1. New Law on Credit Institutions

On 18 January 2024, the National Assembly adopted the Law No. 32/2024/QH15 on Credit Institutions.

With effect from 01 July 2024, except Article 200.3 and Article 210.15 which takes effect from 01 January 2025, the New Law on Credit Institutions (the “New Law”) replaces the Law on Credit Institution No. 47/2010/QH12, as amended by Law No. 17/2017/QH14 (the “Current Law”). Below are some key points of the New Law.

Licences 

Credit institutions and foreign bank branches are required to obtain an establishment licence from the State Bank of Vietnam (SBV). The establishment licence will be issued when certain conditions laid down in the New Law are met. The establishment licence also serves as the enterprise registration certificate of a credit institution or the operation registration certificate of a foreign bank branch.

The notification of relevant information to business registration agencies in order to update into the National Enterprise Registration Portal will be regulated by the SBV.

Shareholding ownership

The New Law reduces the ownership limits in a credit institution for corporate shareholders and for shareholders and related persons. Accordingly, a corporate shareholder is not allowed to hold more than 10% (instead of 15% under the Current Law) of the credit institution’s charter capital, and a shareholder and its related persons are not allowed to hold more than 15% (instead of 20% under the Current Law) of the credit institution’s charter capital.

There are some exceptions to the above ownership limits, including: (i) holding shares in a subsidiary or an affiliate being credit institution stipulated in clauses 2 and 3 of Article 111 of the New Law, (ii) holding State owned shares in an equitised credit institution, and (iii) holding shares by foreign investors in a credit institution.

For shareholders, shareholder and their related persons holding shares in excess of the above limits, they are entitled to maintain their ownership ratio but may not increase their shares until they comply with the ownership limits provided in the New Law, unless receiving dividends paid in shares.

The New Law generally provides that foreign investors may purchase shares in Vietnamese credit institutions and leaves the details for the Government to regulate.

Disclosure of ownership by shareholder holding 1% or more of the charter capital

The New Law newly requires that any shareholder holding 1% or more of the charter capital of a credit institution must disclose in writing to the credit institution: (a) identification information of such shareholder (identification of individual shareholder, or the number of enterprise registration certificate/equivalent document of corporate shareholder and date and place of this document); (b) information about its related persons; (c) the number and ratio of ownership of shares of the shareholder and its related persons in that credit institution.

The credit institution must publish and keep such information at its head office and report the same to the SBV within 07 working days from the date of its receipt. Further, the name of the shareholder, and information referred to in item (c) above shall be posted on the website of the credit institution within 07 working days from the date of its receipt.

Credit extension limits

Under the Current Law, the total outstanding loan to any client may not exceed 15% of the equity of a commercial bank/foreign bank branch, and 25% for any client and its related persons. These limits will be gradually decreased according to the schedule outlined in the New Law. From 01 January 2029 onwards, the respective limits are 10% and 15%.

The New Law also decreases the limits applicable to non-banking credit institutions. From the effective date of this Law, the total outstanding loan to any client may not exceed 15% of the equity of a non-bank credit institution, and 25% for any client and its related persons.

New business activities of credit institutions

To set out a clearer legal basis for some current activities of the credit institution, the New Law provides additional new business lines in accordance with international practice. Of note, under the New Law, subject to relevant regulations, commercial banks and foreign bank branches are entitled to act as security agent on behalf of lenders that are international financial institutions, foreign credit institutions, local credit institutions and foreign bank branches.

Further, the New Law recognises the issuance of a letter of credit as a form of credit extension, which is currently mentioned as a form of payment services via account under the Current Law. The New Law also removes the recourse requirement in its definition of factoring, which is consistent with international standard.

Capital contribution and share purchase by credit institutions

The maximum level of capital contribution and share purchase by a commercial bank and its subsidiaries and affiliates in an enterprise operating in certain sectors (such as insurance, securities, foreign exchange, consumer credit) or by a financial company in an enterprise or investment fund remains unchanged and may not exceed 11% of the charter capital of the enterprise or investment fund receiving such capital contribution.

The total amount of capital contribution and share purchase by a commercial bank or a financial company to other entities including its subsidiaries and affiliates may not exceed 40% of the charter capital and reserve funds of the bank or the financial company.

The New Law provides circumstances when credit institutions are not allowed to contribute capital and purchase shares in other enterprises and credit institutions. In particular, a credit institution and its subsidiaries are not allowed to contribute capital to or purchase shares in any enterprise or other credit institution which is (i) a shareholder or capital contribution member of such former credit institution, and (ii) a related person of the major shareholder or capital contribution member of such former credit institution.

Early intervention

The New Law supplements cases subject to early intervention. The SBV may apply early intervention to a credit institution or foreign bank branch where: (i) its accumulated losses exceed 15% of the value of charter capital/allocated capital and reserve funds, and it violates the capital adequacy ratio specified in Article 138.1(b) of the New Law, (ii) it has been ranked under the average level pursuant to the SBV regulations; (iii) it violates the solvency ratio as specified in Article 138.1(a) of this Law in 30 consecutive days; (iv) it violates the minimum capital adequacy ratio specified in Article 138.1(b) of this Law in six (06) consecutive months; or (iv) it experiences a mass withdraw of money and has a report to the SBV.

The SBV shall issue the written application of early intervention and requires the credit institution or foreign bank branch to comply with one or several restrictions prescribed in Article 157 of the New Law. The SBV shall issue a written termination of the application of early intervention after the credit institution or foreign bank branch overcomes the situation which resulted in it being subject to early intervention or in other cases as provided in the New Law.

Other issues

The New Law prohibits credit institutions, foreign bank branches and their staff from linking the sale of non-compulsory insurance products with the provision of the banking products and services.

The New Law provides the mechanisms of dealing with non-performing loans (NPLs) and security enforcement. Accordingly, credit institutions, foreign bank branches, debt management and assets exploitation companies, and asset management companies of credit institutions established and operating under the New Law are permitted to transfer part or the entire real estate projects being security assets for debt recovery. The transfer of the real estate projects must comply with the Law on Real Estate Business, however, the credit institutions, foreign bank branches, debt management and asset exploitation companies, and asset management companies of credit institutions, as the transferor, are not obligated to meet certain requirements applicable to entities doing real estate business under the Law on Real Estate Business.

The New Law provides the general overview of mechanisms for the controlled testing of new technologies and new models in banking activities. Further details on this will be issued by the Government.

2. New regulations on high-tech parks

On 01 February 2024, the Government issued Decree 10/2024/ND-CP providing for high-tech parks (“Decree 10”). Decree 10 takes effect from 25 March 2024 and replaces Decree 99/2003/ND-CP dated 28 August 2003, as amended.

Decree 10 regulates orientations for construction and plans on development of high-tech parks, establishment and operation of high-tech parks (including high-tech parks provided in Article 31 of the Law on High Technologies and high-tech application agricultural parks provided in Article 32 of that Law). It sets out the conditions for establishment of new high-tech parks and those for expansion of existing high-tech parks. The establishment or expansion of a high-tech park must be approved by the Prime Minister.

High-tech park infrastructure projects are eligible for land incentives, given priority to borrow investment credit facilities of the State and other incentives in accordance with laws. Incentives applicable to the areas of specially difficult socio-economic conditions are also provided for high-tech projects in high-tech parks.

Decree 10 sets out the general principles for all high-tech projects in high-tech parks. For projects in high-tech parks provided in Article 31 of the Law on High Technologies, the principles require that (i) the project’s objective and operation must be conformity with the high-tech park’s duties, (ii) the project applies environmentally friendly and energy-saving measures, (iii) the project is conformity with the approved plannings and the technical and social infrastructure-providing capacity of the high-tech park, and (iv) the investor has financial capacity and technical expertise to carry-out the project.

Decree 10 also sets out additional criteria for each type of project. For example, high-tech application projects for manufacture of high-tech products must, among other things, satisfy turnover criteria, employment criteria and research and development expenditure criteria provided by the competent State agency.

3. Representative offices of foreign trade promotion organisations

The Government issued Decree 14/2024/ND-CP (“Decree 14”) dated 7 February 2024 to amend procedures for establishment of representative offices of foreign trade promotion organisations as stipulated in Decree 28/2018/ND-CP dated 1 March 2018. Decree 14 takes effect from 25 March 2024.

Foreign trade promotion organisations must establish their representative offices in Vietnam to carry out activities related to trade promotion in Vietnam. Decree 14 gives the provincial Department of Industry and Trade the authority to issue, re-issue, extend, amend or revoke a licence to establish a representative office in Vietnam (“RO Licence”). Foreign trade promotion organisations can submit their application files in person, by postal service or online.

Pursuant to Decree 14, when moving representative office to a different province or city, foreign trade promotion organisations must apply for re-issuance of the RO Licence. No later than 90 days before the proposed date of change of location of the office, the foreign trade promotion organisation or its representative office must send a notice of change of location of the office to creditors, employees of the representative office and other persons with related rights, obligations and interests. Such notice must be publicly listed at the representative office and published in a newspaper permitted to be issued in Vietnam in 03 consecutive editions.

4. Risk control in customs operation

The Ministry of Finance issued Circular 06/2024/TT-BTC (“Circular 06”) dated 29 January 2024 to amend Circular 81/2019/TT-BTC dated 15 November 2019 on risk control in customs operation. Circular 06 takes effect from 15 March 2024, except certain provisions which will be applicable from 15 July 2025.

Circular 06 revises the criteria for assessment of law compliance and the criteria for classification of risk levels for customs declarants. The customs offices shall base on the results of assessment of law compliance and classification of risk levels to apply appropriate customs inspection measures and other professional measures.

Regarding refund of taxes for import-export goods, the customs offices will classify dossiers for tax refund, non-collection of tax and apply a corresponding measure for customs declarants with different risk levels. Customs declarants facing high risks will be inspected first and refunded tax later. Customs declarants facing medium risks will be refunded tax first and inspected later and subject to inspection within 05 years after the date of tax refund decision. Customs declarants facing low risks will be refunded tax first and inspected later and subject to random inspection within 05 years after the date of tax refund decision.