Vietnamlawmagazine

The State Bank of Vietnam (SBV) is working on a draft circular to guide bankers on how to apply for the central bank’s approval of changes in their banking operations.

Under the 2010 Law on Credit Institutions, credit institutions, foreign bank branches and representative offices of foreign credit institutions wishing to make changes in their names, head offices, contents, scope and duration of operation, charter capital or granted capital are required to seek approval from the SBV.

The SBV’s approval is also required for share transfer by credit institutions’ shareholders being multiple-member limited liability companies or by major shareholders, share transfer as a result of which a major shareholder becomes an ordinary shareholder or vice versa.

Although the Law on Credit Institutions came into force on January 1 this year, no specific regulation on this matter has been issued, causing problems to bankers who wish to expand or narrow their operations or, more simply, change their head offices. Once promulgated, the draft circular would give answers to all these questions.

The Law on Credit Institutions also requires banks which halt business operations for more than one working day to report such to the SBV. The draft circular stipulates that in this case, banks may apply for permission from provincial State Bank branches. Exceptions are joint-stock commercial banks in which the State holds more than 50% of charter capital, state-run commercial banks, cooperative banks and foreign bank branches which would seek approval directly from the State Bank Governor. This means that these banks, especially those headquartered in localities far from Hanoi, would have to wait for a longer period of time before obtaining permission. Some experts argued that as State Bank branches may represent the State Bank Governor, they should be empowered to process applications from all banks, rather than just some of them.

As required by the Law on Credit Institution, when applying for the SBV’s permission to relocate its head office, a credit institution or foreign bank branch has to prove that its projected new office has sufficient physical foundations for banking operations. However, as the grant of permission for relocation of banks’ head offices depends on many other things such as banking operation licensing policies of the central or local administrations, a bank that has prepared all required conditions for its relocation may see its application rejected as such relocation does not suit common policies. The draft circular should further clarify this case.

The Vietnamese version of the draft is now available at the SBV’s website www.sbv.gov.vn for public comment.-