COUNTRY UPDATE-Vietnam: Securities & Banking

1. COUNTRY UPDATE-Vietnam: Securities &
Banking
Updated on 18 January 2023 by Dr. Oliver Massmann, Duane Morris Vietnam LLC
The State Bank of Vietnam (Ngan hang Nha nuoc Viet Nam, SBV) is the central bank of
Vietnam. It is a ministry-level body under the administration of the government. The SBV
governor is a member of the cabinet. The prime minister and the parliament of Vietnam
(National Assembly) act jointly to nominate the governor of the SBV. The SBV's principal
roles are to:
• Support monetary stability and implement monetary policies.
• Support institutions' stability and supervise financial institutions.
• Support banking facilities and recommend economic policies to the government.
• Support banking facilities for financial institutions.
• Manage the country's foreign exchange reserves.
• Manage foreign exchange and gold trading activities.
• Manage the borrowing and repayment of foreign loans, the provision of loans to
foreign parties and recovery of foreign debts.
• Print and issue bank notes.
• Supervise all commercial banks' activities in Vietnam.
• Lend State money to commercial banks.
• Join the Ministry of Finance in issuing government bonds and government-
guaranteed bonds.
• Act as an agent for the State Treasury in organizing bids and in issuing,
depositing and making payment for treasury bonds and bills.
• Be in charge of other roles in monetary management and foreign exchange rates.
In 1990 the bank system was reorganized. This process led to a separation of the SBV
from other commercial banks and was the start of the establishment of the private
banking sector. A small number of major state-owned commercial banks still dominate
Vietnam's banking sector.
However, today a process of privatization is underway and the goal is to reduce the
state's share of ownership step-by-step to at least 51% during 2021-2025 under
Decision No. 986/QĐ-TTg dated August 8, 2018 of the Prime Minister approving the plan
for development of Vietnamese banks up to 2025, vision to 2030.
As of December 01, 2022, the State's ownership ratios in 4 largest state-owned
commercial banks are as follows: (i) 80.9% in BIDV, (ii) 74.8% in Vietcombank, (iii)
64.46% in Vietinbank, and (iv) 100% in Agribank.
Foreign ownership restrictions for Vietnamese credit institutions

2. On January 3, 2014, the government-adopted Decree 01/2014/ND-CP on purchase by
foreign investors of shareholding in Vietnamese credit institutions. Decree 01 became
effective on February 20, 2014 and replaced Decree 69/2007/ND-CP on purchase by
foreign investors of shareholding in Vietnamese commercial banks.
In Decree 01, Vietnamese credit institutions, which may offer shares, include:
• shareholding credit institutions (i.e., a credit institution established and organized
in the form of a shareholding company and include shareholding commercial
banks, shareholding finance companies and shareholding finance leasing
companies); and
• credit institution currently converting its legal form from a credit institution
operating in the form of a limited liability company to become a credit institution
operating in the form of a shareholding company.
Foreign investor includes foreign organizations (institutions) and foreign individuals.
Foreign organizations include:
• Organizations established and operating under the laws of a foreign country and
any branch of such institutions overseas or in Vietnam; and
• an organization, closed-ended fund, members' fund or securities investment
company established and operating in Vietnam with foreign capital contribution
ratio above 49%. Foreign individual means any person who does not hold
Vietnamese nationality.
Decree 01 defines that shareholding ownership (shareholding) includes direct and
indirect ownership. However, Decree 01 does not explain clearly the scope of direct and
indirect ownership.
In a case of purchase of shareholding by a foreign investor in a Vietnamese credit
institution resulting in such foreign investor's ownership of shares below 5% charter
capital of the Vietnamese credit institution, a prior approval of the SBV is not required. In
other cases, any acquisition by foreign investors of shareholdings in a Vietnamese credit
institution requires the prior approval of the SBV.
The shareholding ratio of any one foreign individual must not exceed 5% of the charter
capital of one Vietnamese credit institution. The shareholding ratio of any one foreign
organization must not exceed 15% of the charter capital of one Vietnamese credit
institution.
Any foreign investor that is an organization owning 10% or more of the charter capital of
any one Vietnamese credit institution is not permitted to assign the shareholding it owns
to any other organization or individual within a minimum three year period as from the
date of ownership of 10% or more of the charter capital in such credit institution.

3. The shareholding ratio of any one strategic foreign investor must not exceed 20% of the
charter capital of one Vietnamese credit institution. The investor may not transfer its
shares in the Vietnamese credit institution within five years after becoming the foreign
strategic investor in the Vietnamese credit institution.
A strategic investor is defined as a foreign organization with financial capacity and
whose authorized person provides a written undertaking to have a close connection
regarding long-term interests with the Vietnamese credit institution and to assist the
latter to transfer to modern technology, to develop banking products and services, and to
raise its financial, managerial and operational capacity.
The shareholding ratio of any one foreign investor and its affiliates must not exceed 20
percent of the charter capital of one Vietnamese credit institution. The total shareholding
ownership of all foreign investors must not exceed 30% of the charter capital of any one
Vietnamese commercial bank.
The total shareholding ownership of all foreign investors in any one Vietnamese non-
banking credit institution shall be implemented in accordance with the law applicable to
public companies and listed. When there are none specific regulations on the rate of
foreign ownership, the maximum rate of foreign ownership will be 49% of charter capital
of such institution.
In a special case in order to implement restructuring of a credit institution which is weak
and/or facing difficulties, in order to ensure safety of the credit institution system, the
Prime Minister may, on a case-by-case basis, make a decision on the total shareholding
ratio of any one foreign organization or any one foreign strategic investor, and the total
level of shareholding of foreign investors in any weak shareholding credit institution
which is restructured, in excess of the limits described above.
Under the Government's instruction in 2018, the MoF is required to draft a Government's
decree to allow foreign ownership ratio in commercial banks in Vietnam up to 50%.
However, this decree would only be finalized and adopted in the fourth quarter of 2019.
However, at the time of writing, the Government has not published any decrees allowing
for the 50% rate that is foreign investors consider very attractive. Nevertheless, a point
worth noting is that Vietnam committed in EU-Vietnam Free Trade Agreement and the
EU-Vietnam Investment Protection Agreement to: (i) increase the share ownership ratio
of European investors to 49% in two Vietnamese banks (except the aforementioned 4
largest State-owned banks) in the next 5 years; and (ii) after 5 years, there will be no
limitation on foreign ownership ratio in Vietnamese commercial banks for European
financial institutions. The Agreements were signed in June 2019 and the EU-Vietnam
Free Trade Agreement came into force on August 1, 2020. The EU-Vietnam Investment
Protection Agreement is pending ratification by EU Member States.
Foreign exchange regulations
The Ordinance on Foreign Exchange, which was enacted by the Standing Committee of
the National Assembly in December 2005 and became effective in June 2006, and
amended on March 18, 2013, regulates currency exchange activities in Vietnam. The
government has promulgated Decree No. 70/2014/ND-CP to provide guidelines for both
the Ordinance on Foreign Exchange and its amendments on March 18, 2013.

4. Decree 70 became effective on September 5, 2014 and replaced Decree No.
160/2006/ND-CP dated December 28, 2006 to provide detailed implementation of the
ordinance.
Decree 70 governs the foreign exchange activities of residents and non-residents in
current transactions, capital transactions, foreign loan borrowing, use of foreign currency
and provision of foreign exchange services, the foreign currency market and rates of
exchange, and the management of import and export of gold in Vietnam.
With regards to foreign loan borrowing, the government has also promulgated Decree
No. 219/2013/ND-CP dated December 26, 2013 on the management and repayment of
offshore loans that are not guaranteed by the government. Decree 219 became effective
on February 15, 2014 and replaced Decree 134/2005/ND-CP on the same subject.
Decree 219 governs all businesses that are incorporated under the Enterprises Law,
credit institution and foreign bank branches under the Law on Credit Institution, and
cooperatives and unions of cooperatives established and operating under the Law on
Cooperatives.
Offshore loans under Decree 219 include loans from non-residents under loan
agreements, deferred payment commodities sale and purchase agreements, entrusted
loan agreements and debt instruments issuance agreements that are not guaranteed by
the government. In general, foreign borrowing must comply with the regulations of, and
is subject to, registration with the SBV.
However, Decree 219 does not state clearly that requirements and types of loans should
be registered, or any licensing/registration procedures. These issues have been
addressed by the SBV's guidelines i.e., Circular 12/2022/TT-NHNN dated September
30, 2022 providing certain guidelines on foreign exchange control in relation to foreign
borrowing activities. Circular 12 came into effect on November 15, 2022 and replaced
Circular 03/2016/TT-NHNN and its amending circulars. Circular 12 has helped to
improve the legal framework for management of the borrowing and repayment of
enterprises in general and enterprises not guaranteed by the government. Some
highlights of the Circular 12 are:
Loans made in the form of deferred payment for import of goods no longer requires
registration with the SBV. However, the opening and use of bank accounts and
remittance activities must comply with the requirements of Circular 12.
Loans subject to registration with the State Bank include: (i) mid-term and long-term
foreign loans, (ii) short-term foreign loans having a principal payment period extended
for which the total term is more than one year; and (iii) short-term foreign loans which
are not renewed but loans' outstanding principal amounts have not been fully repaid
prior to or within 30 workings days after one year from the date of first loan withdrawal.
Circular 12 has also extended the timeline to register the offshore loans and
amendments to the registered offshore loans, from 30 days (as previously stipulated in
Circular 03/2016/TT-NHNN) to 30 working days from the signing date of the loan
agreement or amendment agreement, giving more time for the borrower to prepare to
lodge the application dossiers to the SBV for the registration of offshore loans or the
registration of any amendments to the registered offshore loans.

5. A borrower that is not a foreign invested enterprise must open a bank account for the
purposes of the foreign loan at the authorized banks in Vietnam. For foreign invested
enterprises, they may choose to use a direct investment capital account (DICA) for the
purpose of receipts and expenditures, with respect to the medium or long-term offshore
loan(s). A DICA can be utilized by the borrower for the same purpose, regarding the
short-term loan(s) in addition to its current offshore loan account(s).
.
If the schedule of loan disbursement, repayment or interest payment changes by less
than 10 days from the schedule already registered with the SBV, the borrower must only
notify the changes on the Website for management of foreign loans and repayments that
are not guaranteed by the Government (www.sbv.gov.vn or www.qlnh-sbv.cic.org.vn),
and does not need to register the changes with the SBV. However, if the schedule
changes by more than 10 days, then reregistration with the SBV is required.
Circular 12 also allows notification to SBV (instead of change registration) with regards
to certain corporate changes of information that has been registered with SBV such as
change (increase or decrease) in the amount of capital withdrawal, repayment of
principal, interest, and fees within 100 currency units of the foreign loan currency
compared with the corresponding content as previously certified by the SBV, change of
address of the borrower within the province/city where it has head quarter, or change of
trade names of the relevant banks who provide account services, etc.
The government issued Decree No.88/2019/ND-CP on November 14, 2019 on sanctions
of administrative violations in the field of monetary and banking operations. Decree 88
became effective on December 31, 2019 and replaced (i) Decree No.96/2014/ND-CP
dated December 12,2014, (ii) Decree No. 95/2011/ND- CP dated December 20, 2011,
and (iii) Decree No. 202/2004/ND-CP dated December 10, 2004 on sanctions of
administrative violations in the field of monetary and banking operations.
This decree was said to loosen forex and gold trading and relevant activities in Vietnam.
According to this decree, monetary penalties in relation to gold and forex trading, price
listing/payment/advertising in forex/gold, etc. were significantly reduced i.e., from VND
600 million (approximately $26,000) to VND 250 million (approximately $11,000). For
instance, the possible penalty for violations re: trading on gold bars without license is
only warning for the first-time getting caught or a possible penalty for violations re: forex
activities conducted by credit organizations without licenses may be up to VND 250
million (approximately $11,000) which is about 3 times less than the amount stated in
Decree 96. On another note, forex/gold relevant to trading violations may be confiscated
and certificate of registration for forex agent and business operation license of gold of
relevant parties may be also suspended or revoked.
Developments in securities regulation
In early 2007 the first Securities Law of Vietnam (No. 70/2006/QH11, 2007) came into
effect, which consisted of 11 chapters and 136 articles (as amended on November 24,
2010). The Securities Law primarily covers domestic issues of Vietnam dong-
denominated securities and is, therefore, limited to public issues of securities and does

6. not apply to the private placement of unlisted securities. The term "securities" covers a
wide range of valuable instruments, including:
• Stocks.
• Bonds.
• Warrants.
• Certificates.
• Put and call options.
• Futures contracts, irrespective of their form.
• Investment capital contribution contracts.
Specifically, the Securities Law governs:
• Public offerings of securities.
• Listings.
• Dealing.
• Trading.
• Investment in securities.
• Securities services.
The establishment and regulation of securities companies and investment funds
The Securities Law 2019's area of application considers the systems for trading of listed
securities and the systems for trading of unlisted securities, organized and run by
Vietnam Stock Exchange (VSE) and its subsidiaries. The local regulator, the State
Securities Commission, controls and supervises these systems; however, they are
independent legal entities. The SSC is a State body that the Ministry of Finance
oversees.
The government and the MoF have issued several decrees, decisions and circulars to
implement the Securities Law. Under the Securities Law, publicly offered securities in
Vietnam have to be denominated in VND. A joint-stock company must satisfy the
following requirements to offer its shares publicly for the first time, among others:
a) The contributed charter capital is at least 30 billion VND on the offering date
according to the accounting books;
b) The company has profit over the last 2 years and has no accumulated loss on the
offering date;
c) There is a plan for issuance and use of capital generated by the offering ratified by the
General Meeting of Shareholders;
d) At least 15% of its voting shares have been sold to at least 100 non-major
shareholders. If the issuer's charter capital is 1.000 billion VND or above, the ratio shall
be 10%.

7. e) Before the offering date, the major shareholders have made a commitment to hold at
least 20% of the issuer’s charter capital for at least 1 year from the end of the offering.
On January 10, 2012, the MoF issued Decision No. 62/QD-BTC re: approval of project
plan for restructuring of securities companies. This decision was known as a key in the
master plan to renovate the stock market/sector, insurance market and securities
companies which have been submitted to the Party Politburo by the MoF. According to
this decision, securities companies shall be evaluated based on available
capital/risk/accumulated losses index and categorized into three groups (normal, control
and special control).
The decision does not provide any clear restructuring plan but promulgates certain
controlling methods and penalties applicable to securities companies not satisfying the
required available capital/risk index such as disclosure/report requirements, supervising
or license withdrawal.. On February 28, 2019, the Prime Minister issued Decision
No.242/QD-TTg, approving the plan for restructuring.
Decree No. 155/2020/ND-CP was issued on December 31, 2020 to provide guidelines
for Securities Law 2019 and the Law amending certain articles of the Securities Laws on
offers for sale of securities, listing, trading, business and investment in securities, and
services in relation to securities and securities market. This decree abolished Decree
No. 58/2012/ND-CP dated July 20, 2012 and Decree No. 60/2015/ND-CP dated June
26, 2015.
Decree 155 does not limit foreign ownership applicable to public companies engaging in
business lines that do not have foreign-ownership threshold in Vietnam, and allow
foreign companies to invest in government's and companies' bonds in Vietnam.
Public offerings
To open the procedure for public offering it is necessary to file an application in the form
of a registration statement, which includes:
• The prospectus.
• The audited financial statements for the preceding two fiscal years.
• The issuer's constitutional documents and relevant corporate resolutions.
The main contents of a prospectus are prescribed in Circular No. 120/2020/TT-BTC
dated December 31, 2020 of the MoF providing guidance on listing of securities on stock
exchanges. Foreign investors should be aware of the lack of fixed standards for financial
statements and accounting in Vietnam, which can result in inconsistencies in financial
reporting and quality levels.
Private placements
A private placement is defined in the Securities Law 2019 as an arrangement for offering
securities to less than one hundred investors, not including professional securities
investors or for offering to professional investors only.
Securities Law 2019 provides conditions for a private placement made by public
companies as follows:

8. a) There is a decision of the General Meeting of Shareholders to ratify the plan for
issuance and the plan for use of capital generated by the private placement with specific
criteria and quantity of investors;
b) The private placement is only available to strategic investors and professional
investors;
c) The transfer of privately placed shares, convertible bonds and warrant-linked bonds is
limited to 03 years for strategic investors and 01 year for professional investors from the
ending date of the private placement, except for transfer between professional investors,
transfer under an effective court judgment or decision, arbitral decision, and transfer due
to inheritance as prescribed by law;
d) There is an interval of at least 6 months between two private placements of shares,
convertible bonds, warrant-linked bonds;
e) The ratio of holding of shares, conversion of bonds into shares and execution of
warrants by foreign investors is conformable with law.
If an application file is incomplete and invalid, the competent State authority shall, within
five days from the date of receipt of the application file for registration of a private
placement of shares, provide its opinion in writing requesting the issuing organization to
amend the file. The date of receipt of the valid and complete file shall be the date on
which the issuing organization completes amendment and addition to the file.
Within 15 days from the date of receipt of the valid and compete file for registration, the
State authority provides notification to the registering organization and publish on its
website the private placement of shares of the registering organization. The issuing
organization shall, within 10 days from the selling tranche completion date, submit a
report on the results of the private placement to the competent State authority on the
standard form annexed to Decree 155/2020/ND-CP.
Conditions for listing on Vietnam Stock Exchange (which has two subsidiaries being
Hanoi Stock Exchange and Ho Chi Minh Stock Exchange)
A company may have its shares listed if:
a) It is a joint stock company whose contributed charter capital at the time of listing
application is at least 30 billion VND according to the latest audited financial statement
and its net worth is at least 30 billion VND according to weighted mean of buying price of
shares in the latest public offering as prescribed by this Decree, or the average
reference price of shares traded on UPCOM over the last 30 sessions before the
application is submitted or the weighted mean of buying price in the first offering of the
equitized enterprise.
b) The GMS has approved the listed; shares have been traded on UPCOM for at least 2
years unless the applicant has made public securities offering or equitized;
c) ROE of the year preceding the application year shall be at least 5% and the business
performance of 2 years preceding the application year is profitable; there are no debts
that have been overdue for more than 1 year up to the application date; there is not
accumulated loss according to the latest audited annual financial statement or examined

9. mid-year financial statement in case the application is submitted after ending date of the
period covered by the mid-year financial statement;
d) Unless the enterprise is equitized, the applying organization shall have at least 15%
of voting shares being held by at least 100 shareholders other than major shareholders;
in case the organization's charter capital is at 1000 billion VND or over, the ratio shall be
10%;
e) Shareholders that are individuals, organizations represented by President of the
Board of Directors, members of the Board of Directors, Chief Controller, Controllers,
General Director/Director, Deputy Director/Deputy General Director, chief accountant,
Financial Director and people holding equivalent managerial positions shall have
commitment to keep holding 100% of the shares they are holding for 06 months from the
first trading date of on the Stock Exchange and 50% of these shares for the next 06
months, not including the state-owned shares owned by these individuals;
f) The company and its legal representative have not face penalties for 02 years before
the application date for the violations specified in Article 12 of the Law on Securities;
g) There is a securities company that provides listing advisory services, unless the
applying organization is a securities company.
Registration at Vietnam Stock Exchange (VNX)
Companies wishing to register to list securities must lodge an application file for
registration for listing with the VNX. An application file for registration to list shares shall
comprise the following key documents, among other things:
• General meeting of shareholders' approval;
• Register of shareholders, as entered one month prior to the date of lodging the
application;
• Prospectus;
• Undertaking of certain shareholders such as members of the board of
management or board of controllers, the director (general director), deputy
director (deputy general director) and the chief accountant of the company, etc. to
hold 100 percent of the shares they own for six months from the date of listing
and 50 percent of this number of shares for the following six months;
• Certificate from the Securities Depository Centre confirming registration by the
institution and deposit of the shares at such Centre; and
• Written consent from the State Bank in the case of a shareholding credit
institution.
The VNX/HOSE/HNX shall approve or refuse to approve an application for registration
for listing within 30 days from the date of receipt of a complete and valid application file,
and in a case of refusal shall specify its reasons in writing.

10. Decree No. 155/2020/ND-CP dated December 31, 2020 on foreign ownership in
stock market
In April 2009, the Prime Minister issued Decision 55/2009/QD-TTg governing the
purchase and sale of "securities in Vietnam's stock market". It stipulates the difference
between local investors and foreign investors, in accordance with foreign-invested local
investment funds. It also states the 49 percent rule. This means that local investment
funds and local securities investment companies are considered foreign investors if
foreigners hold more than 49% of the interest of a corporation.
The above limitation of 49% was removed on September 1, 2015 under Decree No.
60/2015/ND-CP, i.e., generally there is no limitation on foreign ownership ratio except for
"conditional" sectors. In particular, the limitation would be subject to the WTO
commitments or other specific domestic law (e.g., the 30% cap in the banking sector).
Under Decree 155, the above limitation is elaborated as follows:
Maximum foreign ownership ratio in a public company:
a) If the business lines of the public company are regulated by a treaty to which Vietnam
is a signatory, the treaty shall apply;
b) If the business lines of the public company is regulated by regulations of law which
specify foreign ownership ratio, these regulations shall apply;
c) If the business lines of the public company are on the list of restricted market access,
regulations on foreign ownership ratio of each category shall apply. If foreign ownership
ratio limits are not specified in such regulations, the maximum foreign ownership ratio in
the company shall be 50% of charter capital;
d) If the public company does not fall into any of the cases specified in Points a, b, c,
there is no maximum limit for foreign ownership ratio;
e) In case the public company has multiple business lines that are subject to different
foreign ownership ratio limits, the foreign ownership ratio must not exceed the lowest
limit among them;
f) In case the public company imposes a foreign ownership ratio limit that is lower than
that specified in Points a, b, c, d and e, it must be approved by the GMS and specified in
its charter.
Foreign investors may invest without limits into debt instruments of the Government,
government-backed bonds, municipal bonds, corporate bonds, fund certificates, shares
of investment companies, derivative securities, DRs and secured warrants, unless
otherwise prescribed by relevant laws.
Circular 51/2021/BTC dated June 30, 2021
At the end of 2008, two years after the first Securities Law, the SSC and the MoF
enacted Decision 121/2008/QD-BTC to make the market more interesting for foreign
investment as well as to penalize those who disobey the Securities Law. Decision 121
governed the activities of foreign investors in the Vietnamese securities market.

11. On December 6, 2012, the MoF adopted Circular 213/2012/TT-BTC governing foreign
investors' activities in Vietnamese securities market. Circular 213 became effective on
February 15, 2013 and replaced Decision 121.
On August 18, 2015, the MoF issued Circular 123/2015/TT-BTC governing foreign
investment activities in Vietnamese securities market (became effective on October 1,
2015), to guide Decree 60 and replace Circular 213. On 16 August 2021, Circular 123
was replaced by Circular 51 of 2021.
Circular 51 provides detailed documents and procedure for foreign investors to operate
in the Vietnam’s stock exchanges. The circular streamlines the procedures for market
participation of foreign investors in the Vietnam’s stock market by reducing the amount
of necessary documentation and simplify the procedure. For example, the circular
removes the need to translate documents into Vietnamese by allowing them to be
submitted in English.
The circular sets out that foreign investors are required to apply for the Securities
Trading Code (STC) before trading shares, bonds or other types of securities under the
securities market regulations.
Notification procedure on foreign ownership limits (FOL)
Circular 155 requires that public companies are responsible for determining the
applicable FOL. Following the determination of the FOL which is applicable to them,
companies must file a notification dossier with the State Securities Commission (SSC).
This dossier includes: (i) extracted information on business lines as uploaded on the
National Business Registration Portal and the electronic address linking to such
information; and (ii) Minutes of Meeting and the Resolution of the Board of Management
approving the unrestricted FOL (if the company does not wish to maintain an FOL) or
Minutes of Meeting and the Resolution of the General Shareholders' Meeting approving
and the charter providing for the specific FOL (if the company wishes to maintain FOL).
The SSC will have 7 working days to acknowledge in writing the notification on FOL.
This country profile was kindly provided by Dr. Oliver Massmann, General Director
of Duane Morris Vietnam LLC