Banking and Finance in Vietnam

Banking and finance sector always attract investors as the growth of financial services in a growing economy. Our banking and finance lawyers in Vietnam constantly monitor the changes of the Vietnam regulations to update our client and provide them with best service.

Banking system in Vietnam has been organized according to the traditional model in which State Bank manages all commercial banks and other credit organizations. According to the Vietnam Law on Credit Institutions, there are six organizational forms of credit institutions: domestic commercial bank established and organized as joint stock company, state commercial bank formed as one-member limited liability company, domestic non-bank credit institution as joint stock or limited liability company, joint venture or wholly foreign-owned credit institution as limited liability company, cooperative bank and people’s credit funds as cooperatives, microfinance institution as limited liability company.

Banking and finance sector is a highly regulated area. Vietnam laws require commercial bank on legal capital of VND 3,000 billion at the setting-up.  Further, commercial banks’ operation must comply with decisions of State Bank and other authorities. Each type of credit institution has different conditions on organization, management, operation. Commercial bank, the type allowed to operate in largest scope is permitted to take demand deposits, time deposits, savings deposits; issue deposit certificates, promissory note, treasure bills, bonds to raise capital at home and abroad; open payment accounts for clients, provide payment instruments, domestic and international payment services; extend credit while the others just conduct some of the above activities.

For foreign investor, to engage in banking and finance in Vietnam, they could commercially present in Vietnam in the forms of representative office, joint-venture bank, wholly foreign-owned bank, foreign bank branch, joint-venture finance company, wholly foreign-owned finance company, joint-venture financial leasing company and wholly foreign-owned financial leasing company base on the Law on credit institutions, Circular no.07/2013/TT-NHNN, Circular no. 20/2008/TT-BTC, and Circular no. 18/2018/TT-BTC.

Professionals at ANT Lawyers work on many a variety of banking and financial services cases. Our attorney’s industry knowledge and expertise allow us to effectively support the banking and financial services sector. ANT Lawyers - Law firm in Vietnam that provide relevant industry-focused advice, delivered quickly to ensure that we add value from day one. ANT Lawyers, your lawyers in Vietnam.

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How Payment by Documentary Credit in International Commerce Works?

Documentary Credit (also known as letter of credit or bankers commercial credit, or letter of undertaking) is one of the payment instruments that institutions providing non-cash payment services (banks, foreign bank branches, etc.) deal with to make a valid payment transaction at the request of the account holder. Documentary credit is the most commonly used for payment of international sales of goods.

Banking and Finance Law Firm in Vietnam

The supply of international payment services by institutions providing non-cash payment services shall be conducted in accordance with regulations of the law on foreign exchange management, treaties to which Vietnam is a member and commercial practices (including international commercial practices provided by the International Chamber of Commerce; and other commercial practices which are not contrary to the Vietnamese laws) which agreed upon by the parties.

According to UCP 600, credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.  Documentary credit is an independent and separate transaction from the sales and other contracts on which it may be based. The Issuing Banks and Advising Banks are in no way concerned with or bound by contract between the Applicant (purchaser) and the Beneficiary (seller), even if any reference whatsoever to it is included in the credit. Banks deal with documents only. Goods, services or performance to which the documents may relate are not under scope of handling of the Banks. When the issuing bank determines that a presentation of documents is complying, payment shall be made.

The independence between the documentary credit and the sales contract ensures that the seller definitely receives payment if complying presentation, however, does not protect the interests of the purchaser when there is any dispute about the quality of the delivered goods or any other dispute after delivery. When the seller presents complying documents, the issuing bank is obliged to make payment without any doubt whether the goods have actually been delivered according to the specifications as specified in the contract. At the same time, the cancellation or termination of contract does not affect the effectiveness of documentary credit, payment still is made if presentation is complying.

International payment instruments play an important role in commercial transactions between parties residing in different countries. Each payment method reflects the way of receiving and paying for goods amount between the buyer and the seller. The parties participating in international commerce transaction need to understand the characteristics of each payment instrument to protect their rights and obligations, and avoid disputes in international sales of goods, or disputes in financial service using letter of credit or other forms, disputes in performance of contract and should involve lawyers in early stage if possible to avoid mishap.

ANT Lawyers - a Law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or service request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529

Let ANT Lawyers help your business in Vietnam.

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How Payment by Documentary Credit in International Commerce Works?

Documentary Credit (also known as letter of credit or bankers commercial credit, or letter of undertaking) is one of the payment instruments that institutions providing non-cash payment services (banks, foreign bank branches, etc.) deal with to make a valid payment transaction at the request of the account holder. Documentary credit is the most commonly used for payment of international sales of goods.

Banking and Finance Law Firm in Vietnam

The supply of international payment services by institutions providing non-cash payment services shall be conducted in accordance with regulations of the law on foreign exchange management, treaties to which Vietnam is a member and commercial practices (including international commercial practices provided by the International Chamber of Commerce; and other commercial practices which are not contrary to the Vietnamese laws) which agreed upon by the parties.

According to UCP 600, credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.  Documentary credit is an independent and separate transaction from the sales and other contracts on which it may be based. The Issuing Banks and Advising Banks are in no way concerned with or bound by contract between the Applicant (purchaser) and the Beneficiary (seller), even if any reference whatsoever to it is included in the credit. Banks deal with documents only. Goods, services or performance to which the documents may relate are not under scope of handling of the Banks. When the issuing bank determines that a presentation of documents is complying, payment shall be made.

The independence between the documentary credit and the sales contract ensures that the seller definitely receives payment if complying presentation, however, does not protect the interests of the purchaser when there is any dispute about the quality of the delivered goods or any other dispute after delivery. When the seller presents complying documents, the issuing bank is obliged to make payment without any doubt whetherf the goods have actually been delivered according to the specifications as specified in the contract. At the same time, the cancellation or termination of contract does not affect the effectiveness of documentary credit, payment still is made if presentation is complying.

International payment instruments play an important role in commercial transactions between parties residing in different countries. Each payment method reflects the way of receiving and paying for goods amount between the buyer and the seller. The parties participating in international commerce transaction need to understand the characteristics of each payment instrument to protect their rights and obligations, and avoid disputes in international sales of goods, or disputes infinancial service using letter of credit or other forms, disputes in performance of contract and should involve lawyers in early stage if possible to avoid mishap.

ANT Lawyers - a Law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or serive request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529

Let ANT Lawyers help your business in Vietnam.

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Vietnam State Bank Guides Intermediary Payment Services under Circular 23

In recent years, digital wallet have been a trend in fintech because of the competitive development from the foreign investors to banks in Vietnam or of large technology companies and corporations which are also gradually entering the financial technology market to challenge the conventional banking in Vietnam.

Banking and Finance Law Firm in Vietnam

In a nutshell, digital wallet, also known as online wallet, is an account of payment for the most popular online transactions such as: payment for electricity, water, tuition, phone recharge, buying movie tickets, etc. The function of the digital wallet is operated by linking a bank account, adding money to the wallet and paying for any associated services in a simple and convenient way.

Besides the benefits, digital wallet could also bring possible negative impacts and obstacles in reality. The State realizes the matter and has recently issued policies and regulations on the management of intermediary payment services in Vietnam in order to achieve economic efficiency. On 22^th Nov in 2019, the State bank of Viet Nam promulgates the Circular No. 23/2019/TT-NHNN amending, supplementing some articles of Circular No. 39/2014/TT-NHNN on 11^th Dec in 2014 guiding the intermediary payment services.

One of the new points of the Circular is the regulation on amending and supplementing of the provision of digital wallet. Firstly, when opening a digital wallet, customer must provide, update fully and accurately the information in the digital wallet opening file to providers of digital wallet services and take responsibility for the truthfulness of the provided information; providers of digital wallet services are responsible for checking, comparing and ensuring that the customer’s application for opening Digital wallet is complete, valid and must request customer to complete the linking of Digital wallet to their payment accounts or debit cards which was opened at associated bank before they use Digital wallet. Customer are allowed to associate Digital wallet with one or many of their payment accounts or debit cards (Digital wallet owner) which was opened at associated banks. It can be seen that this new regulation is reasonable, because Digital wallet are a non-cash payment method. Therefore, banks need to have specific information of users to avoid situation of one person opening multiple Wallet accounts for illegal purposes.

Secondly, money to Digital wallet must deposited from: (i) Customer’s payment account or debit card (Digital wallet owner) at the bank; (ii) Receiving money from other Digital wallet opened by the same Providers of Digital wallet services. Customers can use Digital wallet in order to: (i) Payment for legal goods and services; (ii) Transfer money to other Digital wallet opened by the same Providers of Digital wallet services; (iii) Withdraw money from Digital wallet back to customer’s payment account or debit card (Digital wallet owner) at the bank. One of the most remarkable thing is the new regulation on the total limit of transactions via personal Digital wallet of 01 customer at 01 Providers of Digital wallet services (including transactions of payment for legal goods and services and money transfer from Digital wallet to other Digital wallet opened by the same Providers of Digital wallet services) with maximum of VND 100 (one hundred) million in a month, except for personal Digital wallet of persons having contracts / agreements acting as payment acceptance units with Providers of Digital wallet. For organizations, the State Bank does not set the limit for Digital wallet transactions. The regulation of transaction limits for Digital wallet aims to minimize the risk of taking advantage of money laundering, gambling, and performing illegal activities that have been already difficult to manage.

Finally, The Circular stipulates the prohibition of using Digital wallet to conduct transactions for money laundering, terrorist financing, fraud, cheating and other violations of law; Prohibition of rent, lease, borrow, lend Digital wallet or buy and sell Digital wallet information; Supplementation conditions on tools of supervision on activities of providing Digital wallet services to the State Bank by Providers of Digital wallet services.

Lawyers in banking andfinancial service advisory desk of ANT Lawyers always follow the development of law, especially in fintech where changes are fast to cope with the development of technology and market demand, to provide update to its clients.

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