On 7 May 2014 the Government issued Decree No. 39/2014/ND-CP on the operation of financial companies and financial leasing companies (“Decree 39”). Decree 39 took effect on 25 June 2014 (the “Effective Date”) and replaced: (1) Decree No. 79/2002/ND-CP, dated 4 October 2002, on the operation of financial companies, as amended by Decree No. 81/2008/ND-CP, dated 29 July 2008, and Decree No. 16/2001/ND-CP, dated 2 May 2001; and (2) Decree No. 65/2005/ND-CP, dated 19 May 2005, on the operation of financial leasing companies, as amended by Decree No. 95/2008/ND-CP, dated 25 August 2008.

Decree 39 stipulates the general conditions for financial companies to perform banking operations, including:

  1. The banking operation of a financial company must be specified in the Establishment  and Operation Permit issued by the State Bank (the “Permit”).
  2. Having qualified staffs with professional capacity, material facilities, technology, means,  equipment and internal regulations as provided for by law for the implementation of  banking operation specified in the Permit.
  3. For banking operations related to foreign exchange, a financial company must comply  with regulations of law on management of foreign exchange.
  4. Fulfilling the operational conditions for banking operations stipulated by the State Bank.

These include compliance with the prudential ratios in banking operations, debt classification and continuous appropriation of risks in all quarters of the preceding year of the proposal for additional operation; bad debt ratio remaining below the level specified by the State Bank; the non-existence of any sanctions for administrative violations in the field of money and banking for one year from the time of request for additional operations; business operation with continuous profit for at least two years preceding the year proposed for additional operation; and having a minimum time of operation and plan for the issuance of credit cards as stipulated by the State Bank.

Financial companies and financial leasing companies for consumer credit must not conduct the following activities: Underwriting of issuance of corporate bonds and trading of corporate bonds; receipt of entrusted capital of the Government, organizations and individuals to carry out investment activities in business and production projects; entrustment of capital for other credit institutions to carry out the granting of credit.

In addition, Decree 39 stipulates in detail the rights and obligations of parties involved in financial leasing; termination of financial leasing contracts in advance of schedule; registration of financial leasing contracts; and certificates of ownership of leased assets.

For the financial companies and financial leasing companies that have been established and are operating under a Permit issued by the State Bank before the Effective Date, Decree 39 specifies that they have 12 months to meet all conditions specified for the conditional activities as provided by Decree 39.