The commercial bank is required to convert its transaction departments into branches, and saving deposit funds and transaction places into transaction offices on the basis of meeting requirements of the Circular within 24 months after the effectiveness of the Circular. If the commercial bank does not convert them, the commercial bank must terminate their operations.— File Photo

The Circular regulates the procedures for establishment, change of name, change of location, termination of operation, and dissolution of domestic branches, transaction offices, representative offices, professional units and overseas branches, representative offices or Vietnamese commercial banks abroad. The Circular has more specific and tight provisions to govern the operational network of commercial banks as compared with the previous provisions. Some major provisions are listed below.

No more transaction departments, saving deposit funds and transaction places

The commercial bank is required to convert its transaction departments into branches, and saving deposit funds and transaction places into transaction offices on the basis of meeting requirements of the Circular within 24 months after the effectiveness of the Circular. If the commercial bank does not convert them, the commercial bank must terminate their operations.

Authority of the SBV Governor

Under the Circular, in conformity with the objectives for operating the monetary policy from time to time, the SBV Governor has authority to approve or not approve of establishment, termination of operation or dissolution of a domestic branch, transaction office, representative office or professional unit, or establishment of an overseas branch, representative office or Vietnamese commercial banks abroad. The SBV Governor can authorize directors of State Bank branches to approve or not approve of the followings of commercial banks:

1. Change of name, change of location of the domestic branch or transaction office within the locality;

2. Termination of operation of the transaction office within the locality (in case of voluntary termination of operation);

3. Change of the branch which manages a transaction office within the locality;

4. Satisfaction of conditions to open operation of the domestic branch or transaction office within the locality.

In some specific cases, the SBV Governor will consider a request of the commercial bank to establish a domestic branch, transaction office, representative office, professional unit, or overseas branch, representative office or Vietnamese commercial banks abroad for serving the objectives of developing the economy, society, politics, national security and defense, diplomacy, and operating the monetary policy from time to time, in compliance with the Circular and in conformity with actual conditions.

Tightening conditions to establish operational units of commercial banks

One of the conditions for the commercial bank to establish a domestic branch, transaction office, overseas branch or Vietnamese commercial banks abroad is that its bad debts ratio over total debts on 31 December of the year immediately preceding the year of the request must not exceed 3 per cent or another ratio determined by the SBV Governor from time to time. (Decision 13/2008/QD-NHNN of 29 April 2008 only provides a ratio of bad debts over total debts less than 3 per cent at the time of the request of opening a domestic transaction department, branch or overseas branch, representative office). The commercial bank is permitted to establish a maximum of 10 branches in each inner Ha Noi or HCM City.

Additionally, the commercial bank which has been operating for less than 12 months (from the opening day until the request time) is only permitted to establish a maximum of three branches. The branches must not be within the same province or city under central authority. If the commercial bank has been operating for 12 months or more (from the opening day until the request time), it is only permitted to establish a maximum of five branches within one financial year.

The commercial bank which terminates the operation of its branches in inner Ha Noi or HCM City is permitted to establish the same number of terminated branches in another province or city under central authority, apart from the maximum number permitted to be established (five branches) within one financial year.

To establish an overseas branch or Vietnamese commercial banks abroad, the commercial bank must have total assets of VND100,000 billion or more in accordance with its audited consolidated financial statements on 31 December of the year immediately preceding the year of request.

This Circular takes effect on 23 October 2013 and replaces the SBV Governor Decision 13/2008/QD-NHNN on the operational network of commercial banks. — MAI COUNSEL