Set up a bank in Vietnam

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Question:

 We are essentially looking to enter Vietnam to offer retail banking services. We haven’t yet decided on the entry mode and are open to all possible options ranging from 100% foreign owned bank, joint-venture bank or a foreign bank branch. We are not really sure on pros and cons of each of the options and need some legal advice on it.

Essentially, we need your legal consulting services on helping us decide on suitable mode of entry and guidance on regulatory and operational processes for setting up a bank in Vietnam. It would be great if you could send across some material that can give us details on your services. We will go through it and then we can have further discussions on the next steps.

Also, there is one confusion that our legal team pointed out. We just have a total assets of about USD 1 billion and as per research from our local legal team that prevents us from entering Vietnam as a foreign bank. It would be great if you could provide your opinion on this aspect.

Answer:

Pursuant to the laws of Vietnam, the essential conditions for establishing a bank with 100% foreign capital, joint-venture bank or foreign bank branch are as follows:

(i) The operations expected to be conducted in Vietnam must be those activities which the foreign bank is licensed to conduct in your country;

(ii) A competent foreign authority has signed an agreement with the State Bank of Vietnam on inspection and oversight of banking operations and exchange of information on banking safety oversight and has made a written commitment on consolidated oversight of the foreign bank’s operations in accordance with international practices;

(iii) The Charter capital is at least equal to the statutory capital of 3,000 billion Vietnamese Dong for 100% foreign capital or joint-venture bank; and 15 million US Dollars for foreign bank branch;

(iv) Not to commit any serious violations of regulations on banking activities and other provisions of laws of its country within 05 consecutive years prior to the year of application for issuance of relevant permits and up to the time of licensing;

(v) Having profits in the 05 consecutive years prior to the year of application for issuance of relevant permits and up to the time of licensing;

(vi) Being evaluated by the competent authorities of its country that it can ensure the safety capital ratio, the other rate of safety assurance, fully complying with the regulations on risk management and fully appropriation in accordance with provisions of its country in the year prior to the year of application for issuance of relevant permits and up to the time of licensing.

(vii) Not being the owner, founding member, a strategic shareholder of other credit institutions of Vietnam.

In addition to the aforesaid conditions, the foreign bank must have total assets which is at least equivalent to: (i) 10 billion US Dollars for setting-up a bank with 100% foreign capital or a joint-venture bank; or (ii) 20 billion US Dollars for setting-up a branch, by the end of the year prior to the year of application for issuance of the relevant permits and to the time of licensing.

As per the information provided by you, your bank just have total assets of about 1 billion US Dollars. Therefore, the setting-up of a 100% foreign capital bank, a joint-venture bank or a branch is likely unsuitable to your current financial capability.

Otherwise, you can open a representative office in Vietnam. This mode does not require the financial capability of your bank. However, the representative office must not engage in any business activities. It is only permitted to perform trade promotion activities, and represent under authorization of and for the interests of your bank. Moreover, the head of the representative office shall not concurrently be the General Director (Director) of any branches of foreign banks in Vietnam.