Recent Amendments to the Credit Institutions Law in Vietnam - Key Updates and Legal Implications

The amended Law on Credit Institutions 2024 was approved by Vietnam’s National Assembly on 18 January 2024 (the "Amended Law on Credit Institutions") and is effective from 1 July 2024. We highlight the following key provisions of the Amended Law on Credit Institutions:

1) Shareholders owning 1% or more of the charter capital of a credit institution are required to provide information about themselves, related persons and their ownership ratios. The credit institution must publicly disclose this information.

2) A reduction in the ownership percentage limitation for shareholders who are entities (including indirect shareholders) from 15% to 10% and for shareholders and related persons from 20% to 15%. This amendment includes a transitional provision, that shareholders and related persons who exceed the prescribed ownership limitations will be allowed to maintain their current shareholding, but will not be permitted to increase their shares until they comply with the ownership limitation requirements.

3) Credit institutions may not sell non-compulsory insurance products in conjunction with providing banking products and services.

4) The Governor of the State Bank of Vietnam has the authority to define the scope of insurance agency activities for credit institutions.

5) Introduction of additional categories of related persons, including “(i) subsidiaries of credit institutions; and (ii) grandparents, great-grandparents, grandchildren, great-grandchildren, aunts, uncles, nephews, nieces, cousins, and vice versa.” The law further defines which individuals are authorized to represent shares/capital contribution in the credit institution.

With these new provisions, the Vietnamese legislators intend that the Amended Law on Credit Institutions will contribute to credit institution transparency, mitigate cross-ownership situations, assist the State Bank of Vietnam in identifying major risks from "behind-the-scenes" transactions, and enhance public participation. The provisions of the Amended Law on Credit Institutions are expected to have a significant impact on the activities and operations of credit institutions. More detailed guidelines are expected to be issued in the near future.
 

The information provided is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.