The State Bank of Vietnam issued on April 28 Circular No. 08/2009/TT-NHNN, which guides the establishment of affiliates by small-sized financial institutions and will take effect on June 12.
When wishing to open a new branch, a licensed financial institution with only one existing office must satisfy the following conditions: Its existing office is operating efficiently; the prospective branch director has at least two years’ professional experience; it has policies and procedures and an information system capable of ensuring effective management of the branch; and its charter capital is larger than the total number of branches multiplied by VND 1.5 million.
A branch must commence its operation within six months after obtaining approval of the State Bank, otherwise the approval will expire.
Within 12 months after commencing operation, a small financial institution is allowed to open up to two branches if it has a feasible business plan, clear internal regulations and a good management information system. After one year, it may open more branches if it satisfies additional conditions that its operates profitably in the year and month preceding the opening of the additional branch, its capital adequacy ratio is 15 per cent or more, and it has committed no illegal act within a year of application to open the branch.
Earlier on April 17, the State Bank prescribed the operation safety ratio for small credit institutions in Circular No. 07/2009/TT-NHNN. Accordingly, these institutions can only provide loans of a total value not exceeding 10 per cent of their own capital and loans to a small-sized financial client not exceeding VND 30 million. They should also maintain a regular solvency ratio of at least 20 per cent.-