Tiếng Việt

Legal update relating to Finance and Credit (Monthly Legal Update – 02&03/2022)

by | Mar 11, 2022 | Banking, EN, Legal Update | 0 comments

1. LEGAL DOCUMENTS ARE EFFECTIVE FROM 01/02/2022

1.1. Circular No. 25/2021/TT-NHNN amending and supplementing a number of articles of Circular No. 01/2015/TT-NHNN dated January 6, 2015 defining trading, supply of interest rate derivative products of commercial banks, branches of foreign banks

  • Name of legal document: Circular 25/2021/TT-NHNN issued on 31/12/2021 by the State Bank of Vietnam amending and supplementing a number of articles of Circular No. 01/2015/TT-NHNN dated January 6, 2015 defining trading, supply of interest rate derivative products of commercial banks, branches of foreign banks (referred respectively to as the “Circular No. 25/2021/TT-NHNN” and “Circular No. 01/2015/TT-NHNN”).

  • Effective date: 14/02/2022.

The content should be noted: Adding provisions on defining trading, supply of interest rate derivative products by electronic means

Specifically, Clause 4 Article 1 of Circular No. 25/2021/TT-NHNN stipulates: “Article 1. Amending and supplementing a number of articles of Circular No. 01/2015/TT-NHNN

…

4. Adding Article 4a as follows:

“Article 4a. Defining trading, supply of interest rate derivative products by electronic means

1. Commercial banks, foreign bank branches defining trading and supplying interest rate derivative products by electronic means must develop a business process for providing interest rate derivative products by electronic means in accordance with the provisions of this Circular, the provisions of the law on prevention and combat of money laundering, the law on electronic transactions and relevant legal provisions, ensuring the safety and confidentiality of customer information and safe operation of commercial banks and foreign bank branches.

2. Commercial banks and foreign bank branches must fully store information related to the defining trading and supply of interest rate derivatives by electronic means to serve the inspection, compare, settle tracing, complaints, disputes and provide information upon request from competent state management agencies.””

1.2. Circular No. 23/2021/TT-NHNN amendments to Circular No. 52/2018/TT-NHNN dated December 31, 2018 of Governor of State Bank of Vietnam prescribing credit rating of credit institutions and foreign bank branches

  • Name of legal document: Circular 23/2021/TT-NHNN issued on 31/12/2021 by the State Bank of Vietnam amendments to Circular No. 52/2018/TT-NHNNdated December 31, 2018 of Governor of State Bank of Vietnam prescribing credit rating of credit institutions and foreign bank branches (referred respectively to as the “Circular No. 23/2021/TT-NHNN” and “Circular No. 52/2018/TT-NHNN”).

  • Effective date: 15/02/2022.

The content should be noted: Amending and supplementing regulations on word interpretation in a number of clauses of Article 3 of Circular No. 52/2021/TTBYT-NHNN.

Specifically, Point a Clause 1 Article 1 of Circular No. 23/2021/TT-NHNN stipulates: “Article 1. Amendments to Circular No. 52/2018/TT-NHNN

1. Article 3 is amended as follows:a) Clauses 1, 2, 3, 4, 5 Article 3 are amended as follows:

“1. Capital adequacy ratio means an indicator that is calculated according to SBV’s regulations on prudential limits and ratios for operations of credit institutions and foreign bank branches (hereinafter referred to as “FBB”).

2. Tier 1 capital ratio means an indicator calculated according to the following provisions:

a) If a credit institution or FBB applies the capital adequacy ratio defined according to SBV’s regulations on prudential limits and ratios for operations of credit institutions and FBBs (excluding the Circular No. 41/2016/TT-NHNN dated December 30, 2016 and its amending and superseding documents (if any)), its tier 1 capital ratio shall be calculated adopting the following formula:

Tier 1 capital ratio (%)

=

Standalone tier 1 capital

x

100%

Total standalone risk-weighted assets


Standalone tier 1 capital and total standalone risk-weighted assets shall be calculated according to SBV’s regulations on prudential limits and ratios for operations of credit institutions and FBBs;

b) If a credit institution or FBB applies the capital adequacy ratio defined according to the Circular No. 41/2016/TT-NHNN , its tier 1 capital ratio shall be calculated adopting the following formula:

Tier 1 capital ratio (%)

=

Tier 1 capital

x

100%

RWA + 12,5 x (KOR + KMR)

Where:

– RWA: Total credit risk-weighted assets

– KOR: Capital required for operational risks

– KMR: Capital required for market risks

Tier 1 capital, RWA, KOR, KMR shall be calculated according to the Circular No. 41/2016/TT-NHNN .

3. Debt restructured as potentially bad debt means the balance of debt which is not written off as bad debt at a credit institution or FBB as it is rescheduled or its interest is exempted or reduced and classification group to which it belongs remains unchanged.

4. Debts sold to VAMC as bad debts yet to be disposed of means bad debts which have been purchased using special bonds by VAMC (Vietnam Asset Management Company) and have yet to be disposed or recovered.

5. Customer with a large outstanding balance means a customer (except credit institutions and FBBs) having the outstanding balance making up at least 5% of the equity of a credit institution or FBB.  With regard to cooperative banks, customers with large outstanding balances include people’s credit funds that are their members.”.”

1.3. Circular No. 26/2022/TT-NHNN guiding foreign currency trading between the State Bank of Vietnam and credit institutions permitted to engage in foreign exchange

  • Name of legal document: Circular 26/2021/TT-NHNN issued on 31/12/2021 by the State Bank of Vietnam guiding foreign currency trading between the State Bank of Vietnam and credit institutions permitted to engage in foreign exchange (referred to as the “Circular No. 26/2021/TT-NHNN”).

  • Effective date: 15/02/2022.

Some contents should be noted:

·        Firstly, stipulating on trading method.

Specifically, Article 8 of Circular No. 26/2022/TT-NHNN stipulates: “Article 8. Trading method

SBV shall perform foreign currency trade with permitted credit institutions which have foreign currency trading connection with the SBV via:

  1. Spot trade.

  2. Forward trade.

  3. Foreign currency swap.

  4. Foreign exchange option.

  5. Other trading methods decided by SBV from time to time.”

  • Secondly, stipulating on Instruments and languages of trade

Specifically, Article 8 of Circular No. 26/2022/TT-NHNN stipulates: “Article 10. Instruments and languages of trade

  1. SBV shall trade with permitted credit institutions via online trading systems such as Refinitiv, Bloomberg, telephones, or other instruments decided by SBV from time to time.

  2. Verified foreign currency trades on instruments under Clause 1 of this Article means the commitment is unchanged. Revision or cancellation must be agreed upon by both parties.

  3. If foreign currency trade is performed via telephones, permitted credit institutions must make sure that telephones can record audio, store audio recording, and trace the agreed trade. Once the agreement is made via telephones, on the trade date, SBV and permitted credit institutions shall verify again via physical or electronic documents which will be signed by competent authorities.

  4. Language used in trade across foreign currency trading instruments is Vietnamese or English.”

1.4. Circular No. 28/2021/TT-NHNN amendments to Circular No. 40/2011/TT-NHNN dated December 15, 2011 of the Governor of the State bank of Vietnam on the issuance of licenses and the organization, operation of commercial banks, foreign bank branches, representative offices of foreign credit institutions, other foreign organizations having banking activities in Vietnam

  • Name of legal document: Circular 28/2021/TT-NHNN issued on 31/12/2021 by the State Bank of Vietnam amendments to Circular No. 40/2011/TT-NHNNdated December 15, 2011 of the Governor of the State bank of Vietnam on the issuance of licenses and the organization, operation of commercial banks, foreign bank branches, representative offices of foreign credit institutions, other foreign organizations having banking activities in Vietnam (referred respectively to as the “Circular No. 28/2021/TT-NHNN” and “Circular No. 40/2011/TT-NHNN”).

  • Effective date: 01/03/2022.

The content should be noted: Amending and supplementing regulations on principles for replacement of license and addition of activities to the license.

Specifically, Clause 2 Article 1 of Circular No. 28/2021/TT-NHNN stipulates: “Article 1. Amendments to Circular No. 40/2011/TT-NHNN

…

2. Amendments to Clause 3 Article 18a (amended by Clause 3 Article 1 of Circular No. 17/2017/TT-NHNN dated November 20, 2017 of the Governor of the State Bank of Vietnam on amendments to Circular No.40/2011/TT-NHNN):

“3. A commercial bank or FBB may perform the activities specified in Clause 26 Article 4 of the form in Appendix 01a and Clause 24 Article 4 of the form in Appendix 01b after obtaining the approval from the State Bank; procedures for application for addition of such activities to the License shall be carried out in accordance with specific regulations of the State Bank and other relevant law provisions.””

1.5. Circular No. 01/2022/TT-NHNN amendment to Circular No. 21/2013/TT-NHNN dated September 9, 2013 of Governor of State Bank of Vietnam on operation network of commercial banks

  • Name of legal document: Circular 01/2022/TT-NHNN issued on 28/01/2022 by the State Bank of Vietnam amendment to Circular No. 21/2013/TT-NHNNdated September 9, 2013 of Governor of State Bank of Vietnam on operation network of commercial banks (referred respectively to as the “Circular No. 01/2022/TT-NHNN” and “Circular No. 21/2013/TT-NHNN”).

  • Effective date: 15/03/2022.

The content should be noted: Amending and supplementing regulations on opening of operation of domestic branches and transaction offices.

Specifically, Clause 7 Article 1 of Circular No. 01/2022/TT-NHNN stipulates: “Article 1. Amendments to Circular No. 21/2013/TT-NHNN

…

  1. Amendments to Article 14:

“Article 14. Opening of operation of domestic branches and transaction offices

  1. Requirements for opening of domestic branches and transaction offices:a) Have the right to own or legally utilize head office of the branches and transaction offices; head office must ensure storage of instruments (except for transaction offices), convenience and safety for transactions and assets, be installed with security, protection systems, constant electricity and communication supply systems satisfactory to fire safety;b) Head office of branches where treasury is located must meet the standards of SBV. In case a commercial bank has more than one branch in the same province or central-affiliated city, at least one branch of the commercial bank must have cash treasury in accordance with regulations of SBV and the commercial bank must be responsible for transferring cash of branches without cash treasury to the branch with cash treasury at the end of each working day;c) Branches and transaction offices must be equipped with information technology system that is connected to the head office while transaction offices must be connected to supervisory branches; maintain continuous operations of information technology systems and databases in order to ensure safety and security for professional operations;d) Branches and transaction offices have the required managerial staff including branch directors, vice directors, directors of transaction offices or equivalent titles and professional employees;dd) Branch directors or equivalent titles (for cases of branch opening) must meet all standards and requirements under Clause 5 Article 50 of the Law on Credit Institutions.

  2. Commercial banks shall submit reports on satisfaction of requirements for opening domestic branches and transaction offices to SBV braches where the domestic branches and transaction offices are located at least 15 days prior to the opening day.

  3. Commercial banks shall carry out the opening for domestic branches and transaction offices after meeting requirements under Clause 1 of this Article and completing procedures for registering branch operation (when opening branches) or issuing notice on business facilities (when opening transaction offices) as per the law.

  4. Within 7 working days prior to the expected opening day of domestic branches or transaction offices mentioned under this Article, commercial banks must announce on website of SBV and the commercial banks, a printed daily newspaper in 3 consecutive issues or online newspapers in Vietnam.””

1.6. Decision No. 177/QD-NHNN on the announcement of administrative procedures are amended, supplemented, replaced, and abolished in the field of banking establishment and operations performed at the Single Window Department under the management function of the State Bank of Vietnam

  • Name of legal document: Decision No. 177/QD-NHNN issued on 21/02/2022 by the State Bank of Vietnam on the announcement of administrative procedures are amended, supplemented, replaced, and abolished in the field of banking establishment and operations performed at the Single Window Department under the management function of the State Bank of Vietnam (referred to as the “Decision No. 177/QD-NHNN”).

  • Effective date: 15/03/2022.

The content should be noted: Abolishing the procedure of approving the change of the name of a domestic branch of a commercial bank and the procedure of approving the eligibility to open a domestic branch or transaction office of a commercial bank within the scope of management function of the State Bank of Vietnam.

Specifically, Item 3 Part 1 of Decision No. 177/QD-NHNN stipulates: “PART I. LIST OF ADMINISTRATION PROCEDURES

  1. Lis of administration procedures abolished within the scope of management function of the State Bank of Vietnam

NO

Case number of administrative procedure

Name of administrative procedure

Name of the legal document providing for the abolition of administrative procedures

Field

Implementing agency

1

2.000123

Procedure of approving the change of the name of a domestic branch of a commercial bank

Circular No. 01/2022/TT-NHNN

Banking establishment and operation

State Bank branches in provinces and cities

2

1.000372

Procedure of approving the eligibility to open a domestic branch or transaction office of a commercial bank

Circular No. 01/2022/TT-NHNN

Banking establishment and operation

State Bank branches in provinces and cities

”

1.7. Circular No. 24/2021/TT-NHNN amending and supplementing to some articles of Circular No. 39/2011/TT-NHNN December 15, 2011 of the Governor of the State bank of Vietnam providing independent audit of credit institutions and foreign bank branches

  • Name of legal document: Circular 24/2021/TT-NHNN issued on 31/12/2021 by the State Bank of Vietnam amending and supplementing to some articles of Circular No. 39/2011/TT-NHNN December 15, 2011 of the Governor of the State bank of Vietnam providing independent audit of credit institutions and foreign bank branches (referred respectively to as the “Circular No. 24/2021/TT-NHNN” and “Circular No. 39/2011/TT-NHNN”).

  • Effective date: 15/04/2022.

The content should be noted: Amending and supplementing regulations on contents with at least in independent audit of operations of the internal control system of credit institutions and foreign bank branches.

Specifically, Clause 2 Article 1 of Circular No. 24/2021/TT-NHNN stipulates: “Article 1. Amending and supplementing a number of articles of Circular No. 39/2011/TT-NHNN

…

2. Amending and supplementing Clause 2, Article 8 as follows:

“2. Independently audit the operation of the internal control system of a credit institution or foreign bank branch with at least the following contents:

a) Auditing the internal control system of credit institutions, foreign bank branches (including internal mechanisms, policies, processes and regulations) in compliance with current law provisions and regulations of the State Bank on the internal control system of credit institutions and foreign bank branches.

For the contents of the internal control system that have been audited for compliance without any change, such content is not required to be re-audited;

b) Auditing the operation of the internal control system for the preparation and presentation of financial statements;

c) In addition to the audit contents specified at Points a and b of this Clause, the commercial bank or foreign bank branch must audit the operation of the internal control system for the content of the internal assessment on the sufficient capital level of commercial banks and foreign bank branches in accordance with the State Bank’s regulations on internal control system.””