Both the State Bank of Vietnam (SBV), specialising in licencing credit institutions, and local trade departments, taking responsibility for licencing and managing foreign representative offices, have refused to licence foreign banking service providers which are not credit institutions, reasoning that there is no regulation on licencing these institutions.

In fact, the institutions are not credit institutions but provide banking services that fall under many laws, including the Enterprise Law, Law on Credit Institutions and Commercial Law. However, it is true that there is no regulation on licencing these institutions.

No one takes responsibility for managing the institutions

Recently, Japan’s Diamond leasing company, a non-bank financial institution, asked for permission to set up a representative office in HCM City.

The HCM City Trade Department refused to licence the company, saying that it did not have the authority to grant licences to credit institutions, advising the company to apply to SBV.

However, SBV said that it could not licence Diamond because the company specialises in providing leasing services and loans, but it does not accept deposits. As such, Diamond cannot be seen as a credit institution as stipulated by the Law on Credit Institutions.

SBV, referring to the Law on Credit Institutions, stated that it could not grant licences to foreign institutions to set up representative offices which were not credit institutions.

Besides Diamond, several card companies, including JCB and SMART, are also seeking permission to set up representative offices.

In fact, in the past, Hanoi and HCM City Trade Departments and SBV granted licences to companies specialising in remittance, credit and card services. However, they now refuse to licence similar institutions, reasoning that they do not have the authority to licence the institutions according to the current laws.

Banking service providers now do not know to which State management agency they should apply for the setting up of representative offices.

Law has provision on licensing non-credit institutions, but decree doesn’t

In fact, the Law on Credit Institutions has a provision stipulating that SBV is the agency that licences non-credit institutions.

However, Decree No 22 dated February 28, 2006 on the organisation and operations of foreign bank branches, 100% foreign owned banks, joint venture banks and foreign banking representative offices in Vietnam, does not guide the implementation of the provision.

Meanwhile, Decree 72 dated July 25, 2007 guiding the implementation of the Commercial Law in terms of operations and organisation of representative offices and branches of foreign businesses in Vietnam, also does not have a provision related to the licencing of non-credit institutions.

Experts have related the story of VISA, which could not wait any longer for a licence to set up a representative office in HCM City, and finally decided to apply directly to the Prime Minister.

The story of VISA has a happy ending as the Prime Minister gave the nod to the setting up of the VISA office in HCM City at the end of 2004.

The Government has asked SBV to push up the compilation of the regulations on organisation and operations of representative offices in Vietnam of foreign institutions which are not credit institutions but provide banking services.

However, no improvement has been made so far. SBV has submitted to the Government the draft regulation on this issue after consulting with relevant ministries. Officials said that ministries have agreed to permit SBV to licence and manage the operations of these institutions.

Source: VietnamNet