Amendments to restrictions on the use of foreign currency in Vietnam

On 29 March 2019, the State Bank of Vietnam (SBV) issued Circular 3/2019 to amend and supplement some articles of Circular 32 of the SBV dated 26 December 2034 on restrictions in using foreign exchange within the territory of Vietnam (Circular 32/2013). Circular 3/2019 will take effect from 13 May 2019.

First, a bit of background, under the Foreign Exchange Ordinance, “in the territory of Vietnam” all transactions, payment, price denomination must not be made in foreign currencies except as permitted by the SBV. The SBV usually takes quite a restrictive (and, in our opinion, not reasonable) on what transactions are considered to occur “in the territory of Vietnam”.

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Written by Nguyen Quang Vu On In

Regulations regarding cross-border lending in Vietnam

Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:

  • Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;

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Written by Nguyen Quang Vu On In ,

A new resolution of the Supreme Court on borrowing interests in Vietnam

On 11 January 2019, the Supreme Court issued Resolution 1 guiding the application of several regulations on interest, interest rate and relevant penalty (Resolution 1/2019). Resolution 1/2019 will take effect from 15 March 2019. Below are some salient points of Resolution 1/2019

  • Resolution 1/2019 clearly states that the interest rate caps of the Civil Code 2005 and 2015 will not apply to credit contracts between banks and its customers. In the past, there has been long debate regarding whether the interest rate caps of the Civil Code 2005 and 2015 will apply to credit contracts.

  • If the interest rate, overdue interest on principal and overdue interest on interest are higher than the permitted cap, the exceeding interest which has been paid will be deducted from the principal of the loan.

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Written by Nguyen Quang Vu On In ,

Fintech products and anti-money laundering regulations in Vietnam

Under anti-money laundering regulations, a financial transaction using new technology is transactions which can be conducted by customers without meeting with staffs of a financial institution. If a financial service provider (which may include payment service providers such as e-wallet providers) provides financial services using new technology, the financial institution is still required to meet with its customers at the first time the customer using the services and collect KYC information.  

The requirement for physical meeting for collecting KYC information document may make the rolling out a fintech product in Vietnam much slower in other countries.

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Written by Nguyen Quang Vu On In