Legal Environment

for Banking
Operations
in Viet nam

Faculty of Economics and Laws

Pham Minh Quoc
Learning Outcomes:

 Understanding of legal framework of banks

and regulations for banking activities in
Vietnam
 Understanding of the issues relating to
business contract, legal disputes and
resolution for legal disputes in VN
 Realization of the effects of the legal system
on businesses and banking area
 Understanding and appreciation of the
importance of the State Bank of Vietnam in
relations with other Credit Institutions in
 The Content of the Course
Chapter 1: A Sketchy Introduction about
Vietnamese legal system and legal framework
for banking activities in Vietnam

Chapter 2: Forms of Business Organizations;

Basis of Contract Law; and Dispute
Resolutions for Business in Vietnam

Chapter 3: Legal status of the State Bank in

among Banking System in Vietnam

Chapter 4: Legal status of Credit Institutions

and basic legal regulations for banking
activities in Vietnam
Banking operations / activities = hoạt động tín dụng ( ngân hàng và các hoatj động tín
dụng khác)
Các tổ chức tín dụng ( Credit Institutions) gồm:
- Bank ( ngân hàng)
- Non – banking credit institution

CHAPTER 1

A Sketchy Introduction
about Vietnamese legal system
And legal framework
for banking activities in Vietnam
- What is Law?
regulation

“LEGAL ENVIRONMENT”???
“Banking legal environment” ???
- What are the different between
Common Law and Civil Law
Systems???
- Vietnam Legal System belongs to
the common law system or the civil
law system ????
legal environment: môi trường
pháp lý
Include a lot of components
+ Law, policies, The state and the
capacity of its bodies
WHAT DOES LEGAL ENVIRONMENT MEAN???

- The set or system of rules and regulations to be

abiding by law stimulating and regulating the business
is known as legal environment
- Legal Environment of business consists of various
legislations passed by the government, administrative
orders issued by the Government authorities, court
judgements and decisions rendered by various
commissions and agencies set up at every level of
the government.
- Legal environment of business also includes
international laws.
- Legal environment mentions not only to the field of
commercial law, but also other fields of law: tax and
financial law, environmental protection law, consumer
protection law, labor law, banking law…
 WHAT IS BANKING LEGAL
ENVIRONMENT ???

- BANKING IS A KIND OF BUSINESS. THIS

ACTIVITY MUST BE ADJUSTED AND
REGULATED BY LAW.

- BANKING LEGAL ENVIRONMENT IS A FIELD OF

LEGAL SYSTEM FOR DOING BUSINESS

- IN THIS REGARD, A LEGAL ENVIRONMENT FOR

BANKING OPERATIONS MEANS “A system of
rules and regulations to be abiding by law
stimulating and regulating the banking activities in
business”
 I/ Vietnamese Legal System -
Some introductions
The differences from the Civil Law System to the
Common Law System ???
- In common law countries, case law — in the form of
published judicial opinions — is of primary importance
- In civil law systems, codified statutes predominate.
- In fact, many countries use a mix of features from
common and civil law systems.

Vietnamese Law belongs to the Common Law

or Civil Law System???
 I/ Vietnamese Legal System -
Some introductions
Constitution Marriage and Fam
Law Law
Administration Labor Law
Law

Civil Law Branches Civil Procedure

of Law Law
in Vietnam
Financial and Banking Criminal Law
Law

Land and Environment Criminal Procedu

Law
Law
Economic Public and Private
Law International
 I/ Vietnamese Legal System -
Some introductions
Civil law Commo
n law
LEGISLATION CASE LAW:
- Fundamental and -Not popular yet
highest source -Under the form of
- Based on Legal Resolutions of
the Justice Council Of
Normative Documents
the Supreme People Court
system

Sources of
Law
in Vietnam

CUSTOMS & USAGES INTERNATIONAL LAW:

- Unwritten rules - TREATIES; FTAs
- Generated from the acts - Legal Doctrines
Behaviours
- Recognized by Law under
the form of general
principles
 I/ Vietnamese Legal System -
Some introductions
Hệ thống
CONSTITUTION VĂN BẢN
CIRCULARS
(National Assembly) QUY PHẠM (Chief Justice of the
PHÁP LUẬT Supreme People’s Court;
CODES and LAWS Chief Procurator of the
RESOLUTIONS Supreme People’s
(National Assembly) System of Procuracy;
Ministers; Heads of
Ordinances, Resolutions
Legal Normative
Ministerial Level Agencies )
(Standing Committee Documents
of the National Assembly) in Vietnam Resolutions of
People’s Councils of
ORDERS and DECISIONS
(the State President) all local levels
Law on Decisions of
Decrees (Gov.) Promulgation People’s Committees of
of all local levels
Decisions (Pr. Minister) Legal Normative
Legal normative
Documents
Resolutions of Documents of the Special
The Justice Council Of 2015 Administrative and Economic
the Supreme People Court Units Authorities
II/ Legal Framework for Banking in
Vietnam - Some introductions

II.1 Concepts of Banking Operations

& Banking System

II.2 Sources of Law for Banking

Activities in Vietnam
IT IS true or false if we say that:
a/ All activities relating to lending and
borrowing money would be considered
as banking activities ( False)
b/ Banks just give credit (grant credit)
for their customers (clients).
c/ All kind of credit institutions would
be considered as banks

to grant /granting credit

to give /giving credit
II.1 Concepts of Banking Operations
and Banking System
•What is a Banking Operation?

How do banks finance?

“Banks finance a large part of the granted
credits by attracting deposits from the
population and offer a series of services of
public interest.”
II.1 Concepts of Banking Operations
and Banking System
•What is a Banking Operation?
The signs (characteristics):
+ The banking transactions’s object is money
+ Professional activity (current operations include
granting credits and receiving deposits)
+ This operation must be run (carried out) by
banks or other credit institutions
- It is difficult to have a general definition
since it is varied and complex. Laws in many
countries usually list out the transactions
II.1 Concepts of Banking Operations
and Banking System
•What is Banking Operations?
In Vietnam the concept of Banking
Operations according to the Article 6 Clause
1 of the Law on the State Bank of Vietnam.
- Dealing in and regularly (currently) providing one
or several of banking operations
Includes:
+ Receiving Deposits
+ Extending Credits
+ Providing via-account payment services
II.1 Concepts of Banking Operations
and Banking System

•The structure of a Banking system:

A Banking System in a country usually includes

The Central Bank
Credit Institutions
 THE CENTRAL BANK (NATIONAL
BANK, STATE BANK…)
ItIt is
is aa civil
civil authority
authority financial
financial institution
institution which
which
operates
operates the the banking
banking activities
activities in
in order
order to
to
execute
execute the the national
national monetary
monetary policies.
policies.

2 major models:
* As a government agency:
its legal status, tasks and powers as of a government
agency. (eg, in Vietnam, Malaysia, China…)

* As a non-government organization:
this model is not entirely independent to the national
moneytary policies made by the Government.
(eg, in America, Hunggari, England…)
 Credit Institutions
Credit
Credit Institutions
Institutions exist
exist as
as enterprises
enterprises in
in order
order to
to
carry
carry out
out activities
activities in
in monetary
monetary business
business and
and
other
other banking
banking services
services arising
arising from
from their
their
monetary
monetary business.
business.

2 types of credit institution:

+ Banks (eg, Development Banks, Commercial

Banks, Banks for Social Policies, Joint Venture
Banks(ngân hàng vốn đầu tư nước ngoài)…)
+ Other non-banking credit institutions (Financial
Company; Leasing Company…)
 Banking system in Vietnam
THE STATE BANK OF VIETNAM

THE CREDIT INSTITUTIONS

+ Banks:
Commercial Banks
Policy Banks
Cooperative Banks
+ Non-banking credit institutions
Financial Company
Leasing Company
+ Microfinance institutions
+  People's credit funds 
+ Foreign bank branches and representative offices
 II.2 Sources of Law for Banking
Activities in Vietnam
* The Roles of Law to Banking Activities:
- Law takes a role of tool by which the State
executes its management function in the
field of banking.

- Law takes a role of a tool for credit

institutions to organize and operate their
banking business and other banking
services.

- Banking Law takes a role of tool for the

State to adjust the banking activities in a
 II.2 Sources of Law for Banking
Activities in Vietnam
* The sources of Law for Banking Activities:
. Statutes:
1/ Law on the State Bank of Vietnam 2010
2/ Law on Credit Institution 2010
3/ Other relevant Laws (e.g: Law on Enterprises
2014, Commercial Law 2005, Civil Code 2015…)
. Some Decrees issued by the Government in
order to implement Law on the SBV 2010 and
Law on CI(s) 2010.
. The SBV’s Circulars about the banking
and crediting activities.
. International law and customs.
 Chapter 2
Forms of Business Organizations;
Basis of Contract Law; and
Dispute Resolutions for Business
in Vietnam
I/ Forms of Business Organizations
in Vietnam

I.1 Some definitions relating to Business Operations,

Business Entities

I.2 Introduction about Law on Enterprises 2014 and

Law on Cooperative 2012

I.3 Legal characteristics of each form of enterprise

according to Law on Enterprises 2014

I.4 Legal characteristics of cooperatives according to

Law on Cooperative 2012
 List out the names of all kind of
business organizations in Vietnam
In Vietnam, according to Law on Enterprises
2014 and Law on Cooperatives 2012,
business organizations will be organized
under the following forms:
•ENTERPRISES AND COOPERATIVES
About Enterprises, there are following forms:
+ Limited Liability Company (Ltd Co.):
One member (Single member) Ltd Co.
Multi-member (Two or more members) Ltd. Co.
+ Share-holding Company (or Joint Stock
I/ Forms of Business Organizations
in Vietnam
I.1 Some definitions relating to Business Operations,
Business Entities

+ What does Business Operation mean?

See Cl.16 Art.4 LOEs
+ Distinguish a “business activity”/ a “civil activity”:
The aim of a business activity: to gain/seek profits
Carry out professionally and regularly
+ What does “Business Entities” mean?
Includes:
Enterprises (See Cl.7 Art.4 LOEs)
Cooperative (See Cl.1 Art.3 Law on Cooperative)
Household Business
Khái niệm “Pháp nhân”
The definition of “legal person”
Sinh viên nên xem định nghĩa về một pháp
nhân theo quan điểm của pháp luật Việt nam
trên nền tảng một QUY ĐỊNH ĐÃ CÓ TRONG BỘ LuẬT DÂN
SỰ ViỆT Nam 2015 – ĐiỀU

LEGAL STATUS – ĐỊA VỊ PHÁP LÝ, tư cách pháp ly

TƯ CÁCH PHÁP NHÂN – Have a legal status of “LEGAL PERSON”

Ông A là Giám đốc của một công ty TNHH X, theo Điều lệ của công ty đó có
ghi nhận: Giám đốc có quyền nhân danh công ty để ký kết hợp đồng. Như vậy:
Trong các giao dịch hợp đồng của công ty X với đối tác, ông A là người có tư
cách pháp nhân để ký kết các hợp đồng đó.
Câu khẳng định trên là sai vì: Trong giao trên chỉ có công ty X là pháp nhân, ông
A chỉ là cá nhân có thẩm quyền đại diện cho pháp nhân, nói cách khác ông A có
tư cách pháp lý là đại diện hợp pháp cho pháp nhân X để ký những hợp đồng mà
X là một bên trong quan hệ
 I/ Forms of Business Organizations
in Vietnam

I.1 Some definitions relating to Business Operations,

Business Entities

+ Distinguish a Business Entity/an Enterprise/a Trader

The definition of “Trader” according to Article 6,
Commercial Law 2005 includes: all enterprises and other
Business entities which have their business registration
Certificate and run commercial activities independently
and regularly

+ Distinguish “Limited Liability”/ “Unlimited Liability”

In Business:
In which business entities?
 I/ Forms of Business Organizations
in Vietnam
I.2 Introduction about Law on Enterprises 2014
and Law on Cooperative 2012
a/ Introduction about Law on Enterprises 2014:
+ The scope of governing of the law
+ The subjects for application of the law
+ The relationship between LOEs and other relevant law
in application
+ Basic legal rights and obligations of enterprises
a/ Introduction about Law on Cooperative 2012:
+ The scope of governing of the law
+ The subjects for application of the law
+ Some major principles in organization and operation of
cooperative
+ Basic legal rights and obligations of cooperative
 I/ Forms of Business Organizations
in Vietnam
I.3 Legal characteristics of each form of
enterprise according to Law on Enterprises 2014
a/ Legal characteristics of Multi-members Limited Liability
Company (See Articles 47 – 72 LOEs)

b/ Legal characteristics of Single-member Limited

Liability Company (See Articles 73 – 87 LOEs)

c/ Legal characteristics of Joint Stock Company

(See Articles 110 – 171 LOEs)

d/ Legal characteristics of Partnership

(See Articles 172 – 182 LOEs)

e/ Legal characteristics of Sole-propreatorship

(See Articles 183 – 187 LOEs)
 I/ Forms of Business Organizations
in Vietnam

I.4 Legal characteristics of cooperatives according to

Law on Cooperative 2012

• Requirements to be a member of cooperative

(See Article 13 Law on Cooperative)
• Capital contribution into cooperative and the member’s
Rights relating to his/her proportion of capital contribution
(See Articles 17, 18 Law on Cooperative)
• Organizational Structure and Management in cooperativ
(See Articles 29 - 41 Law on Cooperative)
• Properties and Financial Operations of cooperative
(See Articles 42 – 51 Law on Cooperative)
 II/ Commercial Contracts and
Law of Contract in Vietnam
II.1 Some basics about Commercial
Contract
a/ What is a Contract? (See Art.385 Civil Code 2015)
b/ Classification of Contracts:
* Depend on the forms of contracts, the classification of
contracts is into Oral Contracts and Written Contracts
* Depend on the contents of agreement of contracts, the
classification of contracts is into Bilateral Contracts and
Unilateral Contracts
* Depend on the purpose of the contract: Commercial
Contract, Civil Contract, Labour Contract, Credit Contract,
 II/ Commercial Contracts and
Law of Contract in Vietnam
II.1 Some basics about Commercial
Contract
• What is a Commercial Contract:
See Art. 385 Civil Code and Cl.1 Art.3 Commercial Law 2005
A credit contract is a commercial contract???
II.2 Law of commercial contract in Vietnam:
The relation between these
Legislative: Laws in application:
Civil Code 2015 (See Article 4 of
Commercial Law 2005)
Commercial Law 2005
Other relevant Laws
 II/ Commercial Contract and Law
of Contract in Vietnam
II.4 How to make a contract (See Articles 386 – 408
Civil Code 2015)
Making a contract means making legally binding agreements
by parties having full capacity to contract in order to create,
change or terminate a certain rights and obligations between
those very parties
a/ Parties into a contract – Parties’ Capacity to
contract
b/ Offer
c/ Acceptance
d/ Contents (Terms) of the contract
 Parties into a contract
The purpose of a contract is to establish the agreement that
the parties have made and to fix their rights and duties in
accordance with that agreement. The courts must enforce a
valid contract as it is made, unless there are grounds that
bar its enforcement.

 Parties into a contract therefore should be understood as the

subjects who are bound to the agreements of contract made by
them. They must performs all obligations arise from the contract in
accordance with their agreements.
 Parties into a contract should not be mistaken with the persons who
take part in the process of negotiation and sign that contract. These
persons maybe a representative for contract’s parties only.
 Representatives for parties includes:
+ Ex-officio representative (authorized/Official representative)
+ Appointed (mandated) representative
 Parties into a contract
Parties’ Legal Capacity:
Not all persons can in law enter into a valid contract
Persons do not have full capacity to contract:
Infants or Minors (See Art 20 and 21, Civil Code)
Persons mental ill or insane (See Arts 22, 23 Civil
Code)
Cases of restrictions on contractual capacity:
+ Addiction to drugs (See Art 24, Civil Code 2015)
+ Bankrupts
+ Convicts
 OFFER & ACCEPTANCE

WHAT IS AN OFFER (See Arts 386 – 392 Civil Code 2015)

Article 386, Clause 1 Civil Code 2015:
Offering to enter into a contract means the expression of
the intention to enter into the contract and to be bound
on this offer of the offering party to the other specified
party or to the public
WHAT IS AN ACCEPTANCE:
Article 393 Civil Code 2015:
The acceptance of an offer to enter into a contract is the
offeree’s reply to the offeror on the acceptance of the
whole contents of the offer
 OFFER & ACCEPTANCE
OFFER + ACCEPTANCE = AGREEMENT
Rules for an OFFER:
Must be communicated to a specified party or to
the public (See Article 386, Civil Code 2015)
Must show expressly offeror’s intention to enter
into contract
Offeror must be bound on his/her offer
May be modified, revoked in some cases (See Art.
389, Civil Code)
May be cancelled (See Art 390, Civil Code)
5 cases to be terminated (See Art 391, Civil Code)
 OFFER & ACCEPTANCE

OFFER + ACCEPTANCE = AGREEMENT

Rules for an ACCEPTANCE:
Must relate to the offer
Must be unqualified (or must be unconditional) –
Offeree must accept the whole contents of the offer
(See Art 393, Civil Code 2015)
Must reply to the offeror in the fixed time of the
offer (See Art 394 Civil Code)
May be revoked by the offeree (See Art 397, Civil
Code)
 II/ Commercial Contracts and Law of
Contract in Vietnam
II.4 Remedies for breach of commercial
contract:
6 types of Commercial remedies for breach of contract (See
Article 292, Commercial Law 2005):
1. Specific performance of contracts.
2. Fines for breaches (Penalty).
3. Forcible payment of damages (Damages).
4. Suspension of performance of contracts.
5. Stoppage of performance of contracts.
6. Cancellation of contracts.
Application of commercial remedies against insubstantial
breaches (See Article 293, Commercial Law 2005)
Cases of Exemption from liability for breach of contract
(See Art(s) 294, 295 Commercial Law 2005)
 II/ Commercial Contracts and Law of
Contract in Vietnam
II.4 Remedies for breach of commercial contract:

How to apply Specific performance of contracts (See Art(s)

297 - 299, Commercial Law 2005).
How to apply Penalty for breaches (See Art(s) 300-301,
Commercial Law 2005).
How to apply Forcible payment of damages (See Art(s) 302
– 307 and 316, Commercial Law 2005).
How to apply Suspension of performance of contracts (See
Art(s) 308-309 and 315, Commercial Law 2005).
How to apply Stoppage of performance of contracts (See
Art(s) 310 -311 and 315, Commercial Law 2005).
How to apply Cancellation of contracts (See Art(s) 312 –
314 and 315, Commercial Law 2005).
 III/ Introduction about dispute
resolution in Vietnam

III.1/ Governing Law for

dispute resolution in Vietnam

III.2 Dispute Resolution Means

in Vietnam
 III/ Introduction about dispute
resolution in Vietnam
Dispute Resolution Mechanism in Vietnam

Governing Dispute
Resolution
Law
Means

Vietnamese Foreign
Law Law

Arbitration
Negotiation

Mediation

Litigation
 III.1/ Governing Law for
dispute resolution in Vietnam

Notice:
- A choice of foreign governing law will not release a
foreign investor from any obligation under Vietnamese
Law.
- Generally speaking, Vietnamese law permits the choice
of a foreign law only where the contract involves a
”foreign element”, which typically means the involvement
of a foreign party or an asset located overseas.
- But the permission for a choice of foreign law is often
heavily qualified, including by the provison that the
foreign law (or its choice or its application) must not
contradict the ”fundamental principles of Vietnamese
law”.
III.2 Dispute Resolution Means
in Vietnam
By the mean of negotiation:
 - A method of dispute resolution without the role of the
third party.
- The negotiation having the basic characteristics inludes
parties together to present views, opinions, discuss and
find appropriate measures, and reach a consensus
agreement to resolve the disagreement.
- This method has following advantages:
+ A convenient, fast, simple, flexible, efficient and inexpensive.
+ Protection of reputation and business secrets of the parties
- Otherwise, this method has following disadvantages:
+ The result of the negotiation depends on understanding and
attitude, goodwill and cooperation of the parties.
+ The results of the negotiations are not enforced  by a legal
mechanism, which depends on the willingness of the parties to
implement.
III.2 Dispute Resolution Means
in Vietnam
By the mean of mediation / conciliation:
 - The Vietnamese requires the parties to certain disputes (including
civil, labour and family) at least attempt mediation before permitting
them to start litigation proceedings.
- Vietnam does not yet have any organizations or individuals
specializing in mediation or conciliation. However groups of non-
professional mediators are set up to carry out mediation at the local
community level.
- The enforcement of this method:
+ The method of enforceability depends on how the settlement was
reached.
+ If the parties reach a settlement during mediation or conciliation
that agreement will be enforceable as a normal contractual
agreement.
+ However, any pre-trial settlement agreement reached at a court
arranged conciliation meeting will be recognised as a judge”s
decision and deemed final and enforceable against the parties as
such.
III.2 Dispute Resolution Means
in Vietnam
By the mean of Arbitration

- In 2003, arbitration became an official mechanism for

resolving disputes arising from “commercial activities.”
- In June 2010, the Vietnam National Assembly
promulgated the Law on Commercial Arbitration, which
took effect on 1 January 2011 (“Arbitration Law”).
- The Arbitration Law is aimed at encouraging the
resolution of disputes in Vietnam by arbitration and
facilitating the development of commercial arbitration
activities in Vietnam in accordance with the country’s
ongoing socioeconomic development.
- The Arbitration regime in Vietnam is still developing
and awaits the issuance of guidelines and regulations
to implement the Arbitration Law.
III.2 Dispute Resolution Means
in Vietnam
By the mean of Arbitration

- The enforcement of this method:

+ Domestic arbitral awards are enforceable in the same
way as court judgments.
Historically, the choice of Vietnamese arbitration for
disputes was less popular due to limitations in the
commercial arbitration framework, including a lack of
party autonomy in appointing arbitrators and the inability
for arbitration tribunals to order interim relief.
+ From 1 January 2011, the new Law for arbitration
environment in VN addresses several of the
shortcomings of the previous regulations, making a
choice of domestic arbitration more attractive as the
dispute resolution forum for foreign investors.
 III.2 Dispute Resolution Means
in Vietnam
By the mean of Litigation:
- Resolving disputes by domestic court is a form of dispute resolution
through the activities of the State tribunals, on behalf of the State”s
authority to make the judgements required to be implemented, including
by coercive power, by obligors.
- Recourse to the domestic courts is often suggested by Vietnamese
partners and counterparties. Foreign investors, however, may be
reluctant to agree to this choice due to their unfamiliarity with the
Vietnamese courts, and potential concerns about the impartiality,
independence and efficiencies of the Court system.
- There are three levels of ordinary courts in Vietnam; the District
People”s Courts, provincial or city People”s Courts and the People”s
Supreme Court which supervises and directs the judicial work of
People”s Courts.
- Vietnam follows a civil law system. This means that Vietnam does not
follow the doctrine of precedent which is the basis for western common
law system such as the UK or USA. Instead judges base their
decisions solely upon the relevant legislation and principles of
 Chapter 3
Legal Status of
The State Bank of
Vietnam
 Legal Status of the State Bank of
Vietnam

1. Legal position and Functions of the SBV

2. Tasks and Powers of the State Bank

3. Organization and Management of the

State Bank

4. Operations of the State Bank

 Legal Position and Functions of
the SBV
1.1 Legal Position:
According to Article 2 – Law on the SBV 2010:
* The SBV is a ministerial-level agency of the Gov
* The SBV is the central bank of the Socialist
Republic of Vietnam. (Art.2 Clause 1 – Law on the
SBV)
* The SBV is a legal entity
* The SBV’s legal capital (authorized capital)
belongs to the state ownership (See Art.42,LSBV)
* The SBV’s head office is located in Hanoi
 1. Legal Position and Functions of the
SBV
1.2 Functions of the SBV:
* As a Government Body (Agency):
The SBV performs its function of state management
in currency, banking activities, and foreign exchange
in Vietnam.
* As a Central Bank of Vietnam :
- The SBV performs its function of issuance of money
- The SBV performs its function of a bank of credit
institutions
- The SBV performs its function of a porovider of
monetary services for the Gov.
 1.2 Functions of the SBV (See Art. 2, 4 Law on the SBV)
The SBV’s state management function:
The SBV takes a role of a ministerial-level agency,(cơ quan
cấp bộ) representing for and being responsible to the
Government in:
- Enforcement of national monetary policies (See Art(s) 10
-15)
- State management of banking activities (Art(s) 24, 25, and
27-41)
- Assurance for the safety and effectiveness of national
banking system (Art(s) 49 - 61).
The SBV’s Function of Central Bank :
- Having an exclusive right in issuing money (See Art(s)16-23)
- Taking a role of the Bank of Credit Institutions in Vietnam
(Art(s) 24-30)
- Conducting monetary services for the Government (Art(s)
 2 Tasks and Powers of the SBV
(Article 4 – Law on the SBV)

 Tasks and Powers of the SBV in performance

its function of state management:

 Tasks and Powers of the SBV in performance

its function of the central bank in Vietnam:
See Article 4, Clauses 8, 17, 18, 19, 22, 23, 24
and 25
 3 Organization and
Management of the SBV

HEAD OFFICE OF THE SBV

(In Hanoi – Central Leading and
managing Body)

Representative State
SBV’s
Office (in HCMC) Nonproductive
Branches Departments
(Dependent Units
at
Unit; (Banking Directly
Provinces
(Dependent
Not be allowed Academy; Under the
to conduct Banking News; SBV
Units of the
banking Banking
SBV)
activities) Magazine ...)
 3 Organization and Management of the SBV
• Organization and Management of the SBV are under
the leading and managing of its Govenor.
• The Govenor of the SBV: (See Art. 8 – Law on SBV)
The head and leader of the SBV
A cabinet member of the GOV (nominated by the PM and
approved by the NA)
The Govenor’s Tasks and Powers:
+ To organize and direct the implementation of the national
monetary policy in accordance with his(her) competence
+ To organize and direct the performance of tasks and the
exercise of powers of the SBV in accordance with the Law on
SBV and other relevant law.
+ To act as the ex officio representative of the State Bank
 4 Operations of the SBV
Issuance of money: (See Articles 16 – 23)
The SBV provides money for the monetary circulation process
through 4 following chanels:
- Through credit institutions: The SBV shall provide short-term loans for
credit institutions then money will be paid for depositors or will be
granted for the borrowers as loans... (See Art. 24)
- Through the Gov: The SBV shall provide advances for the central
budget to deal with a temporary deficit in the state budget fund. (See Art.
26)
- Through open-market operations: The SBV shall carry out the purchase
and sale of valuable papers with credit institutions (See Art 15)
- Through foreign exchange and gold trading activities: The SBV shall
buy the gold and foreign exchange sold by credit institutions.
 4 Operations of the SBV
Implementation of the National Monetary
Policy (See Articles 10 - 15)

The SBV shall carry out the National

Monetary Policy through the following tools:
1/ Re-financing (See Art 11)
2/ Interest Rates (See Art 12)
3/ Exchange Rates (See Art 13)
4/ Compulsory Reserves(See Art 14)
5/ Open-market Operations ( Art 15)
 The Ways For The SBV To Deal With
Currency Inflations
(When Monetary Supply>Monetary Demand)

 To Reduce Monetary Supply by:

Using the tool of Interest Rates: The SBV shall increase the prime
interest rate
Using the tool of Compulsory Reserves: The SBV shall increase the
compulsory reserve ratio applicable to credit institutions
Using the tool of Open-market Operations: The SBV shall sell
valuable papers to credit institutions.
Using the tool of Exchange Rates: The SBV shall sell gold
(belonging to the state foreign exchange reserve), foreign currencies
and other types of foreign exchange to credit institutions.
 To Stimulate Monetary Demand: The SBV shall petition
to the Gov for opening borders, loosening customs duties ...
 Other Operations of the SBV
 Credit Operations of the SBV:
1/ Lending: (See Art.24)
- The SBV shall provide short-term loans for credit institutions by
extending credits secured by the pledge of valuable papers. (See Art.11,
Clause 2. Point a)
- The SBV shall grant special loans for credit institutions in cases under
the Art.24 Clause 2.
The SBV shall not grant loans to other individuals and organizations.
2/ Guarantee: The SBV shall provide guarantee only for credit
institutions to borrow foreign loans under the PM’s Decision.
(See Art.25)
3/ Advances for the state budget: The SBV shall, under the PM’s
Decision, provide advances for the central budget to tackle the situation
of temporary deficit in the state budget fund.
(See Art. 26)
 Other Operations of the SBV

 Payment and Budget Operations of the SBV

1/ Open accounts and Carry out transactions via
accounts
(See Article 27)
2/ Oganize, Manage, Operate and Supervise the
national payment system
(See Article 28)
3/ Budget Services
(See Article 29)
4/ Agency for the State Treasury
(See Article 30)
 Other Operations of the SBV
 The SBV’s Operations relating to Foreign
Exchange (See Articles 31-34)
- The tasks and powers of the SBV in the
management of foreign exchange and foreign
exchange activities in Vietnam: (See Art31)
The SBV has the authority to grant and withdraw
foreign exchange operation permits to/from the credit
institutions and other institutions conducting foreign
exchange activities.
- What are included in the state foreign exchange
reserves ? (See Article 32)
 The SBV’s Banking Inspection and
Supervision (See Articles 49-61)
 Chapter 4
Legal status of Credit
Institutions and basic legal
regulations for banking
activities in Vietnam
 Legal status of Credit Institutions and
basic legal regulations for banking
activities in Vietnam
1. Definition of credit institution
2.Establishment, reorganization,
dissolution and bankruptcy of a Credit
Institution

3. The organizational structure, leading

and managing Credit Institutions

4. The limits for ensuring prudence in

operation of a Credit Institution
1. Definition, Characteristics and
Classification of Credit Institution
1.1 Definition of Credit Institution:
A credit institution shall be an enterprise which performs one
or several or all banking activities. Credit institution shall
include banks, non-banking credit institutions, micro-finance
institutions and people’s credit funds.
(See Article 4 Clause 1 – Law on Credit Institutions 2010)
1.2 Characteristics of credit institutions:
The business object of credit institutions is currency
Banking is the major, current and professional business of
credit instituitions (receiving deposits then using those
money to grant credits; supplying payment services).
Running their business under the SBV’s state management
in conformity with the law.
 1. Definition, Characteristics, Classfication
(continued)

3.1.2 Classification
* Base on the possesiveness of credit institutions’
chartered capital:
- State-owned Credit Institution:
- Shareholding Credit Institution:
- Cooperative Credit Institution:
- Foreign Investment Credit Institution:

*Base on the range of business activities of credit

institutions:
- Banks
- Non-banking Credit Institutions
2. Establishment, reorganization, dissolution
and bankruptcy of a Credit Institution
2.1 Establishment of Credit Institutions:

* The power of issuing the establishment and operation

license (the License): (Article 18) The SBV

* Conditions for issuing the License: (Article 20)

- Chartered Capital ≥ Legal (Registered) Capital
- The owner, founding member must qualify certain
conditions
- Managerial Officers, Exercutive Officers, member of
Controller Committee must qualify conditions as
regulated in Article 50
- The Charter must be in line with law
- Establishment Scheme, Business Plan must be
feasible.
2.1 Regulations on establishment of
Credit Institutions (continiued)
Establisment Process:
- The founder of credit institution shall submit the
application file for the License to the SBV (Art.21)
- Licensing Period: (See Art.22)
+Within 180 days: the SBV shall issue or decline to issue
the License to the applying institutions
+Within 60 days: the SBV shall issue or decline to issue the
License for the representative office of foreign credit
inst(s).
- Pay for the license application fee (See Art.23)
- Register business and operation (Art.24)
- Announcement of operation information (Article 25)
- Operation Opening: The conditions for operation
opening are regulated under the Art 26
 2.1 Establisment (Continued)
* Revocation of the License: See Art.28
6 cases for revocation of the License

* Changes subject to approval of the

SBV:
- In changing some contents as regulated under
Article 29
 2.2 Regulations on Special Control
(See Articles 145 - 152)
 Definition: Special control shall mean the case where a
credit institution is put under the direct control of the State
Bank because it is in the risk of insolvency, illiquidity.
(Art.146,1)
 Cases for putting a credit institution under special
control:
5 Cases (See Article 146 Clause 3)
 Legal effects in case of putting under special control of
the SBV
– Putting under the special control of the special control
Committee established by the SBV
– Suspend any activities not consistent with laws
– Suspend or temporarily suspend the right to manage of
managers…
– Be granted special loans from the SBV or other credit
institutions in some cases
 2.3 Reorganization, Dissolution and
Bankruptcy of Credit Institutions
a/ Forms of Reorganization: (See Article 153)
DIVISION, SPLIT, MERGE, ACQUISITION,
TRANSFORMATION

b/ Dissolution of a credit institution: (See Art. 154)

3 cases for dissolution of a credit institution

c/ Bankruptcy of a credit institution: (See Art.155)

After the State Bank has issued a dispatch on terminating
the special control or dispatch on terminating the
application of measures or dispatch on not applying
measures for recovering solvency, but the credit institution
still goes bankrupt
3 Organization Structure and Administration
and Management of Credit Institutions

Organization Structure: Head

Depend on the scale,
sphere of activities and
office
forms of credit
institutions

Branches Companies Non-productive

Representative Directly Units
(banking
offices Under (Trainning Schools,
exchanges) Information Center)
Control
Credit Institutions in the form of a Joint
stock Company

Shareholders’
General Assembly

Controllers’s
Board of Managers
Committee

Director
(General Directors)
 CREDIT INSTITUTION UNDER THE
FORM OF A LIABILITY LIMITED
COMPANY

BOARD
OF MEMBERS

DIRECTOR
CONTROLLERS’
(GENERAL COMMITTEE
DIRECTOR)
 CREDIT INSTITUTIONS UNDER THE FORM OF
COOPERATIVE BANKS & PEOPLE CREDIT FUNDS

Members’ General Meeting

Board of
Controller’s Committee
Management
 General regulations relating to the
managerial and executive officers of credit
institutions
1. PERSONS WHO ARE NOT PERMITTED TO ASSUME SOME
MANAGERIAL OR EXERCUTIVE POSITIONS (See Article 33)
2. PERSONS WHO ARE NOT PERMITTED TO CONCURRENTLY
UNDERTAKE DIFFERENT TITLES (See Article 34)
3. PERSONS WHO ARE AUTOMATICALLY NO LONGER
HAVING CAPACITY TO BE SOME MANAGERIAL AND
EXERCUTIVE POSITIONS (See Article 35)
4. EXONERATION, DISMISSAL, SUSPENSION AND
TEMPORARY SUSPENSION OF SOME MANAGERIAL AND
EXERCUTIVE POSITIONS ( See Articles36, 37)
5. RIGHTS AND OBLIGATIONS OF MANAGERIAL AND
EXECUTIVE OFFICES:
- General Rights and Obligations (See Article 38)
- Responsibility for unveiling information related benefits (See
Article 39)
4. The limits for ensuring prudence in
operation of a Credit Institution
(Arts 126 - 135)
a/ Cases prohibited from being granted credit (See
Article 126)
b/ Restriction on granting credit (See Art 127)
c/ Limits for granting credit (See Art. 128)
d/ Limits for contributing capital, buying share (See
Art. 129)
e/ Prudential ratios (Art 130 Law on CIs ; Circular
13/2010/TT-NHNN)
f/ Provision against risks in operations of CIs (Art.
131)
g/ Running business in Real Estates (Art 132)