Currently, there are many foreign branches established in Vietnam in many different fields, one of which is a foreign bank branch. In the article below, Viet An Law Firm will provide the clients with some information to establish a foreign bank branch in Vietnam according to current legal regulations.
According to Clause 5 Article 4 of Law on Credit Institutions 2024, a foreign bank branch means a business organization that is not a juridical person and is also a foreign bank’s subsidiary. The foreign bank is liable for all of the branch’s obligations and commitments in Vietnam.
To establish a foreign bank branch in Vietnam, the following requirements must be met:
Market access requirements for foreign investors
According to Vietnam’s WTO Commitment Schedule, Vietnam commits to allowing foreign commercial banks to establish their branches in Vietnam under the following requirements:
The parent bank had total assets of more than 20 billion USD at the end of the year before the application to establish a branch in Vietnam;
The established branch is subject to limitations in its operations.
In addition to the requirements stated in this commitment, foreign banks that want to establish branches in Vietnam must comply with other requirements according to Clause 3, Article 29 of Law on Credit Institutions 2024.
Requirements for capital
Foreign bank branches must have capital provided at least equal to the legal capital level. Currently, according to Article 2 of Decree 86/2019/ND-CP, the legal capital of foreign bank branches is 15 million US dollars (USD).
Requirements for membership
The owner of a credit institution is a single-member limited liability company, founding shareholders or members are legal entities that are lawfully operating and financially capable of capital contributions; founding shareholders or members are individuals with full civil act capacity and financially capable of capital contribution;
The managers, executives, and members of the Board of Controllers fully meet the criteria and requirements in Article 41 of Law on Credit Institutions 2024.
Requirements for establishment project
It has an establishment project and a feasible business project that neither affects the safety and stability of the credit institution system nor creates a monopoly or unfair competition within the credit institution system.
Operations conducted in Vietnam must be those which the foreign credit institution is issued with a license to conduct in the country where it is headquartered.
Requirements for commitment of the foreign bank
The foreign bank shall make a written commitment to be liable for all obligations and commitments of its branch in Vietnam, and to ensure that the actual value of the provided capital is not lower than the legal capital and it observes regulations on assurance of operation safety.
If it is required to establish the second foreign bank’s branch and subsequent foreign bank branches in Vietnam, the foreign bank shall ensure that the foreign bank’s branch which has been operating in Vietnam for 03 years preceding the year of the proposal to establish new branches does not commit violations against regulations of law, achieves the minimum safety ratios, and earns profits.
Dossier for license
To operate legally, it is necessary to carry out procedures to apply for the License for the establishment of a foreign bank branch at the State Bank.
Currently, the application dossier for the License for the establishment of a foreign bank branch is specified in Article 17 of Circular 40/2011/TT-NHNN, as amended and supplemented from time to time, specifically including the following components documents as follows:
An application for the establishment license of a foreign bank’s branch.
A project on the establishment of the foreign bank’s branch.
Charter of the parent bank.
Curriculum vitae of the General Director (Director) of the expected foreign bank’s branch; a police clearance; copies of qualifications, and certifications evidencing the ability, professional level, and documents evidencing the satisfaction of conditions, and standards.
A copy of the establishment and operation license or similar document which were granted to the parent bank by competent authorities of the native country.
Documents of the competent authorities of the native country providing information about the parent bank.
Documents of the competent authorities of the native country ensuring the supervision over the entire activities of the parent bank based on consolidation by international practices.
Audited financial statements for 05 consecutive years preceding the year of applying for the License.
A document or materials of an international credit rating institution that rates the creditworthiness of the parent bank within 06 months before the submission of the application dossier.
A document issued by the parent bank undertaking to take full responsibility for all obligations and commitments of the branch in Vietnam; ensuring to maintain the real value of the charter capital of the foreign bank’s branch not to be lower than the legal capital and to fully satisfy requirements on prudential operation by regulations of the State Bank.
A report on the process of establishment, operation, and development orientation of the parent bank up to the time of applying for the License.
A document of the parent bank signed by the legal representative on the appointment of the Preparatory Board and authorization to the Head of the Preparatory Board.
Power of Attorney for Viet An Law Firm to carry out the procedure.
Procedure to establish a foreign bank branch in Vietnam
Step 1: Apply for the License.
The Preparatory Board makes an application dossier for issuance of the License and sends it by post or submits it directly to the State Bank.
Step 2: The State Bank receives and processes the dossier.
Within 60 working days from the date of receiving the license application dossier, the State Bank shall send a document to the Preparatory Board confirming the full receipt of the valid dossier for principle approval consideration.
In case the application dossier for a License is incomplete, the State Bank shall send a document to the Preparatory Board requesting additional dossiers.
Within 90 working days from the date of sending the confirmation of the full receipt of the valid application dossier, the State Bank shall give written approval in principle to the establishment of a foreign bank’s branch. In case of disapproval, the State Bank shall give a written answer to the Preparatory Board, which clearly states the reasons for disapproval.
Within 60 days from the date of receiving the written approval in principle, the Preparatory Board shall prepare supplemental documents as provided for in Clause 13, Article 17 of Circular 40/2011/TT-NHNN and send them to the State Bank. If the State Bank does not receive or receives insufficient documents within the stipulated period, the written approval in principle shall be invalid.
Step 3: The State Bank issues the License.
Within 02 working days from the date of receiving the full supplemental documents, the State Bank shall give a written confirmation of the full receipt of the documents.
Within 30 days from the date of receiving the full supplemental documents, the State Bank shall issue the License by regulations.
In case of refusal to license issuance, the State Bank shall send a written answer to the Preparatory Board, which clearly states the reasons for refusal.
Step 4: Public information about launch for operations.
A foreign bank’s branch issued with a license may only operate from the launch date. The foreign bank’s branch has to launch its operations within 12 months from the date on which it obtains the license, except for force majeure events. If it fails to do so, the issued license expires.
According to Article 33 of Law on Credit Institutions 2024, a foreign bank’s branch shall publish on the media of the State Bank and a Vietnamese daily newspaper for 03 consecutive issues or a Vietnamese e-newspaper for at least 30 days before the date on which operations are expected to be launched.
Some foreign bank branches in Vietnam
Agricultural Bank of China Hanoi;
Bank of Communications Ho Chi Minh City;
BIDC Ho Chi Minh City;
BNP Paribas Hanoi;
Deutsche bank AG Ho Chi Minh City.
Some questions related
Fees for issuance of the license to establish foreign bank branches?
According to Circular 150/2016/TT-BTC, the fee for issuance of the license to establish a foreign bank branch is 1,000,000 VND/license.
Does the client have to carry out procedures to apply for a Foreign Bank Branch Operation Registration Certificate according to the Law on Enterprise?
According to Clause 3, Article 27 of Law on Credit Institutions 2024, the License for the establishment of a foreign bank branch is also the Foreign Bank Branch Operation Registration Certificate. Thus, there’s no need to carry out procedures to apply for a Foreign Bank Branch Operation Registration Certificate according to the Law on Enterprise.
What is the minimum allocated capital of a foreign bank branch?
Foreign bank branches must have a minimum allocated capital equal to the legal capital of 15 million US dollars (USD).
What is the time limit for issuance of the License for establishment?
According to Article 31 of Law on Credit Institutions 2024, within 180 days from the date of receiving the valid dossier, the State Bank shall issue a License for the establishment of a foreign bank branch.
Legal service by Viet An Law Firm
Legal consultation on requirements, dossiers, procedures, and licenses to establish a foreign bank branch in Vietnam;
Draft documents, dossiers, and papers for clients as requested;
Representing clients, conducting procedures at competent authorities, and responding to feedback;
Regular legal consultation for the branch after being granted a License.
Clients who have related questions or need legal support regarding to establish a foreign bank branch in Vietnam, please contact Viet An Law Firm for the best support!
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