Vietnam – Banking – Solutions for Liquidity and Non-performing Loans

1. VIETNAM - BANKING – SOLUTIONS
FOR LIQUIDITY AND NON-PERFORMING LOANS
By Oliver Massmann
The State Bank of Vietnam (SBV) is in the verge of creating a better administered and
transparent banking system. To become an international attractive financial market, the SBV
needs to implement the planed Circulars and adopt international financial standards as described
below.
Foreign exchange governance
The Foreign Exchange Ordinance is revised by Article 1.4, Ordinance No. 06/2013/PL-
UBTVQH13 which specifies that enterprises with foreign direct investment and foreign investors
shall set up a direct capital account in an eligible credit institution, and all transactions regarding
equity financing and capital earnings shall be made through this account. The SBV implemented
Circular 19 to guide the Ordinance and clarified that foreign invested companies and foreign
investment projects have to comply with all relevant national regulations, i.e. Investment Law,
Enterprise Law, Personal income-tax Law, Corporate income-tax Law.
It is recommended that SBV includes and provides guidance on the transfer in foreign currency
since it is only allowed to take US$ 5,000 abroad and the transfer of funds in foreign currencies
is restricted.
Possible additional banking products by the SBV
The draft Circular which is replacing Decision 1627 is not specific enough on debt restructure
lending. Credit institutions and branches of foreign banks have adopted a various number of
procedures to restructure loans without altering their nature or mask bad debts, for example, by
using mid-term or long-term loans to restructure a short-term loan or lending in foreign currency
to restructure a VND loan. Allowing such restructuring measures would help the borrower to
stabilize their business, financially recover and be able to repay the loan.
Licensing
The Government is recommended to allow banks to carry out activities in both domestic and
international markets in order to provide their clients with necessary information and service
while doing business in Vietnam and overseas. This is to ensure their liquidity and more
importantly, there should not be any limitation on basic foreign exchange activities.
Furthermore there is a need to update general banking licenses. All applications for re-issuance
of the eligible certificate are put on hold and this could raise certain legal risks to banks.
Even if Article 89.1 of the Law on Credit Institutions requests branches of foreign banks have a
written approval for the time being, the approval procedures are pending at the Licensing

2. Department because there is no guideline on how to approve the organizational structure of
branches of foreign banks.
The SBV is recommended to push the process and allow branches of foreign banks to implement
their structure without its approval during the interim period.
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Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if
you have any questions on the above.
IF YOU ARE INTERESTED IN DOING BUSINESS IN VIETNAM PLEASE VISIT:
www.vietnamlaws.xyz
THANK YOU VERY MUCH!