By Vo Ha Duyen, Nguyen Quang Hung
Ho Chi Minh City, 22 February 2017

Basel II Standards Underway

The State Bank of Vietnam (the “SBV”) has issued Circular 41/2016/TT-NHNN stipulating the required capital adequacy ratio (“CAR”) for banks and branches of foreign banks (“Circular 41”) in a step to apply Basel II standards in Vietnam. Circular 41 will take effect as of 01 January 2020 (the “Effective Date”), but any bank or branch of a foreign bank may voluntarily apply this Circular prior to the Effective Date by giving notice to the SBV. As such, the Effective Date as finally decided in Circular 41 is one year later than the effective date proposed in an earlier draft of the Circular which was January 2019. Also, Circular 41 as issued removes the effective date of 1 September 2017 which was initially proposed for major local banks which were supposed to apply Basel II standards earlier than other banks.

Vietcombank chooses Credit Suisse, VILAF for equity issue

Hanoi, November 2015
Source: VNA 

20151103 Vietcombank

Leaders of parties at the signing ceremony

The Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vietcombank, on October 22 signed a contract with Credit Suisse and the Vietnam International Law Firm (VILAF) for a new equity issue.

Under the contract, Credit Suisse will act as the finance consultant for the bank while VILAF will be responsible for legal aspect.

According to the bank, the equity issue aims to help the bank raise capital and prepare for the implementation of BASEL II, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision, from the beginning of 2016.

Pham Quang Dung, Vietcombank General Director, said the issuance will help Vietcombank keep pace with the economy’s strong growth as well as maintain its leading position in the banking system.

Helman Sitohang, General Director of Asia-Pacific Credit Suisse, said the cooperation is an important landmark for Vietcombank and a contribution to the capital market development in Vietnam.

Credit Suisse has operated in Vietnam since 2001 and has become the biggest foreign capital broker in Vietnam with a brokerage value reaching over 6 billion USD so far.


By Vo Ha Duyen, Nguyen Quang Hung, Nguyen Thi Phuong Nga
May 2015

One year after the Prime Minister approved Vietnam’s Project for the Development of the Derivative Securities Market, the Government issued the long-awaited Decree 42/2015/ND-CP on derivative securities (“DS”) and the DS market (“Decree 42”). Decree 42 outlines the basic legal framework for a futures exchange tentatively to be developed in 2016 in Vietnam. Vietnam’s stock exchanges are working on the technical infrastructure to put this DS trading system into operation. This briefing summarizes important contents of Decree 42.


Only the following types of DS are recognized:

  • Futures;
  • Options; and
  • Forward contracts and other types of derivatives of

which underlying assets are listed securities.

The settlement of payment for a trade of listed DS must be made via clearing members and Vietnam Securities Depository (“VSD”) as the central clearing house and must comply with Decree 42.

The settlement of payment for an over-the-counter (“OTC”) trade of DS need not be made via VSD unless otherwise agreed by the trading parties. Nevertheless, the parties are required to notify VSD of the intended OTC trade and report to VSD of the completed OTC trade in writing.

Stock exchanges are generally empowered to prescribe specific trading limitations for DS.



Any person may invest in DS except that certain institutional organizations may have to satisfy certain requirements as follows before they can invest in DS for their own account.

A securities company must have a certificate of satisfaction of the DS dealer conditions issued by the State Securities Commission of Vietnam (“SSC”). The minimum equity capital requirement for being granted this certificate is VND600 billion.

A fund management company may only use entrusted funds to invest in DS if its portfolio management contracts and the charters of the funds it manages permit the use of those funds to invest in DS. A fund management company may not use its own funds, even loan capital, to invest in DS.

A credit institution or a branch of a foreign bank may only invest in DS if it has the State Bank of Vietnam (“SBV”)’s license for DS trading.

An insurance firm or a branch of a foreign insurance firm may only invest in DS if it has the Ministry of Finance (“MOF”)’s license for DS trading.

A State economic group or corporation, state-owned enterprise or wholly state-owned enterprise may only invest in DS if permitted by the relevant supervising authority and its owner.

Service vendors

  1. A securities company acting as a DS broker must have a certificate of satisfaction of the DS broker-dealer conditions issued by the SSC, which requires, inter alia, a minimum equity capital of VND800 billion.
  2. A securities company, commercial bank or branch of a foreign bank providing DS settlement and clearing services must have a certificate of satisfaction of the conditions for DS settlement and clearing services issued by the SSC, which requires the following minimum equity capital:
  • For a direct clearing member: VND5,000 billion for a commercial bank and VND900 billion for a securities company;
  • For a common clearing member: VND7,000 billion for a commercial bank and VND1,200 billion for a securities company.

A direct clearing member may only provide settlement and clearing services for its clients.

A common clearing member may provide settlement and clearing services for its clients and also for non-clearing trading members and clients of those non-clearing trading members.

Additionally, a clearing member must also satisfy certain business results and capital adequacy requirements amongst others to be stipulated by the MOF in a future implementing circular.

Decree 42 refers to “commercial banks” and “commercial banks, branches of foreign banks” at different instances and it is confusing whether references to “commercial banks” where not accompanied with “branches of foreign banks” also intend to cover “branches of foreign banks.” It seems however that the intent of Decree 42 is to give “branch of foreign bank” the same treatment as “commercial bank” in almost instances, except where limited by other regulations. This hopefully will be clarified in implementing circulars.

Members of the DS Trading System

Decree 42 recognizes three types of professional members of a DS trading system:

  1. A trading member is a securities company or commercial bank that may trade DS for its own account and provide DS brokerage services (i.e. broker-dealer). If a trading member is not a clearing member, it must have a clearing contract with a common clearing member before it may provide DS brokerage services.
  2. A special trading member is a trading member that is a commercial bank and that is licensed to invest in DS of which underlying assets are Government bonds.
  3. A market driving member is a trading member or special trading member that is authorized to create the market for one or more DS based on a contract with the stock exchange.

A trading member can be a clearing member or a non-clearing trading member.


By Vo Ha Duyen, Nguyen Quang Hung
January 2015

The SBV has issued Circular 01/2015/TT-NHNN (Circular 01) on interest rate derivatives (IRD) products of commercial banks and branches of offshore banks (Banks) to replace Decision 62/2006/QD-NHNN (Decision 62). Circular 01 will take effect on 2 March 2015.

Below are significant changes under Circular 01.

By Vo Ha Duyen
November 2014

Vietnam’s New Regulation on Capital Adequacy and Liquidity of Credit Institutions

The SBV has just issued Circular 36/2014/TT-NHNN (Circular 36) on capital adequacy and liquidity requirements for credit institutions including branches of foreign banks (Institutions). Circular 36 will take effect in February 2015.

Circular 36 exhibits the SBV’s efforts in bringing Vietnam’s regulatory framework closer to Basel II, strengthening the transparency of Institutions’ operations, and both promoting the development of and mitigating the risks of the local capital market.

With respect to the financing of securities activities, the following changes are significant:

investments in a controlling equity stake in an enterprise in the securities sector are deducted from tier 1 capital;

  • for the purpose of risk-weighted assets (RWA), the risk weight of loans granted to finance the trading of securities is reduced from the current 250% to 150%;
  • an Institution may not lend to customers to finance the investment in shares if its bad debts ratio is 3% or higher; this would therefore exclude many local banks from this business;
  • the aggregate balances of all loans granted to finance the investment in shares may not exceed 5% of the charter capital of the Institution (the limit under the repealed regulations is 20% but applies more broadly to all securities);
  • a loan to finance the investment in shares must be a short-term loan and may not be secured with the same shares or secured with shares of another Institution;
  • shares listed on the Vietnam stock exchanges are no longer on the list of liquid assets for purpose of the liquidity ratios.


Each Institution is required to maintain a capital ratio of at least 9%, which is a similar requirement under the repealed regulations.

The capital ratio is the ratio of the capital to the RWA.  The capital is the aggregate of tier 1 capital and tier 2 capital.

Circular 36 adds more items to the list of assets that must be deducted from tier 1 capital. Among those added items are treasury shares, balance of loans granted to finance the contribution of equity capital or purchase of shares in other Institutions, investments in a controlling equity stake in enterprises operating in the insurance sector, securities sector, foreign exchange, gold, factoring, credit cards issuance, consumer credit, intermediary payment services and credit information services.

In the determination of tier 2 capital, the distinction between bonds and “other debt instruments” is removed. The required first tenor for “other debt instruments” is now five years, same as bonds, instead of 10 years as required under the repealed regulations.

With respect to the RWA, credit risk is assessed according to a scale of 0%, 20%, 50%, 100%, and 150%. The previous 250% risk weight level has now been removed. As a result, the risk weight of loans granted to finance the real estate business is 150% and no longer 250%.

Among the assets with 0% risk weight level, Circular 36 adds receivables from or guaranteed by “international financial institutions” and receivables secured with valuable papers issued by or guaranteed by “international financial institutions.” Circular 36 provides a detailed list of entities defined as “international financial institutions,” such as the International Finance Corporation, the International Development Association, the Asian Development Bank, the European Investment Bank, the European Investment Fund and the Council of Europe Development Bank etc.


The aggregate debt balances of one single customer may not exceed 15% of the capital of a bank, and 25% of the capital of a non-bank Institution. The aggregate debt balances of one single customer and its related persons may not exceed 25% of the capital of a bank, and 50% of the capital of a non-bank Institution. These limits were 15% and 50% respectively under the repealed regulations.


The liquidity ratio is the ratio of the total liquid assets to total liabilities. Circular 36 lowers the required continuing liquidity ratios and changes the previous weekly liquidity ratio requirement to a monthly liquidity ratio requirement as below:  

Type of Institution


Monthly VND

Monthly foreign currency





Branch of foreign bank




Non-bank Institution




Cooperative bank




 The list of “liquid assets” is slightly changed. International bonds on this list now must be issued or guaranteed by Governments or central banks of countries with credit ratings from AA.


Circular 36 increases the permited short-term funds used for medium-long term financing.

The changes are as below:

                                                                        Circular 36         Repealed regulations

Banks and branch of foreign banks:                60%                  30%

Non-bank credit institutions:                            200%                30%

An Institution may use short-term funds to invest in Government bonds at the following ratio:

State-owned banks:                               15%

Branches of foreign banks:                    15%

Other banks:                                           35%

Non-bank Insitutions:                              5%

Coop banks:                                           40%

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By Vo Ha Duyen, Tran Tuan Phong in VILAF and Fergus Evans in Clifford Chance
October 2014

The State Bank of Vietnam recently issued two circulars (Circular 12 and 25) to regulate offshore borrowings without a Government guarantee. These circulars apply to any loan facility whereby the borrower is a resident and the lender is a non resident. These circulars also apply to resident borrowers that are credit institutions including branches of offshore banks. This briefing highlights key changes under Circular 12 and 25.

By Vo Ha Duyen, Nguyen Quang Hung, Nguyen Truc Hien and Katrina Alday
August 2014

Vietnam continues to introduce regulatory reforms in an effort to improve the investment environment and regulatory framework ever since her accession to the WTO in 2007, and in response to external factors such as the 2008 global financial crisis. From 2011 to August 2014, the State Bank of Vietnam (SBV) has issued around 144 circulars, rendering banking and foreign exchange issues highly dynamic. Over the past year, to implement changes under the Amended Foreign Exchange Ordinance, the SBV issued various circulars regulating foreign exchange control. We discuss in this briefing note highlights of recently issued regulations on foreign exchange activities in Vietnam.

By Ngo Thanh Tung, Pham Si Hai Quynh and Nguyen Duy Linh
July 2014

Joint Circular No. 16/2014/TTLT-BTP-BTNMT-NHNN of the Ministry of Justice, Ministry of Natural Resource and Environment and the State Bank of Vietnam (Circular 16) provides guidance on issues relating to the disposal of security assets.