VIETNAM - Country Update Securities and Banking 2024

1. VIETNAM - Country Update Securities and Banking 2024
Published 15-Feb-24 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 1, 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
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:

2.  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.
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.

3. 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. Further, according to the latest draft of the Decree
amending Decree 01, for certain banks categorized as credit institutions required to receive
transfer, the foreign ownership ratio can reach up to 49%.
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.
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 No. 134/2005/ND-CP on the same subject.

4. 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 No. 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 03.
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 working
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.
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.

5. 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 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.

6. 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%.
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.

7. 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:
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.

8. 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 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)

9. 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% of the shares they
own for six months from the date of listing and 50% 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.
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;

10. 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/TT-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.
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 51/2021/TT-BTC 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.

11. ***
Please do not hesitate to contact Dr. Oliver Massmann at omassmann@duanemorris.com if you
have any questions. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.