Socialist Republic of Vietnam

NATIONAL ASSEMBLY

No. 02-1997-QH10 12 December 1997


LAW ON CREDIT INSTITUTIONS


In order to ensure sound, safe and efficient operation of credit institutions; to protect the interests of the State and the legitimate rights and interests of organizations and individuals; and to facilitate the implementation of national monetary policy and the development of a socialist oriented market driven multi-sector commodity economy under State administration;

Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam;

This Law provides for the organization and operation of credit institutions and banking operations conducted by other organizations.


CHAPTER I

General Provisions

Article 1 Scope of application

This Law shall provide for the organization and operation of credit institutions and the banking operations of other organizations operating within the territory of the Socialist Republic of Vietnam.

Article 2 Application of the Law on Credit Institutions and relevant legislation

The organization and operation of credit institutions and the banking operations of other organizations shall be subject to the provisions of this Law and other relevant legislation. The Government shall provide in detail for the banking operations of other organizations.

Article 3 Application of international treaties and practices in banking operations involving foreign parties

1. In the event that an international treaty to which the Socialist Republic of Vietnam is a signatory or party contains provisions which are inconsistent with the provisions of this Law, the provisions of such treaty shall prevail.

2. Parties to banking transactions may agree to apply international practices provided that the practices shall not be contrary to the laws of the Socialist Republic of Vietnam.

Article 4 State policy on development of various forms of credit institutions

1. The State shall uniformly manage all banking operations and develop a system of modern credit institutions capable of satisfying demands for capital and banking services of the economy and the population in order to facilitate the implementation of the national monetary policy, to ensure the safe operation of credit institutions, and to protect the legitimate interests of depositors.

2. The State shall financially support and provide necessary resources to State owned credit institutions in order to create favourable conditions for such institutions to play a leading and active role in the monetary market.

3. The State shall establish non-profit banks operating for the benefit of poor people and people entitled to preferential treatment in order to implement the socio-economic policies of the State.

4. The State shall protect the ownership and other legitimate rights and interests of mutual credit institutions established for the purpose of facilitating labourers to assist one another in their work and life.

5. The State shall establish banks for development of agriculture and rural areas and banks providing farmers with preferential treatment with respect to capital, interest rates and conditions for obtaining loans.

Article 5 Credit policies

The State shall formulate appropriate policies to mobilize domestic resources as the principal resource and to utilize foreign invested capital as effectively as possible; to expand credit investment and contribute to the emancipation of all production capacities; to make use of the full potential of economic sectors; to ensure the leading role of State owned enterprises, compliance with socialist orientation and protection of national sovereignty; to ensure the safe operation of the national financial and monetary system; to enhance international co-operation and integration; to contribute to the industrialization and modernization of the country; to meet the requirements of socio-economic development; and to ensure the protection of national defence and security and the improvement of the living standards of the population.

Article 6 Credit policies applicable to State owned enterprises

The State shall formulate credit policies and issue provisions on capital and conditions for obtaining loans applicable to State owned enterprises in order to create favourable conditions for such enterprises to renovate their equipment, modernize their technology, expand effectively the scale of their business production, maintain their leading role in the national economy, and contribute to the socio-economic development of the country.

Article 7 Credit policies applicable to co-operatives and other forms of co-operative economic entities

The State shall formulate credit policies applicable to and create favourable conditions with respect to capital and conditions for obtaining loans for co-operatives and other forms of co-operative economic entities to reform and develop themselves in order to ensure that the State owned economic sector and co-operative economic sector shall become the cornerstone of the national economy.

Article 8 Credit policies applicable to agricultural production, rural areas and farmers

The State shall formulate preferential credit policies with respect to capital, interest rates, and conditions for obtaining and terms of loans applicable to agricultural production, rural areas and farmers for the purposes of constructing technical facilities and infrastructure facilities, accelerating the transformation of agro-economic structures, developing the commodity economy and facilitating the industrialization and modernization of agricultural production and rural areas.

Article 9 Credit policies applicable to mountainous regions, islands, remote regions and regions with socio-economic difficulties

The State shall formulate preferential credit policies with respect to capital, interest rates, and conditions for obtaining and terms of loans applicable to mountainous regions, islands, remote regions and regions with socio-economic difficulties in order to contribute to the development of the commodity economy and economic transactions in such regions.

Article 10 Credit policies applicable to poor persons and persons entitled to preferential treatment

1. The State shall formulate preferential credit policies with respect to capital, interest rates, and conditions for obtaining and terms of loans applicable to poor persons and persons entitled to preferential treatment in order to assist such persons to develop their own production and business operations.

2. The State shall formulate preferential credit policies with respect to capital, interest rates, and conditions for obtaining and terms of loans applicable to poor students in order to assist such students to continue to follow their training courses.

Article 11 International co-operation with respect to banking operations

The State shall uniformly manage and formulate policies to enhance international multilateral and diversified co-operation with respect to banking operations on the basis of respect for independence, sovereignty, equality and mutual benefits; shall encourage foreign investment in the economic development in Vietnam; and shall create favourable conditions for credit institutions to co-operate with foreign partners for the purpose of improving the quality of operations of institutions.

Article 12 Forms of credit institutions

1. Vietnamese credit institutions shall include: State owned credit institutions, shareholding credit institutions owned by the State and individuals and mutual credit institutions.

2. In accordance with the requirements of socio-economic development of the country, the State of Vietnam shall allow the establishment of joint venture credit institutions, non-banking credit institutions with one hundred (100) per cent foreign owned capital, and branches of foreign banks in Vietnam.

A foreign credit institution may establish representative offices in Vietnam. Such representative offices shall not be permitted to conduct business operations in Vietnam.

3. Only credit institutions satisfying all relevant conditions in accordance with the provisions of the law shall be permitted to conduct full foreign exchange business and to provide banking services for various socio-economic sectors of the national economy.

Article 13 Banking operations conducted by organizations being non-credit institutions

1. An organization which is not a credit institution may also be permitted by the State Bank to conduct a number of banking operations upon full satisfaction of the conditions stipulated in clause 2 of article 22 of this Law.

2. Any organization which is not a credit institution but conducts banking operations shall strictly comply with the provisions of this Law with respect to the banking operations conducted by it.

Article 14 Right to conduct banking operations

Any organization which satisfies all relevant conditions in accordance with the provisions of this Law and other relevant legislation and which is issued by the State Bank with an operating licence shall have the right to conduct a number of or all banking operations in Vietnam.

Article 15 Autonomy in conduct of business operations

All credit institutions shall have autonomy in the conduct of business operations and shall be responsible for the results of their business operations. No organization or individual shall be permitted to intervene in the autonomy to conduct business operations of the credit institution. The credit institution may refuse to extend credit capital, to contribute capital, or to provide banking services in cases where relevant conditions are not fully satisfied or where the request for capital or services is deemed to be unreasonable or unlawful.

Article 16 Co-operation and competition in banking

1. Organizations conducting banking operations shall be permitted to compete against one another in a lawful manner.

2. Any unlawful competitive act which may obstruct the implementation of the national monetary policy, cause adverse effects on the credit institution system, or damage the legitimate interests of parties to banking transactions shall be strictly prohibited.

3. Unlawful competitive acts shall include:

(a) Unlawful promotion;

(b) Publication of misleading information, thereby causing damage to the interests of other credit institutions or clients;

(c) Speculation for the purpose of control of the market of domestic currency, gold and foreign currencies;

(d) Other unlawful competitive acts.

Article 17 Protection of interests of depositors

A credit institution shall have the following responsibilities:

1. To participate in a preservation or insurance organization for deposits; the rates of preservation or insurance shall be stipulated by the Government;

2. To create favourable conditions for clients to deposit or withdraw money in accordance with their requirements; to ensure full and timely payment of the principal of and interest on any deposit;

3. Not to disclose any details relating to the balance of deposits of clients; to refuse to carry out investigation or freezing of, deduction from or transfer of, deposits without the consent of depositors, except where otherwise provided for by law;

4. To publish the deposit interest rates adopted by it.

Article 18 Working hours

A credit institution shall publicly announce its working hours and shall not be permitted to suspend at its discretion transactions carried out within the announced working hours. In the event that suspension of transactions is required, the credit institution shall, at least twenty four (24) hours in advance of the time of suspension of transactions, announce the suspension at its transaction office.

Article 19 Responsibilities of credit institutions in respect of money with illegal origins

1. Credit institutions and other organizations conducting banking operations shall not conceal or provide any services in respect of sums of money the origins of which have been proved to be illegal.

2. In cases where sums of money with illegal origins are identified, credit institutions or organizations conducting banking operations shall promptly notify the competent State body.

Article 20 Terms and definitions

In this Law, the following terms shall have the meanings ascribed to them hereunder:

1. Credit institution means an enterprise established under this Law and other relevant legislation for the purposes of conducting currency business and providing banking services, of which the principal activities are receipt of deposits and use of such deposits to provide loans and payment services.

2. Bank means a form of credit institution permitted to conduct all banking operations and other related business operations. On the basis of the nature and objectives of their operations, banks are classified into: commercial banks, development banks, investment banks, policy banks, co-operative banks, and other banks.

3. Non-banking credit institution means a form of credit institution permitted to conduct a number of banking operations which are viewed as its principal and regular business operations but which is not permitted to receive at-call deposits or to provide payment services. Non-banking credit institutions shall include finance companies, finance leasing companies, and other non-banking credit institutions.

4. Foreign credit institution means a credit institution established under the laws of a foreign country.

5. Co-operative credit institution means an institution conducting foreign exchange business and providing banking services established by organizations, individuals and households at their own will to carry out banking operations in accordance with the provisions of this Law and the Law on Co-operatives with the main purpose of assisting its members in developing their business production activities and improving their living standards. Mutual credit institutions shall include credit co-operatives, people’s credit funds and other forms of mutual credit institutions.

6. Major shareholder means any individual or organization owning more than ten (10) per cent of the charter capital or holding more than ten (10) per cent of voting shares of a credit institution.

7. Banking operations means foreign exchange business and provision of banking services, of which the principal activities are receipt of deposits and use of such deposits to provide loans and payment services.

8. Credit operations means the use of equity and borrowed funds by credit institutions to extend credit.

9. Deposit means any amount of money deposited by clients at credit institutions in the form of at-call deposits, fixed term deposits, savings deposits, or other deposits. Deposits may be deposited in either interest bearing accounts or non-interest bearing accounts and shall, in either case, be repaid to the depositor when due.

10. Extension of credit means the agreement of the credit institution for a client to use a certain amount of money, which shall be repaid to the credit institution thereafter, in the form of loan, discounted money, financial leasing, bank guarantee, or others.

11. Financial leasing means medium or long term credit operations carried out on the basis of an assets leasing contract entered into by the lessor (being the credit institution) and the lessee. Upon expiry of the leasing duration, the lessee may either purchase or continue to lease the assets in accordance with the terms and conditions agreed in the leasing contract.

12. Bank guarantee means a written undertaking of a credit institution to fulfil financial obligations on behalf of its clients when such clients fail to fulfil the obligations undertaken. The clients shall owe to the credit institution the amount paid on their behalf by the institution and shall be responsible to make full repayment of such amount to the credit institution.

13. Equity means the actual value of the charter capital, reserve funds and a number of other liabilities of credit institutions as stipulated by the State Bank. Equity shall serve as the basis for calculation of prudential limits with respect to banking operations.

14. Discount means the purchase of commercial notes and other short term valuable papers of beneficiaries by a credit institution prior to maturity of such notes and papers.

15. Re-discount means the purchase of commercial notes and other short term valuable papers which have been discounted prior to maturity of such notes and papers.


CHAPTER II

Organization and Operation of Credit Institutions

SECTION I

Issuance of Establishment and Operating Licences

Article 21 Authority to issue establishment and operating licences

The State Bank shall be the body authorized to issue establishment and operating licences to credit institutions and banking operating licences to other organizations conducting banking operations in accordance with the provisions of this Law and other relevant legislation.

Article 22 Conditions for issuance of establishment and operating licences

1. Conditions for issuance of establishment and operating licences to a credit institution:

The credit institution shall:

(a) have a demand for conducting banking operations within the registered locality;

(b) have sufficient capital as stipulated in article 83 of this Law;

(c) have as its founders organizations or individuals with prestige and financial capacity;

(d) have administrators and managers with full capacity for civil acts and qualifications appropriate to the specific features of the credit institution;

(dd) have a charter with terms consistent with the provisions of this Law and other relevant legislation;

(e) have a feasibility study.

2. Conditions for issuance of establishment and banking operating licences to a non-credit institution:

The non-credit institution shall:

(a) have reasons proving that the registered banking operations are necessary and closely related to its principal operations;

(b) have sufficient capital and other technical conditions necessary for conducting banking operations;

(c) have staff members knowledgeable about banking operations;

(d) have a feasibility study with respect to the registered banking operations.

Article 23 Application files for issuance of establishment and operating licences

1. A set of application files for issuance of establishment and operating licences in the case of a credit institution shall include:

(a) Application for issuance of establishment and operating licences;

(b) Draft charter of the institution;

(c) Operational plan for the first three years in which the economic benefits of banking operations shall be clearly specified;

(d) List and curriculum vitae of, degrees and certificates held by, and proof of the capacity and qualifications of, its founders, the members of the board of management, and the general director (director) of the institution;

(dd) Proportion and method of capital contribution and list of organizations and individuals making contributions;

(e) Financial status of and other relevant information in relation to major shareholders;

(g) Approval of the competent people’s committee of the location where the institution is to be based.

2. A set of application files for issuance of a banking operating licence in the case of a non-credit institution shall include:

(a) Application for issuance of banking operating licence;

(b) Decision on establishment or establishment licence and certificate of business registration with respect to the current business lines of the organization;

(c) Charter of the organization;

(d) List and curriculum vitae of the members of the board of management, the general director (director) and the board of controllers (if any);

(dd) Reports on financial status of the organization for the last three years;

(e) Banking operation plans.

Article 24 Duration for issuance of licences

Within ninety (90) days of receipt of full application files for issuance of establishment and operating licences forwarded by a credit institution or application files for issuance of a banking operating licence forwarded by a non-credit institution, the State Bank shall either issue the licence or refuse the application. In cases of refusal of an application, the State Bank shall provide a written statement of reasons.

Article 25 Fees for issuance of licences

Credit institutions issued with licences as referred to above shall be obliged to pay a fee for the issuance of the licences in accordance with provisions of the law.

Article 26 Use of licences

1. A credit institution issued with a licence shall use the name specified in and operate in accordance with the provisions of the licence.

2. Forgery, erasure, transfer, leasing or lending of operating licences in any form shall be strictly prohibited.

Article 27 Business registration

After having been issued with an operating licence, the credit institution shall carry out registration of its business in accordance with provisions of the law.

Article 28 Conditions for conducting banking operations

1. To be permitted to conduct banking operations, a credit institution having been issued with an operating licence shall satisfy all of the following conditions:

(a) Its charter shall be approved by the State Bank;

(b) It shall have a business registration certificate, adequate legal capital and headquarters appropriate to the requirements of banking operations;

(c) The part of its legal capital contributed in cash shall be deposited into a frozen non-interest bearing account opened at the State Bank at least thirty (30) days prior to the date of commencement of operation of the institution. Such an amount of capital shall only be released after the institution has commenced its operation;

(d) It shall publish in central and local newspapers the contents stated in the issued operating licence in accordance with provisions of the law.

2. To be permitted to conduct banking operations, a non-credit institution having been issued with a banking operating licence shall satisfy all of the following conditions:

(a) It shall have a business registration certificate and headquarters appropriate to the requirements of banking operations;

(b) It shall publish in central and local newspapers the contents stated in the issued banking operating licence in accordance with provisions of the law.

3. An organization having been issued by the State Bank with an operating licence shall, within twelve (12) months of receipt of the licence, commence its operations.

Article 29 Revocation of operating licences

1. The operating licence issued to a credit institution may be revoked in any of the following circumstances:

(a) The details stated in the application files for issuance of the licence are identified and proved to be incorrect;

(b) The credit institution fails to commence its operation after the time-limit stipulated in article 28 of this Law;

(c) The credit institution wishes to dissolve or is dissolved by the competent State body;

(d) The credit institution is divided, incorporated, merged, or becomes bankrupt;

(dd) The credit institution fails to operate in accordance with its registered business objectives;

(e) The credit institution fails to fully satisfy the conditions stipulated in clauses 1 and 2 of article 28 of this Law.

2. Upon revocation of its operating licence, the credit institution shall promptly suspend its operations.

3. Any decision on revocation of operating licences shall be published by the State Bank in the mass media.

Article 30 Charter

1. The charter of a credit institution shall contain the following main contents:

(a) Name and address of the headquarters of the institution;

(b) Nature and scope of its operations;

(c) Duration of operation;

(d) Charter capital and method of capital contribution;

(dd) Duties and powers of the board of management, the general director (director) and the board of controllers;

(e) Method of appointment and dismissal of the members of the board of management, the general director (director) and the board of controllers;

(g) Rights and responsibilities of shareholders;

(h) Applicable regimes on finance, accounting and internal inspection and audit;

(i) Cases and procedures for dissolution;

(k) Procedures for amendment of the charter.

2. The charter of a credit institution shall only be adopted upon approval by the State Bank unless otherwise provided for by law.

Article 31 Changes for which approval is to be obtained

1. A credit institution shall be required to obtain the written approval of the State Bank upon making any change in respect of the following contents:

(a) Name of credit institution;

(b) Levels of charter capital and paid-up capital;

(c) Location of headquarters, transaction offices, branches, and representative offices of credit institution;

(d) Nature, scope and duration of operations of credit institution;

(dd) Transfer of registered shares in a quantity in excess of the quantity stipulated by the State Bank;

(e) Proportion of shares held by major shareholders;

(g) Members of the board of management, the general director (director), or the members of the board of controllers.

2. Upon approval of the State Bank being obtained, the credit institution shall register any such change of the contents specified in clause 1 of this article with the competent State body and shall publish such changes in central and local newspapers in accordance with provisions of the law.

SECTION II

Organizational Structure of Credit Institutions

Article 32 Opening of transaction offices, branches, and representative offices; establishment of companies and professional units

Any credit institution may:

1. Open transaction offices, branches, and representative offices in localities within and outside the country, where required, including the locality in which its headquarters are located, upon obtaining the written approval of the State Bank;

2. Establish independent cost accounting subsidiaries having legal status to conduct operations in the field of finance, banking or insurance in accordance with the provisions of the Government;

3. Establish professional units under its management subject to the approval of the State Bank.

Article 33 Conditions, application files and procedures for opening transaction offices, branches and representative offices and establishing subsidiaries

1. Any credit institution may open transaction offices, branches and representative offices or establish subsidiaries in accordance with the provisions of article 32 of this Law provided that the following conditions are satisfied:

(a) The credit institution has operated for a duration of no less than the minimum duration of operation stipulated by the State Bank;

(b) Business operations conducted by the institution are profitable; the institution has a sound financial status;

(c) Administrative and management mechanisms and internal inspection systems of the institution are effectively operated;

(d) The institution has established an information system capable of meeting management requirements;

(dd) The institution has not committed any breach of the regulations on safety in banking and other relevant provisions of the law.
2. Application files and procedures for opening transaction offices, branches and representative offices and establishing subsidiaries shall be in accordance with relevant provisions of the State Bank.

Article 34 Division, separation, merger, incorporation, take-over and dissolution of credit institutions

The written approval of the State Bank shall be required to be obtained in respect of any division, separation, merger, take-over or dissolution of credit institutions.

Article 35 Co-operation amongst mutual credit institutions

Mutual credit institutions may co-operate with each other in regulating their financial status and financially supporting themselves with the view to enhancing their mutual assistance and ensuring safe and effective operation of each institution.

SECTION III

Administration, Management and Control

Article 36 Administration, management and control

1. The election, appointment and dismissal of the chairman and other members of the board of management, the chief controller and other members of the board of controllers, and the general director (director) of credit institutions shall be carried out in accordance with provisions of the law.

2. The appointment of the chairman and other members of the board of management, the chief controller and other members of the board of controllers, or the general director (director) of credit institutions shall be subject to the approval of the Governor of the State Bank, except where such persons are appointed by the Prime Minister.

Article 37 Board of management

1. The board of management of a credit institution shall be the administrative unit of the credit institution in accordance with the provisions of this Law and other relevant legislation.

2. A board of management shall comprise at least three members being reputable persons with professional ethics and extensive knowledge of banking operations.

3. The chairman and other members of the board of management shall not be permitted to authorize persons who are not members of the board of management to fulfil their duties or exercise their powers.

4. The chairman of the board of management shall not concurrently be the general director (director) or deputy general director (deputy director) of the credit institution, unless otherwise provided for by law.

5. The chairman of the board of management of a credit institution shall not be permitted to be a member of the board of management of, or participate in management of, any other credit institution, unless the latter institution is a subsidiary of the former credit institution.

Article 38 Board of controllers

1. The board of controllers of a credit institution shall operate in accordance with the provisions of this Law and other relevant legislation.

2. The board of controllers shall be responsible for inspecting financial operations of the credit institution and supervising observance of the accounting regimes and operation of the internal control and audit system of the credit institution.

3. The board of controllers shall comprise at least three members, including a chief controller; at least half of the number of members of the board of controllers shall be specialized members.

4. Members of the board of controllers shall satisfy the requirements on professional qualifications and ethics as stipulated by the State Bank.

5. The board of controller shall be entitled to use the internal inspection and audit system of the credit institution to fulfil its duties.

Article 39 General director (director)

1. The general director (director) of a credit institution shall be responsible to the board of management for the management of day-to-day operations in accordance with the duties and powers stipulated in this Law and other relevant legislation.

2. The general director (director) and deputy general director (deputy director) of a credit institution shall satisfy the following requirements:

(a) To reside in Vietnam during his or her term of office;
(b) To have professional qualifications and be capable of managing a credit institution in accordance with relevant provisions of the State Bank.

Article 40 Persons not permitted to be members of the board of management or board of controllers or managers of a credit institution

1. The following persons shall not be elected to the board of management or board of controllers or appointed as the general director (director) or deputy general director (deputy director) of a credit institution:

(a) Persons who are subject to investigation for criminal liability;

(b) Persons who have been sentenced to imprisonment for commission of a serious breach in relation to national security or socialist or civil property or a serious economic breach;

(c) Persons who have been convicted of a breach which has not been removed from the record;

(d) Persons who used to be a member of the board of management or the general director (director) of a now-bankrupt company, except subjects specified in clause 2 of article 50 of the Law on Business Bankruptcy;

(dd) Persons who used to be the legal representative of a company the operation of which has been suspended as a result of the commission of a serious breach of the law.

2. The parents, spouses, children, brothers and sisters of members of the board of management or the general director (director) of a credit institution shall not be permitted to be members of the board of controllers or the chief accountant of the credit institution.

SECTION IV

Internal Inspection and Audit System

Article 41 Internal inspection and audit system

Every credit institution shall establish an internal inspection and audit system under its administrative mechanism for the purposes of assisting the general director (director) to administer properly and safely all business operations of the credit institution in compliance with provisions of the law.
Article 42 Internal inspection

Credit institutions shall inspect on a regular basis observance of laws and internal regulations; and shall directly inspect professional operations in all aspects carried out by their headquarters, branches, representatives offices and subsidiaries.

Article 43 Internal audit

Credit institutions shall carry out audits of their professional operations for particular periods and in specific fields in order to assess accurately the results of their business operations and their substantial financial status.

Article 44 Report on internal inspection and internal audit

Reports on the results of internal inspection and audits shall be forwarded in a timely manner to the general director (director), the board of management and the board of controllers of the credit institution.


CHAPTER III

Operation of Credit Institutions

SECTION I

Mobilization of Capital

Article 45 Receiving deposits

1. Banks may receive deposits from organizations, individuals and other credit institutions in the form of at-call deposits, fixed term deposits, savings deposits and others.

2. Non-banking credit institutions may receive term deposits with maturity periods of one year or more from organizations and individuals in accordance with relevant provisions of the State Bank.

Article 46 Issuance of valuable papers

Upon the approval of the State Bank, a credit institution may issue deposit certificates, bonds and other valuable papers in order to raise capital from domestic and foreign organizations and individuals.

Article 47 Borrowing funds between credit institutions

A credit institution may borrow funds from any another domestic or foreign credit institution.

Article 48 Borrowing funds from the State Bank

Banks may obtain short term loans from the State Bank in the form of re-granting of capital in accordance with the provisions of article 30 of the Law on the State Bank of Vietnam.

SECTION II

Credit Operations

Article 49 Extension of credit

A credit institution may extend short term credit to organizations and individuals in the form of loans, discounts of commercial notes and other valuable papers, guarantees, financial leasing and others in accordance with relevant provisions of the State Bank.

Article 50 Types of loans

1. Credit institutions shall provide short term loans to organizations and individuals to satisfy requirements for capital for development of production, business, services and improvement of living standards of the organizations and individuals.

2. Credit institutions shall provide medium and long term loans to organizations and individuals in order to implement investment projects for development of production, business, services and improvement of living standards of the organizations and individuals.

Article 51 Credit contracts

Loans shall be made on the basis of credit contracts. A credit contract shall contain contents in relation to loan conditions, purposes of use of loan, form of loan, amount of loan, applicable interest rates, loan term, method of security for loan, value of assets used as security, method of repayment and other undertakings agreed by the parties to the contract.

Article 52 Security for loans

1. Credit institutions shall take initiative to provide loans to business production projects which are deemed to be feasible and effective where the loans are deemed to be recoverable.

2. Credit institutions shall only make loans which are secured by pledged or mortgaged assets or third party guarantees; and shall not make any loans proposed to be secured by pledges of shares issued by the credit institutions themselves.

3. Loans which are secured by assets purchased by way of capital from another loan and loans which are not secured by assets shall be made in accordance with relevant provisions of the Government.

4. State owned credit institutions may make unsecured loans subject to the decision of the Government. Any loss resulting from objective causes arising from such a loan shall be borne by the Government.

Article 53 Approval and inspection of use of loans

1. Credit institutions may request clients to provide any documents in relation to the feasibility study and financial status of the clients or their guarantors prior to making a lending decision.

2. Credit institutions shall carry out evaluation and approval of loans on the basis of the principle of the separation of evaluation and approval processes.

3. Credit institutions shall carry out inspection and supervision of the processes of obtaining, use and repayment of loans by clients.

Article 54 Cancellation of loans, settlement of debts and adjustment of interest rates

1. Credit institutions shall have the right to cancel a loan and recover it prior to the due date in cases where information provided by the clients is identified to be incorrect or where the clients are identified to have committed a breach of the credit contract.

2. In cases where the client fails to make repayments on the due date, the credit institution shall, unless otherwise agreed by the two parties, have the right to:

(a) Carry out the sale of pledged assets or the assignment or sale of mortgaged assets for loan recovery purposes within a certain time-limit stipulated by law;

(b) Request the guarantor to fulfil his or her obligations as committed;

(c) Institute legal proceedings against the client having committed a breach of the credit contract and the concerned guarantor in accordance with law.

3. In cases where a client or his or her guarantor becomes bankrupt and therefore fails to make repayment of loans, the loans shall be recovered by the credit institution in accordance with the Law on Business Bankruptcy.

4. Credit institutions shall be permitted to carry out exemptions from and reductions of interest rates and fees, extension of duration of loans and trading of debt certificates in accordance with relevant provisions of the State Bank. Debt reversal shall be carried out in accordance with relevant provisions of the Government.

Article 55 Maintenance of credit files

1. Credit institutions shall maintain files in respect of all loans made by them, including:

(a) Credit contracts and relevant documents clearly specifying the purposes of use of loans and origins of the assets used as security for the loans (if any);

(b) Reports on actual financial status of borrowers and guarantors;

(c) Decisions on extension of credit signed by competent persons; where such decisions are collectively made, the minutes of the meetings approving the decisions shall be required;

(d) Documents arising in the course of using loans related to credit contracts.

2. Duration of maintenance of credit files shall be stipulated by law.

Article 56 Rights and obligations of borrowers

1. A borrower shall have the following rights:

(a) To refuse to satisfy any requirements of a credit institution which are inconsistent with the terms agreed in a credit contract;

(b) To lodge a complaint in relation to, or to institute legal proceedings against, a credit institution which unreasonably refuses to provide loans or commits a breach of a credit contract.

2. A borrower shall have the following responsibilities:

(a) To provide full information and documents relating to the loan and to be responsible for the accuracy of such information and documents;

(b) To use loans for the correct purposes and to comply with the terms agreed in the credit contract;

(c) To repay the principal of and interest on loans in accordance with the terms of the credit contract;

(d) To bear full responsibility upon failure to perform the signed credit contract.

Article 57 Discount, re-discount and mortgage of commercial notes and other short term valuable papers

1. Credit institutions may extend credit in the form of discounts of commercial notes and other short term valuable papers. Owners of such commercial notes and other short term valuable papers shall transfer immediately all legitimate rights and interests associated with the ownership of such notes and papers to the credit institutions upon discounting thereof at the institution.

2. Credit institutions may extend credit in the form of mortgages of commercial notes and other short term valuable papers. The credit institutions shall have the right to assume all rights and interests associated with such notes and papers upon the owners of such notes and papers failing to fulfil fully undertakings stated in the credit contract.

3. A credit institution may have its commercial notes and other short term valuable papers re-discounted by or pledged to other credit institutions.

4. Discounted commercial notes and other short term valuable papers of credit institutions being banks may be re-discounted by and pledged to the State Bank for the purpose of obtaining loans.

5. The discount, re-discount and pledge of commercial notes and other short term valuable papers for extension of credit amongst organizations in the credit institution system shall be carried out in accordance with provisions of the State Bank.

Article 58 Bank guarantees

1. Credit institutions may provide guarantees on the basis of their creditworthiness and financial capability.

2. Credit institutions may provide guarantees in favour of loans, payments, contract performance, and tender participation and other types of bank guarantees to organizations and individuals.

3. Only banks authorized to conduct international payments shall be permitted to provide guarantees in favour of loans and payments and other types of guarantees to foreign organizations and individuals.

Article 59 Rights and responsibilities of guarantor credit institutions

1. A credit institution shall have the following rights upon providing a guarantee on behalf of a client:

(a) To request the client to furnish documents relating to his, her or its financial capability and other documents relating to the transaction to be guaranteed;

(b) To request the client to provide security for the guarantee;

(c) To collect a fee for guarantee in accordance with relevant provisions of the State Bank;

(d) To refuse to provide guarantees to clients who are deemed not to be creditworthy.

2. In cases where the beneficiary of the guarantee fails to fulfill his, her or its obligations, the guarantor credit institution shall be obliged to fulfil the obligations on behalf of the beneficiary of the guarantee.

Article 60 Responsibilities of beneficiaries of guarantees

A beneficiary of a guarantee shall have the following responsibilities:

1. To provide full information and documents relating to the guarantee as may be requested by the guarantor credit institution;

2. To fulfil fully his, her or its undertakings to the recipient of the guarantee and the guarantor;

3. To be subject to supervision by the guarantor credit institution of any of his, her or its operations relating to the guaranteed obligation;

4. To owe and repay to the guarantor credit institution the principal of and interest on any amount paid by the credit institution on his, her or its behalf with respect to, and other costs arising from, the fulfilment of obligations in accordance with the undertakings stated in the guarantee.

Article 61 Financial leasing

1. Financial leasing to organizations and individuals shall be carried out through financial leasing companies.

2. Financial leasing companies (hereinafter referred to as lessors) shall be the owners of assets to be leased. Upon expiry of leasing contracts, the lessees may either purchase the leased assets or continue to lease the assets in accordance with the terms stated in the leasing contracts.

3. Both lessors and lessees shall not be permitted to terminate unilaterally the signed leasing contracts.

Article 62 Rights and responsibilities of lessors

1. A lessor shall have the following rights:

(a) To purchase and import directly assets in accordance with the requirements of the lessee;

(b) To request a lessee to pay compensation for any damage due to the lessee failing to carry out his, her or its responsibilities of maintenance and repair of, or purchase of insurance for, the leased assets during the lease duration;

(c) To reclaim the leased assets and to request the lessee to make full payment of the fees for use of the assets upon the lessee being discovered to have committed a breach of the leasing contract.

2. A lessor shall have the following responsibilities:

(a) To enter into assets purchasing contracts, to carry out relevant procedures for import of assets for lease and to make full payment for purchased assets;

(b) To pay to the lessee compensation for damage arising from any breach of the leasing contract committed by the lessor.

Article 63 Rights and responsibilities of lessees

1. A lessee shall have the following rights:

(a) To select and negotiate with the sellers of assets with respect to technical specifications, categories and prices of, insurance for, method and time of delivery and installation of and warranty for the leased assets;

(b) To receive directly leased assets from the sellers in accordance with the terms of purchasing contract;

(c) To decide either to continue to lease or to purchase the assets upon expiry of the leasing contract.

2. A lessee shall have the following responsibilities:

(a) To use the leased assets for the correct purposes as stated in the leasing contract; not to transfer the right to use the leased assets to any other organization or individual without the written approval of the lessor;

(b) To pay leasing fees in accordance with the terms of the leasing contract and to pay all import-related costs, taxes levied on and insurance for the leased assets;

(c) To bear all responsibility for any loss or damage of the leased assets as well as damage caused by the operation of the leased assets to other organizations and individuals;

(d) To carry out maintenance and necessary repair of the leased assets during the lease duration;

(dd) To purchase the leased assets or to continue to lease such assets in accordance with the terms agreed in the leasing contract;

(e) Lessees shall not be permitted to use leased assets for the purpose of mortgage, pledge or security for any other financial transaction conducted by them.

Article 64 Operation of co-operative credit institutions

A co-operative credit institution may raise capital from its members and other organizations and individuals and use such funds to provide loans to its members. Any loan made to subjects which are not members of the institution shall be approved by a session of members of the institution provided that the loan amount shall not exceed the limits stipulated by the State Bank.

SECTION III

Payment and Budgetary Services

Article 65 Opening of accounts

1. A credit institution may open its deposit accounts at the State Bank and other credit institutions.

2. A credit institution which receives deposits shall open its deposit accounts at the State Bank and shall maintain in the accounts an average balance of no less than the compulsory reserve level stipulated by the State Bank.

3. A bank may open accounts for both foreign and domestic clients. A client may select at his, her or its discretion the bank at which his, her or its principal transaction account shall be opened.

Article 66 Payment services

Banks shall be authorized to provide the following payment services:

1. To provide clients with payment instruments as required;

2. To conduct domestic payment operations on behalf of their clients;

3. To provide international payment services upon obtaining the permission of the State Bank;

4. To conduct payment and collection operations on behalf of their clients;

5. To provide other payment services as stipulated by the State Bank.

Article 67 Budgetary services

Credit institutions shall conduct budgetary operations by way of collection and payment of cash to clients.

Article 68 Organization of and participation in payment systems

Banks may organize their internal payment systems and participate in the national inter-bank payment system. In cases where a bank wishes to participate in an international payment system, the permission of the State Bank shall be required.

SECTION IV

Other Operations

Article 69 Contribution of capital and purchase of shares

A credit institution may use its charter capital and other reserve funds to make capital contribution to, or purchase shares of, other credit institutions in accordance with provisions of the law.

Article 70 Participation in monetary markets

Credit institutions may participate in monetary markets established by the State Bank, including the market in which Treasury bills are auctioned, the inter-bank market for domestic and foreign exchange, and the market for other short term valuable papers, in accordance with relevant provisions of the State Bank.

Article 71 Trading of foreign exchange and gold

A credit institution may, upon obtaining the permission of the State Bank, carry out trading of foreign exchange and gold in domestic and international markets.

Article 72 Trust and agency operations

Credit institutions may offer trust services or act as agents for other organizations in various areas relating to banking operations, including assets management and investment management for various organizations and individuals on the basis of trust contracts.

Article 73 Real estate business

A credit institution shall not be permitted to conduct directly real estate business operations.

Article 74 Insurance business and services

1. A credit institution may establish independent insurance companies to conduct insurance operations in accordance with provisions of the law.

2. Banks may provide insurance services in accordance with provisions of the law.

Article 75 Consultancy services

Credit institutions may provide consultancy to clients in relation to monetary and financial matters.

Article 76 Other services relating to banking operations

Credit institutions may provide precious assets and valuable papers management services, safe-keeping services, pledging and other services to clients in accordance with provisions of the law.


SECTION V

Measures to Ensure Security for Operations of Credit Institutions

Article 77 Subjects to which credit institutions shall not be permitted to make loans

1. A credit institution shall not be permitted to make loans to the following subjects:

(a) Members of the board of management or board of controllers or the general director (director) or deputy general director (deputy director) of the credit institution;

(b) Persons in charge of loans appraisal and approval;

(c) Parents, spouses or children of the members of the board of management or board of controllers or the general director (director) or deputy general director (deputy director) of the credit institution.

2. The provisions of clause 1 of this article shall not apply to co-operative credit institutions.

3. The credit institution shall not be permitted to accept guarantees provided by one of the above subjects as the basis for extension of credit to clients.

Article 78 Credit restrictions

1. A credit institution shall not provide loans without security or preferred loans to any of the following subjects:

(a) Auditing organizations or auditors carrying out audits of the credit institution; the chief accountant of the credit institution; or inspectors carrying out inspection of the credit institution;

(b) Major shareholders of the credit institution;

(c) Enterprises of which more than ten (10) per cent of the charter capital is owned by one of the subjects specified in clause 1 of article 77 of this Law.

2. The total amount of any loan made to subjects specified in clause 1 of this article shall not exceed five per cent of the equity of the credit institution.

Article 79 Lending and guarantee limits

1. Limit of lending to a single client shall be as follows:

(a) The total amount of loans made to a single client shall not exceed fifteen (15) per cent of the equity of the credit institution, with the exception of loans made from funds of and authorized by the Government, organizations or individuals or loans made to other credit institutions;

(b) In cases where the demand for capital of a client exceeds fifteen (15) per cent of the equity of the credit institution or where the client wishes to obtain loans from various credit institutions, the credit institutions may jointly make loans to the client in accordance with relevant provisions of the Governor of the State Bank;

(c) In order to implement socio-economic objectives, in special circumstances where the financial capability of the credit institution can not satisfy the demand for capital of a single client, the Prime Minister may determine the maximum amount of loans made to the client on a case-by-case basis.

2. The amount of loans guaranteed by the credit institution in favour of a single client and the total amount of loans guaranteed by the credit institution shall not exceed the limits stipulated by the Governor of the State Bank.

Article 80 Limits for contribution of capital and purchase of shares

The level of capital contributed to, or shares purchased from, one enterprise by a credit institution and the level of capital contributed to, or shares purchased from, all enterprises by the credit institution shall not exceed the maximum levels stipulated by the Governor of the State Bank for specific forms of credit institutions.

Article 81 Prudential limits

1. A credit institution shall maintain the following prudential limits:

(a) Liquidity, being the liquid assets of the credit institution as a percentage of liabilities payable by the credit institution at a certain point in time;

(b) Capital adequacy, being computed by dividing the equity by the total assets, including risk-adjusted assets;

(c) The maximum ratio of medium and long term loans provided by use of short term funds;

(d) The maximum ratio of the total amount of outstanding loans as a percentage of the total amount of balance of deposits.

2. The Governor of the State Bank shall stipulate in detail the limits mentioned in clause 1 of this article for specific forms of credit institutions.

3. The total amount of capital invested by a credit institution in any other credit institution in the form of capital contribution or purchase of shares shall be subtracted from its equity when calculating the prudential limits.

Article 82 Contingencies

1. Credit institutions shall make provisions for contingencies in case of risks occurring to banking operations. Such contingencies shall be included in the overheads of the credit institutions.

2. The Governor of the State Bank shall, upon agreement with the Minister of Finance, provide for classification of credit assets, rates, methods of determination and purposes of use of contingencies in case of risks occurring to banking operations.

3. Where a credit institution is able to recover a loan to which a weighting has been given, such loan amount shall be considered as income of the credit institution.


CHAPTER IV

Financial, Accounting and Reporting Regimes

Article 83 Legal capital

The levels of legal capital for specific forms of credit institutions shall be stipulated by the Government.

Article 84 Financial collection and payments

1. Financial collection by and payments of credit institutions shall be in accordance with provisions of the law.

2. The Minister of Finance shall provide guidelines for and inspect the implementation of financial regimes by credit institutions in accordance with provisions of the law.

Article 85 Fiscal year

The fiscal year of a credit institution shall commence on the first day of January and shall finish on the thirty first day of December of the calendar year.

Article 86 Accounting regimes

Credit institutions shall establish and adopt an accounts and vouchers system in accordance with the laws on accounting and statistics.

Article 87 Funds

1. A credit institution shall, on an annual basis, contribute to and maintain the following funds by recourse to its after-tax profits:

(a) Charter capital increasing fund: the annual rate of contribution shall be five per cent of after-tax profits. The Government shall stipulate the maximum level for such a fund;

(b) Other funds as stipulated by law.

2. Credit institutions shall not be permitted to use the funds mentioned in clause 1 of this article to pay dividends to shareholders.

Article 88 Purchase of and investment in fixed assets

A credit institution may carry out purchase of or investment in fixed assets provided that the value of such assets shall not exceed fifty (50) per cent of its equity.

Article 89 Reporting regimes

1. Credit institutions shall prepare financial reports in accordance with provisions of the laws on accounting and statistics and periodical professional reports in accordance with provisions of the Governor of the State Bank.

2. In addition to periodical reports, credit institutions shall immediately prepare and forward to the State Bank reports in the following circumstances:

(a) There exist tendencies which may cause adverse effects to business operations of the credit institutions;

(b) There are major changes of the organizational structure of the institutions.

3. Credit institutions shall, within ninety (90) days of termination of the fiscal year, forward to the State Bank annual reports in accordance with provisions of the law.

Article 90 Publicity of financial reports

Within one hundred and twenty (120) days of termination of the fiscal year, the credit institution shall publicize its financial reports in accordance with provisions of the law.

CHAPTER V

Special Control, Bankruptcy, Dissolution and Liquidation
of Credit Institutions

SECTION I

Special Control

Article 91 Reports on insolvency

Where a credit institution is likely to become insolvent, it shall promptly forward to the State Bank reports on its actual financial status, causes of insolvent status, and measures taken and to be taken to deal with the situation.

Article 92 Application of special control

1. Special control means direct supervision by the State Bank of a credit institution which is likely to become insolvent.

2. The State Bank shall be responsible for identifying in a timely manner any institutions which are likely to become insolvent.

3. A credit institution shall be put under special control in any of the following circumstances:

(a) The credit institution is likely to become insolvent;

(b) The credit institution is committed to bad loans and therefore likely to become insolvent;

(c) The total amount of accumulated losses of the credit institution exceeds fifty (50) per cent of its actual charter capital and other reserves funds.

Article 93 Decisions on application of special control

1. The Governor of the State Bank shall make decisions on application of special control to credit institutions.

2. A decision on application of special control to a credit institution shall contain the following main contents:

(a) Name of the credit institution to be put under special control;

(b) Reasons for application of special control;

(c) List and specific duties of members of the special controlling board;

(d) Duration of application of special control.

3. The competent State body and relevant competent bodies within the locality in which the controlled credit institution is located shall be notified by the State Bank of the decision on application of special control for co-ordination purposes.

4. A decision on application of special control to a credit institution shall not, under any circumstances, be publicized.

Article 94 Duties, powers and responsibilities of special controlling boards

1. A special controlling board shall have the following duties:

(a) To provide guidelines for the board of management, board of controllers and general director (director) of the credit institution subject to special control to formulate solutions for strengthening the organizational structure and operations of the credit institution;

(b) To direct and supervise the implementation of the approved solutions for strengthening the organizational structure and operations of the credit institution;

(c) To prepare and submit to the State Bank reports on operations and results of implementation of solutions for strengthening the organizational structure and operations of the credit institution.

2. A special controlling board shall have the following powers:

(a) To suspend any operations which are not in accordance with the approved solutions for strengthening the organizational structure and operations of the credit institution and to cancel any regulations on safety in banking which may cause damage to the legitimate interests of depositors;

(b) To suspend the administrative authority of any member of the board of management or board of controllers or of the general director (director) or deputy general director (deputy director) of the credit institution, where necessary;

(c) To request the board of management or the general director (director) of the credit institution to dismiss or suspend operations of any person committing a breach of the laws or failing to comply with the approved solutions for strengthening the organizational structure and operations of the credit institution;

(d) To propose to the Governor of the State Bank to extend or terminate the duration of application of special control;

(e) To make recommendations to the Governor of the State Bank in relation to any special loans to be made to the credit institution.

3. A special controlling board shall be responsible for its decisions during periods of special control.

Article 95 Responsibilities of credit institutions subject to special control

1. The board of management, the board of controllers and the general director (director) of a credit institution shall, upon control by a special controlling board, have the following responsibilities:

(a) To formulate solutions for strengthening the organizational structure and operations of the credit institution for approval by the special controlling board and to organize the implementation of such solutions;

(b) To continue to administer and manage operations and maintain the assets of the credit institution, except in the cases stipulated in clause 2(b) of article 94 of this Law;

(c) To fulfil requirements of the special controlling board with respect to the organization, administration, control and management of the credit institution.

Article 96 Special loans

In special cases where additional funding is required to repay deposits or interest thereon to clients, a credit institution may obtain special loans from other credit institutions or the State Bank. Such special loans shall take precedence over any other liabilities of the credit institution upon liabilities of the credit institution being settled.

Article 97 Termination of special control

1. Special control shall terminate in any of the following circumstances:

(a) The duration of special control has expired and is not extended;

(b) Operations of the credit institution have been stabilized;

(c) The credit institution is merged or incorporated prior to the expiry of the period of special control;

(d) The credit institution becomes bankrupt.

2. The termination of special control shall be subject to the decision of the Governor of the State Bank. Such a decision shall be notified to relevant bodies.

SECTION II

Bankruptcy, Dissolution and Liquidation of Credit Institutions

Article 98 Bankruptcy of credit institutions

Where a credit institution becomes insolvent upon a written decision on refusal or termination of application of solutions to recover the solvency of the credit institution being made by the State Bank, the credit institution shall be requested by the court to announce bankruptcy in accordance with the Law on Business Bankruptcy.

Article 99 Dissolution of credit institutions

A credit institution shall be dissolved in any of the following circumstances:

1. The credit institution voluntarily requests to be dissolved, is capable of settling all outstanding debts, and is approved by the State Bank to be dissolved;

2. The credit institution does not apply for extension of its operating licence upon expiry of the licence or the credit institution applies for such extension but the application is not approved by the State Bank;

3. The establishment and operating licence of the credit institution is withdrawn.

Article 100 Liquidation of credit institutions

1. Where a credit institution is declared bankrupt, it shall be liquidated in accordance with the laws on business bankruptcy.

2. Where a credit institution is dissolved in accordance with the provisions of article 99 of this Law, the credit institution shall be liquidated under the supervision of the State Bank.

3. All costs arising from the liquidation of a credit institution shall be borne by the credit institution.


CHAPTER VII

Information and Confidentiality

Article 101 Information to account holders

Credit institutions shall periodically provide account holders with information in relation to the transactions conducted through, and the balance of, the accounts opened by such account holders at the credit institutions.

Article 102 Exchange of information amongst credit institutions

Credit institutions may exchange information with one another with respect to banking operations conducted by them or their clients.

Article 103 Exchange of information between State Bank and credit institutions

Credit institutions shall be responsible for providing the State Bank with information in relation to the extension of credit to clients as requested by the State Bank and shall be provided by the State Bank with information in relation to the banking operations of clients having dealings with the credit institutions.

Article 104 Confidentiality of banking information and data

1. Staff members of any credit institutions and concerned persons shall not be permitted to disclose any details in relation to national secrets or business secrets of credit institutions as may be known by them.

2. Credit institutions shall have the right to refuse to provide other organizations or individuals with information in relation to deposits or assets of clients or operations of the credit institutions themselves, except where requested by the competent State body in accordance with provisions of the law or where accepted by the clients.


CHAPTER VIII

Foreign Credit Institutions and Representative Offices of Foreign Credit Institutions Located in Vietnam

Article 105 Forms of operations

1. Foreign credit institutions may operate in Vietnam in one or more of the following forms:

(a) Joint venture credit institutions;

(b) Non-banking credit institutions with one hundred (100) per cent foreign owned capital;

(c) Branches of foreign banks in Vietnam.

2. Foreign credit institutions may open representative offices in Vietnam. Such representative offices shall not be permitted to conduct business operations in Vietnam.

Article 106 Conditions for issuance of establishment and operating licences

1. Conditions for issuance of establishment and operating licences to joint venture credit institutions or non-banking credit institutions with one hundred (100) per cent foreign owned capital shall include:

(a) Conditions stipulated in clause 1 of article 22 of this Law;

(b) The foreign credit institution is licensed by the competent body of its home country to conduct banking operations;

(c) The foreign credit institution is permitted by the competent body of its home country to operate in Vietnam.

2. Conditions for issuance of licences for establishment of a foreign bank branch in Vietnam shall include:

(a) Conditions stipulated in clauses 1(a), 1(b), 1(d) and 1(e) of article 22 of this Law;

(b) The foreign bank is permitted by the competent body of its home country to establish a branch in Vietnam;

(c) A written statement is issued by the competent body of the home country of the foreign bank assuring its capability to control the overall operations of the branch in Vietnam;

(d) A written commitment is made by the foreign bank, undertaking to fulfil all relevant obligations of the branch in Vietnam where necessary.

3. Conditions for issuance of licences to open a representative office of a foreign credit institution in Vietnam:

(a) The foreign credit institution shall be a legal entity licensed to conduct banking operations in its home country;

(b) The foreign credit institution is permitted by the competent body of its home country to open a representative office in Vietnam;

(c) The foreign credit institution has entered into co-operative activities with Vietnamese economic organizations.

Article 107 Authority to issue licences

The State Bank shall be the body authorized to issue establishment and operating licences to joint venture credit institutions and non-banking credit institutions with one hundred (100) per cent foreign owned capital; licences for establishment of foreign bank branches or representative offices of foreign credit institutions in Vietnam.

Article 108 Application files for issuance of licences

1. Application files for issuance of establishment and operating licences for joint venture credit institutions or non-banking credit institutions with one hundred (100) per cent foreign owned capital operating in Vietnam shall include:

(a) Application for issuance of establishment and operating licence;

(b) Draft charter of credit institution;

(c) Business plans for the first three years, clearly specifying the economic efficiency of banking operations to be conducted by the credit institution;

(d) List, curriculum vitae and relevant certificates and diplomas proving the qualifications and professional capability of the founders, the members of the board of management and board of controllers, and the general director (director) of the credit institution;

(dd) Levels and method of capital contribution and list of organizations and individuals making capital contributions;

(e) Financial status of and relevant information in relation to major shareholders;

(g) Written approval of the people's committee of the province or city under central authority in which the headquarters of the credit institution are located;

(h) Charter of the foreign credit institution;

(i) Operating licence of the foreign credit institution;

(k) Written approval of the competent body of the home country of the credit institution permitting the institution to operate in Vietnam;

(l) Audited balance sheet, financial statement and performance reports for the latest three years of the foreign credit institution;

(m) Joint venture contract (in the case of joint venture credit institutions);

(n) Full name of the general director (director) of the joint venture credit institution or non-banking credit institution with one hundred (100) per cent foreign owned capital in Vietnam.

2. Application files for issuance of licences for establishment of a foreign bank branch in Vietnam shall include:

(a) Documents specified in clauses 1(a) and 1(b) of this article;

(b) Charter of the foreign bank;

(c) Operating licence of the foreign bank;

(d) Written approval of the foreign competent body permitting the foreign bank to establish a branch in Vietnam;

(dd) Audited balance sheet, financial statement and performance reports for the latest three years of the foreign bank;

(e) Full name and curriculum vitae of the general director (director) of the foreign bank branch in Vietnam.

3. Application files for issuance of licences to open a representative office of a foreign credit institution in Vietnam shall include:

(a) Application for opening of a representative office in Vietnam;

(b) Operating licence of the foreign credit institution;

(c) Written approval of the foreign competent body permitting the foreign credit institution to open a representative office in Vietnam;

(d) Audited balance sheet, financial statement and performance reports for the latest three years of the foreign credit institution;

(dd) Full name and curriculum vitae of the chief representative of the foreign credit institution in Vietnam.

Article 109 Nature of operations

The nature of operations of joint venture credit institutions, non-banking credit institutions with one hundred (100) per cent foreign owned capital, branches of foreign banks operating in Vietnam, and representative offices of foreign credit institutions in Vietnam shall be in accordance with the provisions of this Law and other relevant provisions of Vietnamese laws.

Article 110 Capital and financial collection and payments of foreign credit institutions operating in Vietnam

1. The levels of legal capital of joint venture credit institutions and non-banking credit institutions with one hundred (100) per cent foreign owned capital and the levels of allocated capital of foreign bank branches operating in Vietnam shall be stipulated by the Government.

2. The financial collection and payments of foreign credit institutions operating in Vietnam shall be subject to the relevant provisions of Vietnamese laws.

Article 111 Accounting and reporting regimes

1. Joint venture credit institutions, non-banking credit institutions with one hundred (100) per cent foreign owned capital and branches of foreign banks operating in Vietnam shall establish and adopt an accounting system and shall comply with the regimes on accounting and financial reports as stipulated by the law of Vietnam.

2. Joint venture credit institutions, non-banking credit institutions with one hundred (100) per cent foreign owned capital, branches of foreign banks operating in Vietnam and representative offices of foreign credit institutions in Vietnam shall, within one hundred and eighty (180) days of termination of the fiscal year, forward to the State Bank their annual performance reports.

Article 112 Overseas remittance of profits and assets

1. Foreign bank branches and non-banking credit institutions with one hundred (100) per cent foreign owned capital operating in Vietnam may remit overseas their retained profits upon contribution to reserve funds and fulfilment of all financial obligations in accordance with the provisions of Vietnamese laws.

2. The foreign party to a joint venture credit institution may remit overseas its shared profits upon contribution to reserve funds and fulfilment of all financial obligations by the joint venture credit institution in accordance with the provisions of Vietnamese laws.

3. Foreign bank branches and non-banking credit institutions with one hundred (100) per cent foreign owned capital operating in Vietnam and foreign parties to joint venture credit institutions may remit overseas their remaining assets upon liquidation and termination of operation of the foreign credit institution in Vietnam.

4. Overseas remittance of money and other assets as referred to in clauses 1, 2 and 3 of this article shall be carried out in accordance with the relevant provisions of Vietnamese laws.

Article 113 Other provisions

On the basis of the principles stipulated in this Law, the Government shall provide in detail for the organization and operation of joint venture credit institutions and non-banking credit institutions with one hundred (100) per cent foreign owned capital, foreign bank branches operating in Vietnam and representative offices of foreign credit institutions in Vietnam.


CHAPTER VIII

State Management of Operations of Credit Institutions and Banking Operations of Other Organizations

Article 114 Uniform State management

The State shall carry out uniform management of the operations of credit institutions and the banking operations of other organizations.

Article 115 Contents of State management of banking operations

Contents of State management of banking operations shall include:

1. To issue and provide guidelines for implementation of legal instruments on banking operations; to formulate policies, strategies and plans for development of the system of credit institutions;

2. To issue and withdraw banking establishment and operating licences;

3. To inspect and supervise operations of credit institutions and banking operations of other organizations in accordance with provisions of the law;

4. To adopt measures to prevent and overcome risks; to prevent acts of currency destruction and illegal monetary activities;

5. To carry out collection, processing and provision of information and forecasts on monetary and capital markets;

6. To sign or participate in international treaties on currency and banking operations;

7. To manage operations of Vietnamese credit institutions operating in foreign countries;

8. To organize and manage scientific research into banking issues;

9. To organize training courses for and development of managerial and professional staff for the system of credit institutions.

Article 116 State management bodies

1. The Government shall carry out uniform State management of banking operations.

2. The Governor of the State Bank shall be responsible to the Government for State management of banking operations.

3. Ministries, ministerial equivalent bodies and Government bodies shall, within the scope of their respective duties and authority, be responsible for State management of credit institutions and other organizations conducting banking operations in accordance with provisions of the law.

4. People’s committees at various levels shall carry out State management of credit institutions and other organizations conducting banking operations operating within their respective localities in accordance with provisions of the law.


CHAPTER IX

Banking Inspection Body and Audits of Operations of Credit Institutions and Banking Operations of Other Organizations

SECTION I

State Bank Inspection Body

Article 117 Banking inspection body

Credit institutions and other organizations conducting banking operations shall be subject to inspection by the banking inspection body in accordance with provisions of the law.

Article 118 Rights of credit institutions upon inspection by banking inspection body

A credit institution shall, upon inspection by the banking inspection body, have the following rights:

1. To request inspectors to present the decision on inspection and their inspector cards and to comply with legal provisions on inspection;

2. To lodge complaints or institute legal proceedings at the relevant competent State body in respect of any act of inspectors or conclusion and decision by the banking inspection body which is considered to be wrongful;

3. To request compensation for damage resulting from improper acts or wrongful conclusions and decisions of the banking inspection body.

Article 119 Responsibilities of credit institutions upon inspection by banking inspection body

A credit institution shall, upon inspection by the banking inspection body, have the following responsibilities:

1. To fulfil requests of the banking inspection body relating to the contents of inspection;

2. To comply with the decisions of the banking inspection body.

Article 120 Powers of banking inspection body

The banking inspection body shall, in carrying out inspections, have the following powers:

1. To request the objects of inspection and concerned parties to provide any documents and evidence or to answer questions in relation to the contents of inspection;

2. To make records of inspection and recommendations on solutions to deal with offences;

3. To apply measures to prevent or deal with offences in accordance with provisions of the law.

Article 121 Responsibilities of banking inspectors

Banking inspectors shall, in performing their duties, have the following responsibilities:

1. To present the decision on inspection and inspector card;

2. To follow the stipulated process of and procedures for inspection; to avoid causing interference or obstruction to the ordinary operations of, and thereby causing damage to, the legitimate rights and interests of inspected credit institutions and other organizations conducting banking operations;

3. To prepare and submit to the Governor of the State Bank reports on results of inspection and proposed measures to deal with offences;

4. To abide by provisions of the law and be responsible to the Governor of the State Bank and before the law for any conclusions, acts and decisions in relation to inspection.

SECTION II

Auditing

Article 122 Auditing

1. No later than thirty (30) days prior to the termination of the fiscal year, a credit institution shall select an independent auditing company, other than its own internal auditing unit, to carry out an audit of its operations. The selection of auditing company shall be approved by the State Bank.

2. The credit institution shall be responsible for providing in a timely manner full information as required by auditors.

3. Audits of operations of mutual credit institutions shall be stipulated by the State Bank as appropriate to the requirements of management and scale of operations of the credit institutions.

Article 123 Responsibilities of auditors

Auditors shall, upon carrying out audits of operations of a credit institution, have the following responsibilities:

1. To certify the accuracy, truthfulness and legitimacy of accounting books and financial reports prepared by the credit institution;

2. To make comments on and evaluate the implementation of financial and accounting regimes by credit institutions;

3. To make proposals to the audited credit institution in relation to problems arising in the auditing process.


CHAPTER XI

Reward for Contributions and Dealing with Breaches

Article 124 Reward for contributions

Organizations and individuals making achievements with respect to banking operations, facilitating development of business production activities, or contributing to the identification of breaches of the laws on monetary and banking operations shall be rewarded in accordance with provisions of the law.

Article 125 Forms of breaches of laws on monetary and banking operations

Breaches of laws on monetary and banking operations shall include:

1. Conducting banking operations without the relevant licence or beyond the scope of operations specified in the licence issued by the State Bank;

2. Continuing to conduct banking operations upon suspension, withdrawal or expiry of the licence;

3. Failure to comply with the provisions on required reserves prudential limits or failure to apply the published rates of interest, commission, service fees and penalties;

4. Committing a breach of the regimes on accounting; or failure to maintain complete and accurate records in accounting books;

5. Forcing, in any manner, credit institutions to extend credit, contribute capital, purchase shares or provide guarantees inconsistent with applicable provisions; taking advantage of position or powers to gain unlawfully personal interest or to protect illegally offenders;

6. Carrying out unlawful competition;

7. Causing obstructions to inspections by banking inspectors;

8. Committing other breaches of the laws on monetary and banking operations.

Article 126 Dealing with breaches

Any organization or individual committing a breach of the provisions of article 125 of this Law shall, depending on the nature and seriousness of the breach, be subject to internal penalty, administrative penalty or investigation for criminal liability and shall be requested to pay compensation for any damage caused in accordance with provisions of the law.

Article 127 Authority to deal with breaches

The State Bank shall be authorized to deal with administrative breaches committed by organizations and individuals in relation to monetary and banking operations in accordance with provisions of the law.

Article 128 Complaints and legal proceedings in relation to decisions on dealing with administrative breaches

1. Any organization or individual being administratively penalized for an offence in relation to monetary and banking operations shall have the right to lodge a complaint to the competent State body or to institute legal proceedings at a court. Lodgement of complaints and institution of legal proceedings shall be carried out in accordance with provisions of the law.

2. Pending a response to the complaint lodged or legal proceedings instituted, the administratively penalized organization or individual shall continue to comply with the decision on dealing with administrative offence. When a decision on settlement of the complaint by the competent State body or a judgement of the court is made, the decision on settlement of the complaint by the competent State body or the judgment of the court shall be complied with.


CHAPTER XI

Implementation Provisions

Article 129 Provisions applicable to organizations conducting banking operations

1. Credit institutions established and operating in accordance with establishment and operating licences issued by the State Bank prior to the effective date of this Law shall not be required to apply for re-issuance of establishment and operating licences.

2. The State Bank shall determine the specific time-limit for restructuring and renovation of operations by credit institutions in conformity with the provisions of this Law and relevant implementing legislation.

3. Non-credit institutions which are presently conducting banking operations shall either terminate their operations or apply for issuance of a banking operating licence as from the first effective date of this Law.

Article 130 Enforcement

1. This Law shall be of full force and effect as of 1 October 1998.

2. The Ordinance on Banks, Credit Co-operatives and Financial Companies dated 23 May 1990 shall expire as from the first effective date of this Law.

3. The Government, Supreme People's Court and Supreme Inspectorate Body shall, within the scope of their respective duties and powers, consider provisions of the laws on monetary and banking operations for the purposes of repeal or amendment thereof and addition thereto or issuance of new provisions, or shall propose to the Standing Committee of the National Assembly to repeal, amend or add to such provisions or to issue new provisions, in the light of the provisions of this Law.

Article 131 Guidelines for implementation

The Government shall provide in detail for the implementation of this Law.


This Law was passed by Legislature X of the National Assembly of the Socialist Republic of Vietnam at its 2nd Session on 12 December 1997.


The Chairman of the National Assembly


NONG DUC MANH