related to foreign exchange.

– Completing the legal framework defining the responsibilities of the State Bank in inspecting and supervising financial corporations in the form of a parent – child company in which the parent company is a credit institution; coordinating with relevant agencies in advising the Government on the establishment of a legal framework for financial corporations;

– Identifying the focal role of the State Bank in promoting financial stability; Legalize the function of financial stability of the State Bank and step by step completing the legal framework for macro-security supervision of the financial system;

– Studying the model for supervising the integration of the financial system in conformity with international practices and Viet Nam’s realities and then report it to the Prime Minister;

– Reviewing, supplementing and finalizing regulations on assurance of banking operations safety, licensing, inspecting, supervising and post-inspecting supervising in line with international practices and Viet Nam’s realities; increasing accountability and transparency in the governance and operation of credit institutions, in line with the requirements of the restructuring of credit institutions in each period;

– Issuing a roadmap for guiding and implementing Basel II; formulating criterions, classifying and ranking credit institutions, clearly identifying healthy credit institutions, weak credit institutions and credit institutions being important in the system; and reviewing and improving the appropriate management and monitoring mechanisms for each type;

– Formulating a mechanism for assisting credit institutions designated to receive and manage weak credit institutions and credit institutions in restructuring; setting up a system of early warning of risks, mechanisms for handling system crises and dealing with credit institutions with high risks, ensuring the State Bank’s right to intervene in order to protect the system’s safety and deposit of people’s safety; amending and supplementing the provisions on intensifying the handling of cross-ownership, preventing the abuse of management and operation rights and the right to major shareholders to manipulate activities of credit institutions; completing the legal framework on merger, consolidation and bankruptcy of credit institutions;

– Studying, amending and finalizing regulations on foreign investor purchasing shares of Vietnamese credit institutions in the direction of increasing the foreign investors’ ownership ratio for each type of credit institution. They are in line with the signed international commitments in order to increase the mobilization of resources in terms of capital, technology and administration of foreign investors; and encouraging the participation of foreign investors in the handling of weak credit institutions;

– Amending and supplementing a number of articles of the Law on prevention of money laundering;

– Studying to formulate and promulgate the Law on Payment Systems in order to enhance the management and supervision for the payment system in the ensuring safety economy, compatibility with Vietnam’s reality based on national standards and international practices and improve the state management role in the payment sector of the State Bank;

– Completing institutions and policies, creating favorable conditions for credit institutions to fully supplying and diversifying financial products and services, especially non-credit banking products and the products of modern services based on the application of digital technology, meeting the growing demand of the economy;

– Reviewing, amending, supplementing and promulgating legal documents on electronic money.”

• Thirdly, promulgated together with Decision No. 986/2018/QĐ-TTg is the list of programs, projects and strategies of sections not falling under the approving competence of the Governor of the State Bank of Vietnam (Appendix of programs, projects and strategies of sections not falling under the Governor’s approving competence (Attached to Decision No. 986/QĐ-TTg issued on 08/8/2018 by Prime Minister)).

2.4. Circular No. 17/2018/TT-NHNN amending and supplementing a number of articles of circulars prescribing licensing, business network and foreign exchange operations of credit institutions and foreign bank branches

• Name of legal document: Circular No. 17/2018/TT-NHNN issued on 14/8/2018 by the State Bank of Vietnam amending and supplementing a number of articles of circulars prescribing licensing, business network and foreign exchange operations of credit institutions and foreign bank branches (hereinafter referred to as the “Circular No. 17/2018/TT-NHNN”).
• Effective date: 01/10/2018.

Some contents should be noted:

• Firstly, amending, supplementing and abolishing a number of provisions relating to the conditions for founding shareholders in the grant of establishment and operation licenses of joint-stock commercial banks specified at Points a, b, d, e , e, g (ii) Clause 2, Article 9 and Clause 3, Article 10 of Decision No. 40/2011/TT-NHNN issued on 15/12/2011 by the Governor of the State Bank of Vietnam providing for the issuance of license and the organization, operation of commercial banks, foreign bank’s branches, representative offices of foreign credit institutions, other foreign organizations having banking activities in Vietnam.

Specifically, Article 1 of Circular No. 17/2018/TT-NHNN stipulates: “Amending, supplementing and repealing certain Articles of the Circular No. 40/2011/TT-NHNN dated December 15, 2011 of the State Bank’s Governor prescribing licensing, organization and operation of commercial banks, foreign bank branches and representative offices of foreign credit institutions and other foreign organizations involved in banking operations in Vietnam.

1. Point dd clause 2 Article 9 shall be amended and supplemented as follows:

“dd) All founding shareholders shall be required to own at least 50% of the charter capital when establishing a joint-stock commercial bank, and all of those who are legal persons shall own at least 50% of total shares of founding shareholders;”.

2. Point e clause 2 Article 9 shall be amended and supplemented as follows:

“e) Notwithstanding the conditions prescribed in point c and dd of this clause, a founding shareholder who is an individual person must satisfy the following conditions:

(i) Hold the Vietnamese citizenship;

(ii) Not a prohibited person as provided in the Enterprise Law;

(iii) Not eligible to use mobilized funding sources and funds borrowed from any organization or individual as the contributed capital;

(iv) Be a manager of the enterprise earning profits within a minimum period of 03 consecutive years preceding the year of submission of the application for a business license, or holding a undergraduate or postgraduate degree in economics or law;”.

3. Point g (ii) clause 2 Article 9 shall be amended and supplemented as follows:

“(ii) Not allowed to use mobilized funding sources and funds borrowed from any other organization or individual as the contributed capital;”.

4. Point a, b and d clause 2 Article 9 shall be repealed; the words “a, b” specified in point g clause 2 Article 9, clause 3 Article 10 shall be eliminated.”

• Secondly, abolishing the “to have full and valid dossier” conditions for the establishment of a domestic branch of a commercial bank specified at Point i, Clause 1, Article 6 of Circular No. 21/2013/TT-NHNN issued on 09/9/2013 by the State Bank of Vietnam providing for the operational network of commercial banks.

Specifically, Article 2 of Circular No. 17/2018/TT-NHNN stipulates: “Repealing certain articles of the Circular No. 21/2013/TT-NHNN dated September 9, 2013 of the State Bank’s Governor prescribing business networks of commercial banks

Repealing point I clause 1 Article 6[2].”

• Thirdly, abolishing the condition: “the permit with limited duration is issued by the State bank” under the conditions for commercial banks to be considered and allowed to extend other foreign exchange transactions on domestic or foreign markets, Which stipulated in Point a, Clause 2, Article 10 of Circular No. 21/2014/TT-NHNN issued on 14/8/2014 by the State Bank of Vietnam providing guidance on scope of foreign exchange transactions, requirements and procedures for permitting foreign exchange transactions of credit institutions, branches of foreign banks.

Specifically, Article 3 of Circular No. 17/2018/TT-NHNN stipulates: “Repealing certain articles of the Circular No.21/2014/TT-NHNN dated August 14, 2014 of the State Bank’s Governor providing guidance on the scope of foreign exchange operations, conditions, procedures and processes for approval of foreign exchange operations of credit institutions and foreign bank branches

Repealing point a clause 2 Article 10 (which has been amended and supplemented by clause 10 Article 1 of the Circular No. 28/2016/TT-NHNN dated October 5, 2016 amending and supplementing certain articles of the Circular No. 21/2014/TT-NHNN dated August 14, 2014 of the State Bank’s Governor providing guidance on the scope of foreign exchange operations, conditions, procedures and processes for approval of foreign exchange operations of credit institutions and foreign bank branches).”

• Fourthly, amending, supplementing and abolishing other contents:

Specifically,

• Requirements for licensing joint stock non-bank credit institutions prescribed in Clause 5, Point a Clause 6, Clauses 1, Clause 2 and Clause 3 of Article 11 of Circular No. 30/2015/TT-NHNN dated 25/12/2015 by the Governor of the State Bank of Vietnam regulations on issuance of licences, organization and operation of non-bank credit institutions (Article 4 of Circular No. 17/2018/TT-NHNN);
• Requirements for head offices, material foundations in the conditions for granting cooperative bank licenses; criteria on working time in the banking domain, for the standards of the general director of cooperative banks prescribed in Clause 6 Article 8, Clause 1 Article 25 of Circular No. 31/2012/TT-NHNN issued on 26/11/2012 by the Governor of the State Bank of Vietnam providing for cooperative banks (Article 5 of Circular No. 17/2018/TT-NHNN);

Conditions for individual to become a member of people’s credit fund stipulated at Point d, Clause 1, Article 31 of Circular No. 04/2015/TT-NHNN issued on 31/3/2015 by the Governor of the State Bank of Vietnam on people’s credit funds (Article 6 of Circular No. 17/2018/TT-NHNN).

[1] The term “maintain the solvency ratio within 30 days regarding VND“ is stipulated in Clause 3, Article 1 of Circular No. 16/2018/TT-NHNN as “maintain the solvency ratio within 30 days regarding VND (including VND and other freely convertible foreign currencies converted into VND according to the exchange rate prescribed in Point a Clause 25 Article 3 hereof)” and then be rectified as “maintain the solvency ratio within 30 days regarding VND “ by Article 1 of Decision No. 1564/QĐ-NHNN which issued and be effected on 03/8/2018 by the Governor of the State Bank of Vietnam rectifying the Circular No. 16/2018/TT-NHNN issued on 31/7/2018 by the State Bank of Vietnam amending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN dated 20/11/2014 of the Governor of the State Bank of Vietnam providing for prudential ratios and limits for operations of credit institutions and foreign bank branches.

[2] Article 6. Conditions for establishment of branches in country of commercial bank

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

1. For commercial banks with operational duration of 12 months or more (counted from the date of starting activities till the time of request):
2. i) To have full and valid dossier as prescribed in this Circular.