Possibility to apply term deposit interest to security deposit (ký quỹ)

At law, enterprises engaging in certain special business lines (e.g. labour outsourcing service, employment services, etc.) (Security Deposit Enterprise) are required to place a security deposit at a licensed bank in Vietnam (Custodian Bank) before conducting the relevant businesses (Security Deposit). The Security Deposit is subject to strict control regulations (e.g. it can only be withdrawn or released in specific cases upon being approved by a competent authority). While the term of the Security Deposit could be long (e.g. more than one year), it is not entirely clear from the law whether the Custodian Bank can establish the Security Deposit as a term deposit and apply the respective interest rate.

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Written by Lawyers VNLaw On In

State Bank of Vietnam’s further clarifications on lending regulations

On 8 November 2023, the State Bank of Vietnam (SBV) issued Official Letter 8631 to publish answers to certain questions on lending regulations under Circular 6/2023 of the SBV dated 28 June 2023 (Circular 6/2023) amending Circular 39/2016 of the SBV dated 30 December 2016 on lending activities of credit institutions (CIs) and/or foreign bank branches with customers (Circular 39/2016).

The table below will highlight some notable answers of the SBV.

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Written by Lawyers VNLaw On In

No clear legal basis for controlling annual credit growth by Vietnamese credit institutions

In practice, annually, the State Bank of Vietnam (SBV) allocates annual credit growth limits to each credit institution including the finance company. However, the SBV’s allocation for each credit institution is not publicly available. Each credit institution will be subject to different credit growth limits. Based on newspaper reports, it appears the SBV takes into account the financial status of each credit institution, targeted inflation rate and targeted GDP growth rate to make the decision. In September 2022, it was reported that the SBV should use its ranking system to decide to allocate credit growth limits to each credit institution.

The planned credit growth limit for a year can be adjusted by the SBV during that year based on the assessment of the operation status and liquidity of each credit institution, as well as other development policies.

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Written by Nguyen Quang Vu On In

Vietnam Securities Depository Center becoming Vietnam Securities Depository and Clearing Corporation and its implication

In December 2022, the Prime Minister decided to establish VSDC by converting Vietnam Securities Depository Center (VSD) being a Government agency under the State Securities Commission (SSC) into a single limited liability company under the Enterprise Law 2020. The Minister of Finance will act as representative of the State capital in VSDC.

The conversion of VSD into VSDC could have the following legal implications:

  • As an enterprise, VSDC can now be exposed to civil claims by its users if VSDC breaches its rules or contracts signed with securities companies, listed companies or other users. VSDC could also be subject to non-contractual claims by securities investors. As a Government agency, VSD is only exposed to administrative claims by its users which are more limited than civil claims.

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Written by Nguyen Quang Vu On In ,