What is a foreign bank branch? What are the conditions for establishing a foreign bank branch according to current regulations? So, LSX Lawfirm will give you an article about: “Conditions for establishing foreign bank branches in Vietnam”, as follows:
Legal grounds
Law on credit institutions 2010
What is a foreign bank branch?
Accordingly, Foreign bank branch is a dependent unit of a foreign bank, has no legal status, foreign bank guaranteed bank to be responsible for all obligations and commitments of the foreign bank branch in Vietnam.
Related artice: Dossier of application for a license to establish a foreign bank branch
Dossier to establish a joint venture bank a bank with 100% foreign capital
Conditions on operation of foreign bank branches
According to Vietnamese law, consolidated credit institutions and foreign bank branches granted a License when fully meeting the following conditions:
- Have charter capital, the capital allocated at least equal to the legal capital level.
- Then, the owner is a one-member limited liability company; the founding shareholders, the founding members are legal entities and have sufficient financial capacity to contribute capital; founding shareholders or founding members are individuals with full civil act capacity and sufficient financial capacity to contribute capital.
- Managers, executives, also members of the Supervisory Board fully meet the standards and conditions as prescribed.
- Have a suitable establishment plan and business plan.
- Then, the foreign credit institution which they permitted to conduct banking activities in accordance with the provisions of the law of the country; where the foreign credit institution is headquartered.
- Then, the activity expected to apply for a permit to perform in Vietnam an activity permitted perform in the country; where the foreign credit institution’s head office is located.
- So, Foreign credit institutions must have healthy operations, meet the conditions on total assets; financial situation; safety ratios according to regulations of the State Bank.
- In addition, the foreign competent authority has signed an agreement with the State Bank on banking inspection and supervision; exchanging information on banking safety supervision; and has a written commitment to consolidated supervision in accordance with international practices for operations of foreign credit institutions.
- Finally, the foreign bank must have a written guarantee to be responsible for all obligations; and commitments of the foreign bank branch in Vietnam; Ensure compliance with capital regulations,etc.
Conditions for the parent bank of a foreign bank branch
According to Article 11 of VBHN 48/VBHN-NHNN, the parent bank of a foreign bank branch must satisfy the following conditions:
– The parent bank has total assets of at least USD 20 billion in the year preceding the year of applying for the License; and up to the date of issuance of the License.
– Then, no serious violations of regulations on banking activitie;s and other legal regulations of the country of origin within 5 consecutive years, etc.
– Have experience in international operations, also being ranked from stable level or higher by international credit rating agencies, etc.
– Have profit for 5 consecutive years immediately preceding the year of applying for the License; and up to the time of granting the License.
– Be assessed by the competent authority of the country of origin to ensure the capital adequacy ratio, then other prudential ratios, etc. in the year preceding the year of applying for the License and up to the time of issuance of the License.
Related questions
Foreign bank branch means a foreign bank’s subsidiary without legal entity status and the foreign bank is liable for all of the branch’s obligations and commitments in Vietnam.
Credit institution means an enterprise conducting one. some or all banking operations. Credit institutions include banks, non-bank credit institutions, microfinance institutions and people’s credit funds.
Foreign credit institution means a credit institution established overseas under a foreign law.
Foreign credit institutions may be commercially present in Vietnam in the forms of representative office, joint-venture bank, wholly foreign-owned bank, foreign bank branch, joint-venture finance company, wholly foreign-owned finance company, joint-venture financial leasing company and wholly foreign-owned financial leasing company.
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