Tiếng Việt

Legal update relating to Finance and Credit (Monthly Legal Update – 01/2019)

by | Jan 7, 2019 | Banking, EN, Legal Update | 0 comments

1. LEGAL DOCUMENTS ARE EFFECTIVE FROM 01/12/2018

1.1. Circular No. 13/2018/TT-NHNN on internal control systems of commercial banks and foreign banks’ branches

  • Name of legal document: Circular No. 13/2018/TT-NHNN issued on 18/05/2018 by the State Bank of Viet Namon internal control systems of commercial banks and foreign banks’ branches (hereinafter referred to as the “Circular No. 13/2018/TT-NHNN”).

  • Effective date: 01/01/2019.

Some contents should be noted:

  • Firstly, regulating on submission of internal control reports to the State Bank.

Specifically, Article 7 of Circular No. 13/2018/TT-NHNN stipulates: “Submission of internal control reports to the State Bank

1. The commercial bank/foreign bank branches must produce internal control reports and submit them to the State Bank (the Bank Inspection and Oversight Authority) as specified in Clauses 2, 3 and 4 of this Article.

2. The internal control report includes:

a) Annual self-inspection and self-assessment results, as specified in Appendix 1 issued together with this Circular;

b) Annual risk management report, as specified in Appendix 2 issued together with this Circular;

c) Annual internal capital adequacy assessment report, as specified in Appendix 4 issued together with this Circular;

d) Annual internal audit report, as specified in Appendix 5 issued together with this Circular, alongside unscheduled internal audit report.

3. Report submission period:

a) In the case of reports mentioned in Points a, b and c, Clause 2 of this Article: The commercial bank/foreign bank’s branch shall submit the fiscal year’s report within 45 days after the end of that fiscal year.

b) In the case of reports mentioned in Points d, Clause 2 of this Article:

(i) The commercial bank shall submit the fiscal year’s internal audit report within 60 days after the end of that fiscal year.

(ii) The foreign bank branches shall submit the fiscal year’s internal audit report within 60 days after the internal audit’s date of completion. No submission is required if there is no internal audit in that fiscal year;

(ii) The commercial bank/foreign bank branches shall submit the unscheduled internal audit report within 07 working days after the unscheduled internal audit’s date of completion.

4. The internal control report mentioned in Clause 2 of this Article must update the problems, limitations and risks that recently arose in the internal control system of the whole commercial bank, including the departments of the headquarters, branches and other affiliates specified in the State Bank’s regulations on commercial banks’ operational networks (hereinafter referred to as other affiliates) and foreign bank’s branch.”

  • Secondly, regulating on Requirements for internal control.

Specifically, Article 14 of Circular No. 13/2018/TT-NHNN stipulates: “Requirements for internal control

1. Internal control applies to all activities, business processes and departments of the commercial bank (including the headquarters, branches and other affiliates) or foreign bank’s branch and must fulfill the following requirements:

a) The commercial bank’s/foreign bank’s branch’s activities must comply with regulations of law;

b) Control conflict of interest; detect and take action against violations in a timely manner;

c) Increase awareness of the roles and responsibilities of individuals and departments in internal control in order to build and maintain the commercial bank’s/foreign bank’s branch’s control culture.

2. Internal control is conducted through control activities, the information exchange mechanism and the management information system.”

  • Thirdly, regulating on risk limits in risk management.

Specifically, Article 25 of Circular No. 13/2018/TT-NHNN stipulates: “Risk limits

1. The commercial bank’s risk limit is issued and amended (including risk limit adjustment) by the Director General (Director). The competence to promulgate and amend the foreign bank’s branch’s risk limit shall comply with the parent bank’s regulations.

2. The risk limit must:

a) Comply with regulations on restrictions specified in the Law on Credit Institutions and the State Bank’s regulations in to ensure safety of the credit institution’s/foreign bank’s branch’s operations;

b) Have limits on material risks;

c) Comply with the risk appetite, risk management strategies and the total risk assets allocated to that risk;

d) Be sufficient and specific in order to control risks coming from business activities and departments participating in risk-bearing transactions;

dd) Be reviewed and reassessed (adjusted if necessary) at least once per year or when a major change affects the risk position, as specified in the commercial bank/foreign bank’s branch’s internal regulations. In case of raising the commercial bank’s risk limit, the Director General (Director) must notify the Board of Directors/Members’ Council of that adjustment;

e) Be disseminated to the related individuals and departments.

  1. If an activity, transaction or product has different limits for different risks, the commercial bank/foreign bank’s branch must apply the more conservative risk limit.”

1.2. Circular No. 18/2018/TT-NHNN on information system security in banking operations

  • Name of legal document: Circular No. 18/2018/TT-NHNN issued on 21/8/2018 by the State Bank of Viet Namon information system security in banking operations (hereinafter referred to as the “Circular No. 18/2018/TT-NHNN”).

  • Effective date: 01/01/2019.

Some contents should be noted:

  • Firstly, stipulating on management of information technology assets.

Specifically, Article 6 of Circular No. 18/2018/TT-NHNN stipulates: “Management of information technology assets

1. Information technology assets include:

a) Information assets such as digital data and information which are processed and stored through the information system;

b) Physical assets such as information technology equipment, means of media, information-bearing objects and equipment that support operation of the information system;

c) Software assets such as software systems, utility software, middleware, database, application programs, source codes and development tools.

2. The institution shall make a list of all information technology assets attached to each information system as prescribed in Clause 3 Article 4[1] herein. Annual review and update of such list is required.

3. According to the importance of information systems, the institution shall adopt management and protection methods suitable for each type of information technology asset.

4. According to classification of information technology assets prescribed in Clause 1 this Article, the institution shall set up and adopt regulations on asset management and use as prescribed in Article 7, 8, 9, 10 and 11 herein.”

  • Secondly, stipulating work which institution[2] shall do When an employee in an institution terminates or change employment.

Specifically, Article 15 of Circular No. 18/2018/TT-NHNN stipulates: “Employment termination or change

When an employee in an institution terminates or change employment, such institution shall:

  1. determine responsibilities of such employee at the date of employment termination or change

  2. request such employee to hand over the information technology assets

  3. revoke the right to access to the information system of the employee resigning from his/her job

  4. timely change the access right to information system of the employee who changes his/her employment in order to conform to the principle that such right is given adequately for him/her to perform the assigned duty.

  5. at least every six months, carry out review, inspection and comparison between personnel management department and department in charge of management of granting and revocation of rights to access to information systems for the purpose of complying with regulations specified in Clause 3 and 4 this Article

  6. inform the State Bank of Viet Nam (Information Technology Authority) of cases in which individuals working in information technology sector of the institution have been disciplined in forms of dismissal, discharge or legal proceedings on account of violations against information security regulations.”

  • Thirdly, stipulating on criteria for selecting a third party providing the cloud computing service.

Specifically, Article 33 of Circular No. 18/2018/TT-NHNN stipulates: “Criteria for selecting a third party providing the cloud computing service

Any third party shall be selected if it:

1. is an enterprise;

2. owns information technology infrastructure corresponding to the service requested by the institution which:

a) complies with provisions of Viet Namese laws;

b) is granted an unexpired international certificate of information security.”

1.3. Circular No. 20/2018/TT-NHNN regulating on monitoring of payment systems

  • Name of legal document: Circular No. 20/2018/TT-NHNN issued on 30/8/2018 by the State Bank of Viet Nam regulating on monitoring of payment systems (hereinafter referred to as the “Circular No. 20/2018/TT-NHNN”).

  • Effective date: 01/01/2019.

Some contents should be noted:

  • Firstly, explaining the terms “Payment system”, “Important payment system”.

Specifically, Clause 1, Clause 2 Article 3 of Circular No. 20/2018/TT-NHNN stipulates:

“1. Payment system means a system consisting of payment facilities, regulations, procedures, technical infrastructure, operation organizations and participating members for handling, clearing, settling payment transactions arising between participating members.

2. Important payment system is the payment system that plays a key role in servicing the demand of payment in the economy, potentially results in systemic risk, meets at least one in the following criteria:

a) It is the only payment system or accounts for a large proportion of the total payment value compared to the same type payment systems; or

b) It is a system processing high-value payment transactions; or

c) The system is used to settle accounts for other payment systems or for financial market transactions.

Important payment systems defined in this Circular include: the National Interbank Electronic Payment System; Foreign currency payment system (operated by the Joint Stock Commercial Bank for Foreign Trade of Viet Nam); payment system for securities trading; system for compensation, financial transaction switching.”

  • Secondly, stipulating on supervision contents of the National Interbank Electronic Payment System.

Specifically, Article 8 of Circular No. 20/2018/TT-NHNN stipulates: “The National Interbank Electronic Payment System

  1. The general operation of the National Interbank Electronic Payment System, including information on the duration of operation, status of participants, payment status of each service provided (high-value payment services, low-value payment services, foreign currency payment services, net settlement services for other payment systems).

  2. Risk situation arising and risk management for operational risk, credit risk, liquidity risk and settlement risk of the National Interbank Electronic Payment System.

  3. The observance of legal provisions relating to the management and operation of the National Interbank Electronic Payment System.

  4. Changes in the operation of the National Interbank Electronic Payment System, including changes in system features, procedures and internal procedures.”

  • Thirdly, issuing annexes for implementing Circular No. 20/2018/TT-NHNN.

Specifically,

  • Appendix I issued together with Circular No. 20/2018/TT-NHNN on the operation data of the National Interbank Electronic Payment System.

  • Appendix II issued together with Circular No. 20/2018/TT-NHNN on the operation data of Foreign currency payment system; payment system for securities trading; system for compensation, financial transaction switching.

  • Appendix III issued together with Circular No. 20/2018/TT-NHNN on the report on operation of the important payment system.

  • Appendix IV issued together with Circular No. 20/2018/TT-NHNN on incident notification.

  • Appendix V issued together with Circular No. 20/2018/TT-NHNN on the report on evaluation of the payment system.

1.4. Circular No. 42/2018/TT-NHNN amending and supplementing a number of articles of the Circular No. 24/2015/TT-NHNN dated December 08th,  2015 of the Governor of the State bank of Viet Nam on foreign currency loans granted to residents by credit institutions and branches of foreign banks

  • Name of legal document: Circular No. 42/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of the Circular No. 24/2015/TT-NHNN dated December 08th, 2015 of the Governor of the State bank of Viet Nam on foreign currency loans granted to residents by credit institutions and branches of foreign banks.

(Circular No. 24/2015/TT-NHNN dated December 08th, 2015 of the Governor of the State bank of Viet Nam on foreign currency loans granted to residents by credit institutions and branches of foreign banks hereinafter referred to as the “Circular No. 24/2015/TT-NHNN”

Circular No. 42/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of the Circular No. 24/2015/TT-NHNN dated December 08th, 2015 of the Governor of the State bank of Viet Nam on foreign currency loans granted to residents by credit institutions and branches of foreign banks hereinafter referred to as the “Circular No. 42/2018/TT-NHNN”).

  • Effective date: 01/01/2019.

Some contents should be noted:

  • Firstly, amending and supplementing regulations on currency used for loan repayment.

Specifically, Clause 2 Article 1 of Circular No. 42/2018/TT-NHNN stipulates: ”2. Article 5[3] is amended and supplemented as follows:

“Article 5. Currency used for loan repayment

1. With regard to foreign currency loans, at the time before the signing of credit contracts or loan agreements, the credit institutions and foreign bank branches shall appraise borrowers with sufficient revenues in foreign currencies to repay the loan:

a) Borrowers are in foreign currency which must pay principal and interest on borrowed capital in such foreign currency; cases of debt repayment in other foreign currencies shall be made according to agreements between credit institutions, foreign bank branches and customers in accordance with relevant provisions of law;

b) In case, when the loan is due, borrowers can prove that due to objective causes leading to the source of foreign currency from production and business activities of the borrower being delayed payment, borrowers not having or not having enough foreign currency to repay the loan, borrowers are allowed to buy foreign currency at credit institutions, foreign bank branches or other credit institutions, foreign bank branches to repay the loan.

In cases borrowers have a demand to buy foreign currencies at credit institutions, foreign bank branches, credit institutions, foreign bank branches, they must sell foreign currencies to customers. In case customers borrow money to buy foreign currency at credit institutions, other foreign bank branches, credit institutions, foreign bank branches selling foreign currency must transfer such foreign currency to credit institutions, foreign bank branches lending.

Borrowers who have to sell foreign currency to credit institutions, foreign bank branches have sold foreign currency in case of receiving foreign currency from production and business activities.

2. With regard to foreign currencies, at the time before the signing of credit contracts or loan agreements, the credit institutions and foreign bank branches shall appraise borrowers without or insufficient revenue. foreign currency for loan repayment: Borrowers may purchase foreign currencies at credit institutions, foreign bank branches or other credit institutions and foreign bank branches to repay loans.

In cases where borrowers have a demand to buy foreign currencies at credit institutions, foreign bank branches, credit institutions, foreign bank branches, they must sell foreign currencies to customers. In case customers borrow money to buy foreign currency at credit institutions, other foreign bank branches, credit institutions, foreign bank branches selling foreign currency must transfer such foreign currency to credit institutions, branches foreign banks lending. ””.

  • Secondly, regulating the transitional provisions for credit contracts apply the lending method according to the credit limit or loan agreement to apply the lending method according to the limit signed before Circular No. 42/2018/TT-NHNN takes effect.

Specifically, Article 3 of Circular No. 42/2018/TT-NHNN provides the following: “Article 3. Transitional provisions

  1. For credit contracts apply the lending method according to the credit limit or loan agreement to apply the lending method according to the limit signed before Circular No. 42/2018/TT-NHNN takes effect, which loan agreements are signed each time since the effective date of this Circular, credit institutions, foreign bank branches and borrowers shall comply with the provisions of this Circular.

  2. In addition to the cases stipulated in clause 1 of this Article, credit contracts or loan agreements signed before the effective date of this Circular, credit institutions, foreign bank branches and customers continue to comply with the signed contents in accordance with the provisions of law at the time of signing. In case there is an agreement to amend or supplement the credit contract or loan agreement, the amended and supplemented contents must be consistent with the provisions of this Circular.”

1.5. Circular No. 27/2018/TT-NHNN regulating cases of blockade, termination of blockade of capital and assets of foreign bank branches

  • Name of legal document: Circular No. 27/2018/TT-NHNN issued on 22/11/2018 by the State Bank of Viet Nam regulating cases of blockade, termination of blockade of capital and assets of foreign bank branches (hereinafter referred to as the “Circular No. 27/2018/TT-NHNN”).

  • Effective date: 10/01/2019.

Some contents should be noted:

  • Firstly, providing for the blockade of capital and assets.

Specifically, Article 5 of Circular 27/2018/TT-NHNN provides: “Cases of blockade of capital and property

The State Bank shall consider and decide on the blockade of capital and assets of the foreign bank branch in the following cases:

  1. The net value of the granted capital of the foreign bank branch shall be lower than the legal capital level for a continuous period of 06 months.

  2. Violations of prudential ratios in banking activities stipulated in Article 130 of the Law on Credit Institutions and the State Bank have made a written request for remedy but have not taken remedial measures or failed to remedy them within the time limit as requested by the State Bank.

  3. The accumulated loss amount of a foreign bank branch is more than 50% of the value of the issued capital and reserves stated in the latest audited financial statement.

  4. The State Bank has requested that the parent bank fail to properly perform its obligations to its branch operating in Viet Nam.

  5. When there is information that the parent bank shows signs of insolvency or insolvency or is required by the competent authorities of the country of origin to be in a state of special control liquidation, bankruptcy, or withdrawal of licenses for establishment and operation.”

  • Secondly, regulating on the cases of termination of blockade of capital and assets.

Specifically, Article 6 of Circular 27/2018 / TT-NHNN states: “Cases of cases of termination of blockade of capital and assets

The State Bank shall consider and decide to terminate the blockade of capital and assets of the foreign bank branch in the following cases:

  1. Foreign banks’ branches have overcome the violations as provided for in Clauses 1, 2 and 3, Article 5 of this Circular.

  2. The parent bank has fulfilled the obligations already committed to the foreign bank branch at the request of the State Bank stipulated in Clause 4, Article 5 of this Circular.

  3. The State Bank shall receive information from competent authorities of the country of origin that the parent bank has overcome the shortcomings specified in Clause 5, Article 5 of this Circular.”

  • Thirdly, deregulating on blockage of capital and assets stipulated in Circular No. 03/2007/TT-NHNN guiding the implementation of a number of articles of Decree No. 22/2006/NĐ-CP on organization and operation of Branches of foreign banks, joint venture banks, banks with 100% foreign capital, representative offices of foreign credit institutions in Viet Nam.

Specifically, Clause 2, Article 10 of Circular No. 27/2018/TT-NHNN stipulates: “2. Annulling Section VI, Part II of Circular No. 03/2007/TT-NHNN issued on June 5th, 2007 by State bank governor guiding the implementation of a number of articles of Decree No. 22/2006 of the Government on organization and operation of foreign bank branches, joint venture banks, banks with 100% foreign capital and representative offices of foreign credit institutions in Viet Nam.”

1.6. Circular No. 28/2018/TT-NHNN amending and supplementing a number of articles of the Circular No. 40/2011/TT-NHNN issued on December 15th, 2011 issued by the Government of the State bank of Viet Nam 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 Viet Nam

  • Name of legal document: Circular No. 28/2018/TT-NHNN issued on 30/11/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of the Circular No. 40/2011/TT-NHNN issued on December 15th, 2011 issued by the Government of the State bank of Viet Nam 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 Viet Nam.

(Circular No. 40/2011/TT-NHNN issued on December 15th, 2011 issued by the Government of the State bank of Viet Nam 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 Viet Nam hereinafter referred to as the “Circular No. 40/2011/TT-NHNN”

Circular No. 28/2018/TT-NHNN issued on 30/11/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of the Circular No. 40/2011/TT-NHNN issued on December 15th, 2011 issued by the Government of the State bank of Viet Nam 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 Viet Nam hereinafter referred to as the “Circular No. 28/2018/TT-NHNN”).

  • Effective date: 15/01/2019.

Some contents should be noted:

  • Firstly, amending and supplementing regulations on payment fees for License[4].

Specifically, Clause 2 Article 1 of Circular No. 28/2018/TT-NHNN stipulates: “2. Clause 2 of Article 6[5] is amended and supplemented as follows:

“2. The fee level for issuance of a license shall comply with the law on charges and fees.””

  • Secondly, amending and supplementing regulations on documents that must be included in the dossiers of shareholders being individuals contributing capital to establish for dossiers of application for establishment and operation of commercial joint stock banks.

Specifically, Clause 8 Article 1 of Circular No. 28/2018/TT-NHNN stipulates: “Point a (iii) clause 3 Article 15[6] is amended and supplemented as follows:

(iii) Besides the above components, founding shareholders are required to submit following documents:

– A Curriculum of vitae in accordance with the form as provided for in Appendix 03 of this

Circular; criminal record issued by the agency managing the criminal record database, which must have sufficient information on criminal status (including deleted criminal record and unexplained criminal record) and information on prohibiting of holding of posts, establishment, management of enterprises and cooperatives;

Criminal record must be issued by competent agencies before the time of submitting dossiers of application for permits for no more than 6 (six) months;;

– Financial statements of 03 consecutive years prior to the year of applying for the license of the enterprise managed by the founding shareholders or the copy of university qualification or higher in economics or law profession;

– A list of assets which have the value of 100 million VND or above, debts and related documentations of individuals in accordance with the form as provided for in Appendix 07 of this Circular;”

  • Thirdly, amending the regulations on procedures for renewing the License, granting additional operational contents to the License.

Specifically, Clause 1 Article 2 of Circular No. 28/2018/TT-NHNN stipulates: “Article 2.

  1. Remove “and shall apply for registration of such amendments to its Charter with the State Bank according to the provisions of Clause 3 Article 27 of this Circular” at Point c, Clause 3, Article 18b[7] of Circular No. 40/2011/TT-NHNN (supplemented by Clause 3 Article 1 Circular No. 17/2017/TT-NHNN dated November 20th, 2017 of the Governor of the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 40/2011/TT-NHNN)”

2. LEGAL DOCUMENTS ISSUED IN 12/2018

2.1. Consolidated document No. 20/VBHN-NHNN providing for the issuance of license and the organization, operation of commercial banks, foreign bank branches, representative offices of foreign credit institutions, other foreign organizations having banking activities in Viet Nam

  • Name of legal document: Consolidated document No. 20/VBHN-NHNN issued on 12/12/2018 by the State Bank of Viet Nam providing for the issuance of license and the organization, operation of commercial banks, foreign bank branches, representative offices of foreign credit institutions, other foreign organizations having banking activities in Viet Nam.

  • Effective date: 12/12/2018.

The content should be noted: Consolidating the provisions stipulated at Circular No. 40/2011/TT-NHNN; Circular No. 17/2017/TT-NHNN dated November 20th, 2017 of the Governor of the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 40/2011/TT-NHNN; Circular No. 17/2018/TT-NHNN dated August 14th, 2018 of the Governor of the State Bank of Viet Nam amending and supplementing a number of articles of the Circulars providing for the issuance of licenses, operation networks and foreign exchange activities of credit institutions, foreign bank branches; Circular No. 28/2018/TT-NHNN.

2.2. Circular No. 36/2018/TT-NHNN regulations on lending activities for offshore investment of credit institutions and foreign bank branches to customers

  • Name of legal document: Circular No. 36/2018/TT-NHNN issued on 25/12/2018 by the State Bank of Viet Nam regulations on lending activities for offshore investment of credit institutions and foreign bank branches to customers (hereinafter referred to as the “Circular No. 36/2018/TT-NHNN”)

  • Effective date: 15/02/2019.

Some contents should be noted:

  • Firstly, regulating loan demand.

Specifically, Article 4 of Circular No. 36/2018/TT-NHNN stipulates as follows: “Article 4. Demand for offshore investment loans

Credit institutions consider lending to customers with the following needs:

  1. Contributing charter capital to establish an economic organization in accordance with the law of the investment recipient country.

  2. Contributing capital to implement business cooperation contracts (BCC contracts) in foreign countries.

  3. Acquisition of part or all of the charter capital of an overseas economic organization to participate in managing and implementing business investment activities in foreign countries.

  4. The demand for capital for making offshore investment in the form prescribed at Point đ, Clause 1, Article 52[8] of the Law on Investment and its guiding documents.”

  • Secondly, regulating loan conditions.

Specifically, Article 5 of Circular No. 36/2018/TT-NHNN stipulates: “Article 5. Conditions for borrowing capital

Credit institutions shall consider and decide to provide loans for offshore investment when customers meet the following conditions:

  1. Customers are legal entities with civil legal capacity as prescribed by law. Individual customers (including individuals who are members or authorized representatives of households, cooperative groups and other organizations without legal status) from full 18 years or older with administrative capacity full civilian according to the law.

  2. Having been granted an offshore investment registration certificate and investment activities approved or licensed by the competent authority of the investment recipient country. In case, the law of the investment-receiving country does not provide for investment licensing or investment approval, investors must have documents evidencing their right to invest in the investment-receiving country.

  3. Having offshore investment projects and plans evaluated as feasible by credit institutions and customers capable of repaying credit institutions.

  4. There are 2 consecutive years without bad debt incurred until the time of loan request.”

2.3. Circular No. 35/2018/TT-NHNN amending and supplementing a number of articles of Circular No. 35/2016/TT-NHNN dated December 29th, 2016 of the Governor of the State Bank of Viet Nam providing regulations on safety and confidentiality over provision of banking services on the internet

  • Name of legal document: Circular No. 35/2018/TT-NHNN issued on 24/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 35/2016/TT-NHNN dated December 29th, 2016 of the Governor of the State Bank of Viet Nam providing regulations on safety and confidentiality over provision of banking services on the internet.

(amending and supplementing a number of articles of Circular No. 35/2016/TT-NHNN dated December 29th, 2016 of the Governor of the State Bank of Viet Nam providing regulations on safety and confidentiality over provision of banking services on the internet hereinafter referred to as the “Circular No. 35/2016/TT-NHNN”

Circular No. 35/2018/TT-NHNN issued on 24/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 35/2016/TT-NHNN dated December 29th, 2016 of the Governor of the State Bank of Viet Nam providing regulations on safety and confidentiality over provision of banking services on the internet hereinafter referred to as the “Circular No. 36/2018/TT-NHNN”).

  • Effective date: 01/07/2019.

Some contents should be noted:

  • Firstly, amending and supplementing regulations on Database management system.

Specifically, Clause 4 Article 1 of Circular No. 35/2018/TT-NHNN stipulates: “4. Clause 2 Article 6[9] (Circular No. 35/2016 / TT-NHNN) is amended and supplemented as follows:

“2. The Internet Banking system must have a disaster backup database capable of replacing the main database and ensuring no loss of customers’ online transaction data.””.

  • Secondly, amending and supplementing regulations on compulsory functions of the application.

Specifically, Clause 5 Article 1 of Circular No. 35/2018/TT-NHNN stipulates: “5. Points c and đ, Clause 6, Article 7[10] (Circular No. 35/2016/TT-NHNN) are amended and supplemented as follows:

“c) Session control: the system has a mechanism that shall automatically disconnect the session when the user does not manipulate for a period of time specified by the unit or applies other protection measures”;

“đ) For institutional customers, application software is designed to ensure the transaction execution includes at least two steps: creating, approving transactions and being executed by different people. In case the customer is an organization permitted by law to apply a simple accounting regime, the execution of the transaction is similar to that of individual customers”.”

2.4. Circular No. 40/2018/TT-NHNN amending and supplementing a number of articles of the Circular No. 13/2018/TT-NHNN dated May 18th, 2018 of the Governor of the State Bank of Viet Nam on internal control systems of commercial banks and foreign banks’ branches

  • Name of legal document: Circular No. 40/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 13/2018/TT-NHNN dated May 18th, 2018 of the Governor of the State Bank of Viet Nam on internal control systems of commercial banks and foreign banks’ branches.

(Circular No. 13/2018/TT-NHNN dated May 18th, 2018 of the Governor of the State Bank of Viet Nam on internal control systems of commercial banks and foreign banks’ branches hereinafter referred to as the “Circular No. 13/2018/TT-NHNN”

Circular No. 40/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 13/2018/TT-NHNN dated May 18th, 2018 of the Governor of the State Bank of Viet Nam on internal control systems of commercial banks and foreign banks’ branches hereinafter referred to as the “Circular No. 40/2018/TT-NHNN”).

  • Effective date: 12/02/2019.

Some contents should be noted:

  • Firstly, adding provisions on credit risk.

Specifically, Clause 1 Article 1 of Circular No. 40/2018/TT-NHNN stipulates: “1. Adding Clauses 23, 24, 25, 26, 27, 28, 29, 30, 31 and 32 to Article 3 (Circular No. 13/2018 / TT-NHNN) as follows:

“23. Credit risks include:

a) Credit risk is a risk that customers do not perform or are unable to perform part or all of their debt repayment obligations under contracts or agreements with commercial banks, foreign bank’s branches, except for the cases specified at Point b of this Clause. In particular, customers (including credit institutions, foreign bank’s branches) have relations with commercial banks, foreign bank’s branches in receiving credit (including receiving credit through trust), receiving deposits, issuing corporate bonds.

b) Partner credit risk is the risk that the counterparty does not perform or is unable to perform part or all of its payment obligations before or when it is due to self-trading transactions; repo transaction and reverse repo transaction; trading derivative products to prevent risks; transactions of buying and selling foreign currencies, financial assets to serve the needs of customers and partners. In which, partners (including credit institutions, foreign bank branches) have transactions with commercial banks, foreign bank branches in self-trading transactions; repo transaction and reverse repo transaction; trading derivative products to prevent risks; transactions of buying and selling foreign currencies, financial assets to serve the needs of customers and partners.””

  • Secondly, amending and supplementing regulations on principles of independence in internal audit principles.

Specifically, Clause 6, Article 1 of Circular No. 40/2018/TT-NHNN stipulates: “6. Point a (iv) clause 1 Article 64[11] (Circular No. 13/2018/TT-NHNN) is amended and supplemented as follows:

“(iv) Criteria for building salaries and other benefits for the positions of the internal audit department must be separate from the business results and operation results of units and sections of the first and second protection line;””

2.5. Circular No. 41/2018/TT-NHNN amending and supplementing a number of articles of the Circular No. 19/2016/TT-NHNN dated June 30th, 2016 of the Governor of the State Bank of Viet Nam on bank card operations

  • Name of legal document: Circular No. 41/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 19/2016/TT-NHNN dated June 30th, 2016 of the Governor of the State Bank of Viet Nam on bank card

(Circular No. 19/2016/TT-NHNN dated June 30th, 2016 of the Governor of the State Bank of Viet Nam on bank card operations hereinafter referred to as the “Circular No. 19/2016/TT-NHNN”

Circular No. 41/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 19/2016/TT-NHNN dated June 30th, 2016 of the Governor of the State Bank of Viet Nam on bank card operations hereinafter referred to as the “Circular No. 41/2018/TT-NHNN”).

  • Effective date: 18/02/2019.

The content should be noted: adding provisions on card conversion process.

Specifically, Clause 5, Article 2 of Circular No. 41/2018/TT-NHNN stipulates: “5. Supplement Chapter IVa after Chapter IV (Circular No. 19/2016/TT-NHNN) as follows:

“Chapter IVa

CONVERSION PROCESS

Article 27a. For card payment organizations

  1. To date December 31st, 2019, at least 35% of ATMs, 50% of cards acceptance devices at the point of sale operating in Viet Nam of acquirer comply with the Basic Standard for domestic chip cards.

  2. To date December 31st, 2020, 100%of ATMs and cards acceptance equipment operating in Viet Nam of acquirer comply with the Standard on domestic chip cards.

Article 27b. For card issuers

  1. To date December 31st, 2019, at least 30% of the cards with BIN issued by card issuer of the State Bank comply with the Basic Standard on domestic chip cards.

  2. To date December 31st, 2020, at least 60% of the cards with BIN issued by card issuer the State Bank comply with the Basic Standard on domestic chip cards.

  3. To date December 31st, 2021, 100% of the cards with BIN issued by card issuer the State Bank comply with the basic standards for domestic chip cards.

Article 27c. Responsibilities of card issuers and card payment organizations

During the transition period, card issuer and acquirer must ensure card activities take place continuously, stably, safely and ensure the legitimate interests of cardholders. “”

2.6. Circular No. 43/2018/TT-NHNN amending and supplementing a number of articles of Circular No. 16/2010/TT-NHNN dated June 25th, 2010 of the Governor of the State Bank of Viet Nam guiding the implementation of the Decree No. 10/2010/NĐ-CP dated February 12th, 2010 of the Government on credit information-related activities

  • Name of legal document: Circular No. 43/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 16/2010/TT-NHNN dated June 25th, 2010 of the Governor of the State Bank of Viet Nam guiding the implementation of the Decree No. 10/2010/NĐ-CP dated February 12th, 2010 of the Government on credit information-related activities (hereinafter referred to as the “Circular No. 43/2018/TT-NHNN”).

  • Effective date: 18/02/2019.

The content should be noted: amending and supplementing documents used to prove conditions in the application for Certificate of eligibility for credit information-related activities.

Specifically, Clause 1 Article 1 of Circular No. 43/2018/TT-NHNN stipulates:

“1. Point c(viii) clause 1 Article 5[12] Circular No. 16/2010/TT-NHNN (amended and supplemented in Clause 4 Article 1 of Circular No. 23/2016/TT-NHNN dated June 30th, 2016 of the Governor The State Bank of Viet Nam on amending and supplementing a number of articles of Circular No. 16/2010/ TT-NHNN is amended and supplemented as follows:

“Viii) Documents of credit institutions and foreign bank branches committed to providing credit information to enterprises according to form No. 04/TTTD enclosed with this Circular;””

2.7. Circular No. 44/2018/TT-NHNN amending and supplementing a number of articles of the Circular No. 36/2012/TT-NHNN dated December 28th, 2012 of the Governor of the State Bank of Viet Nam on the installation, management, operation, and security of automated teller machines

  • Name of legal document: Circular No. 44/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 36/2012/TT-NHNN dated December 28th, 2012 of the Governor of the State Bank of Viet Nam on the installation, management, operation, and security of automated teller machines.

(Circular No. 36/2012/TT-NHNN dated December 28th, 2012 of the Governor of the State Bank of Viet Nam on the installation, management, operation, and security of automated teller machines hereinafter referred to as the “Circular No. 36/2012/TT-NHNN”

Circular No. 44/2018/TT-NHNN issued on 28/12/2018 by the State Bank of Viet Nam amending and supplementing a number of articles of Circular No. 36/2012/TT-NHNN dated December 28th, 2012 of the Governor of the State Bank of Viet Nam on the installation, management, operation, and security of automated teller machines hereinafter referred to as the “Circular No. 44/2018/TT-NHNN”).

  • Effective date: 18/02/2019.

Some contents should be noted:

  • Firstly, amending and supplementing regulations on installation, change of location and termination of ATM operations.

Specifically, Clause 1, Article 1 of Circular No. 44/2018/TT-NHNN stipulates as follows: “1. Clause 2 Article 4 (Circular No. 36/2012/TT-NHNN) is amended and supplemented as follows:

“2. Within 10 working days before the date of deployment, installation, change of location, change of time, termination of ATM operation, payment service suppliers must notify the State Bank’s branch in the province centrally-run cities (hereinafter referred to as the State Bank’s branch) in the locality where ATMs are deployed or installed under Form No. 1 (for ATM) or Form No. 2 (for mobile ATM) issued together with this Circular.

Within 10 working days before the date of deployment, installation, change of location, change of time or termination of ATM operation in different provinces or cities where the head office or branch of the service provider is located. Payment service directly managing ATMs, payment service providers must notify the State Bank’s branch in the area where ATM is deployed, installed and the State Bank branch in the locality where the head office is located or branch that directly manages ATM according to Form 1 (for ATM) or Form 2 (for mobile ATMs) issued together with this Circular. ””

  • Secondly, amending and supplementing regulations on information and reports.

Specifically, Clause 4 Article 1 of Circular No. 44/2018/TT-NHNN stipulates: “4. Clause 1 of Article 10 is amended and supplemented as follows:

“1. The payment service supplier, the State Bank’s branch in the area where ATM is deployed and installed shall be responsible for reporting to the State Bank of Viet Nam (via the Department  of Payment ) as follows:

a) Report according to the regulations of the State Bank of Viet Nam on the statistical reporting mode applicable to credit institutions and foreign bank branches and when required by competent agencies as prescribed under the law;

b) Periodic report on ATM operations for the first 6 months (reporting period is from January 1st to June 30th) and annually (reporting period is from January 1st to December 31st) before the 15th of the consecutive month following the reporting period according to the contents guided in Form 4 (for payment service suppliers) and Form 5 (for the State Bank branch) issued together with the Information this Circular””

[1] “Article 4. Classification of information and information system

3. Institutions shall classify their information system by importance prescribed in Clause 2 this Article. The list of information system categorized by importance must be approved by the legal representative of such institution.”

[2] “Institution includes credit institutions (except for people’s credit funds and microcredit institutions), branches of foreign banks and intermediary payment service providers.” (Clause 2, Article 1 Circular No. 18/2018/TT-NHNN).

[3] “Article 5. Currency used for loan repayment

1. With regard to foreign currency loans, prescribed in Point a, Point c, Point d Clause 1 and Clause 2 Article 3 hereof, which borrowers have sufficient foreign currency revenues to repay: borrowers shall pay the loan principal and interest by the currency that they borrow; in case borrowers repay debts by another foreign currency, they shall be bound to the agreement between the credit institutions and borrowers in conformity with relevant laws.

On the due date of the foreign currency loan, if borrower’s late repayment in foreign currency is caused by unexpected events such as borrower’s deferred collection of foreign-currency operating revenues, borrower’s inadequacy of foreign currency earned from production and business activities or other legal revenues to repay loans after being inspected and confirmed in writing by the lending credit institution, the lending credit institution shall sell foreign currency to the borrower for the borrower to repay the loan, and the borrower shall make a commitment to resell such foreign currency back to the lending credit institution when earning enough foreign currency from their business operation.

2. With regard to foreign currency loans, prescribed in Point b Clause 1 and Clause 2 Article 3 hereof, which borrowers lack legal foreign currency revenues to repay, the lending credit institution shall sell foreign currency to the borrower in order for the borrower to repay principal and interest.”

[4] “License shall include establishment and operation License of a commercial bank, establishment License of a foreign bank’s branch, establishment License of a representative office issued by the State Bank. Documents issued by the State Bank on the amendment, supplement of the License is an integral part of the License.” (Clause 1 Article 2 Circular No. 40/2011/TT-NHNN)

[5] “Article 6. Payment of fee for issuance of License

…

2. The fee level for issuance of a license shall be in accordance with provisions of the Ministry of Finance on licensing fee.”

[6] “Article 15. Application file for the establishment and operation license of a joint-stock commercial bank

…

3. Profile of shareholders who contribute capital for establishment:

a) For individuals:

…

 (iii) Besides the above components, founding shareholders are required to submit following documents:

– A Curriculum of vitae in accordance with the form as provided for in Appendix 03 of this

Circular, a criminal record (or similar document) in compliance with provisions of applicable laws;

– Financial statements of 03 consecutive years prior to the year of applying for the license of the enterprise managed by the founding shareholders or the copy of university qualification or higher in economics or law profession;

– A written commitment of each shareholder on providing financial support to the bank to solve difficulty in case where the bank faces difficulties concerning capital or liquidity;

– A list of assets which have the value of 100 million VND or above, debts and related documentations of individuals in accordance with the form as provided for in Appendix 07 of this Circular;”

[7] “Article 1. Amendments to the Circular No. 40/2011/TT-NHNN dated December 15, 2011 providing for issuance of license and organization and operation of commercial banks, branches of foreign banks, representative offices of foreign credit institutions and other foreign organizations performing banking activities in Viet Nam (hereinafter referred to as the Circular No. 40/2011/TT-NHNN)

…

3. Addition of Section 4 into Chapter II:

Section 4: REGULATIONS ON REPLACEMENT OF LICENSE AND ADDITION OF ACTIVITIES TO THE LICENSE

…

Article 18b. Procedures for application for replacement of license and addition of activities to the license

…

3. When the replacement of License or the addition of activities to the license is granted approval by the State Bank, the commercial bank or the branch of foreign bank shall:

…

c) The commercial bank shall make amendments to its Charter in conformity with the contents of the new License or the license containing activities added, and shall apply for registration of such amendments to its Charter with the State Bank according to the provisions of Clause 3 Article 27 of this Circular.”

[8] “Article 52. Forms of outward investment

…

1. Outward investments in the following forms:

…

đ) Other forms of investments prescribed by law of the host country.”

[9] “Article 6. Database management system

…

2. The Internet Banking system must have backup database at the Disaster Recovery Center. The backup database must be updated within at least one hour compared to official database. The database shall be copied daily. Copies shall be managed and stored safely.”

[10] “Article 7. Internet Banking application

…

6. Compulsory functions of the application:

…

c) Have a mechanism to control transaction sessions and assess time of websites and applications. In a case where a user fails to manipulate within a certain time prescribed by the service provider but not exceeding five minutes, the system shall automatically disconnect the session or apply other protective measures;

…

đ) With regard to a client being an organization, the application is designed in a manner to ensure that the transaction will be conducted in two steps as follows: creating and approving transaction and conducted by at least two different persons.”

[11] “Article 64. Principles of internal audit

1. The principles of internal audit are:

a) Independence:

…

(iv) The criteria for creating pay levels of the Chief Internal Auditor and internal auditors must be separated from the business and operational results of the units and departments belonging to the first and second lines of defense;”

[12] “Article 1. Amending and supplementing a number of Articles of Circular 16/2010/TT-NHNN

…

4. Article 5 is amended and supplemented as follows:

“Article 5. Application for Certificate

1. Dossiers of application for certificates include:

…

c) Documents proving the Conditions stipulated in Article 7 of Decree 10/2010/NĐ-CP and the Government’s regulations amending, supplementing and replacing these Conditions (if any), including:

…

viii) Documents of commercial banks committed to providing credit information to businesses in accordance with Form 04/TTTD issued with this Circular;”