Can the Vietnam Development Bank Use Operating Capital to Contribute Capital or Establish Subsidiaries?

Short answer: In principle, very limited. The Vietnam Development Bank (VDB) is a policy bank operating not for profit to implement the State’s credit policies. The law on credit institutions strictly limits credit institutions’ use of capital to contribute capital, purchase shares, or establish enterprises — and for VDB, any investment outside policy lending must comply with the specific regulations on the organization and operation of this bank.

Legal basis

• Law on Credit Institutions 2024 (No. 32/2024/QH15, effective from 01/7/2024) — limits on capital contributions and share purchases;
• The legal documents on the organization and operation of the Vietnam Development Bank.

Limiting principles of the law

• Credit institutions may only contribute capital or purchase shares within ratio limits relative to charter capital or allocated capital;
• Prohibited from contributing capital to or purchasing shares of enterprises operating in certain business lines;
• The purpose of the limits: to ensure operational safety and avoid the spread of risks from off-sector investments.

Specific features of the Vietnam Development Bank

• VDB operates under a policy bank mechanism, with capital mainly from the state budget and mobilized funds as designated;
• Its core mission is to provide policy credit (development investment, export, etc.), not commercial investment;
• Using operating capital to contribute capital or establish enterprises — if any — must be approved by the competent authority and be consistent with its policy functions.

Consequences of exceeding the limits

• Capital contribution transactions exceeding the limits may be ordered to divest;
• The violating credit institution is subject to administrative penalties and special control measures;
• Managers who make decisions contrary to regulations bear personal liability.

If you need to determine the right approach for your specific situation, you should discuss it with a lawyer in advance for a review of your documents and advice on the course of action.

For quick advice, you can contact a lawyer at 0966.475.966.

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