Can Vietnam Development Bank use operating capital to contribute capital and establish subsidiaries?

The use of the Development Bank’s operating capital to contribute capital and establish subsidiaries is specified in Point i, Clause 1, Article 8 Decree 46/2021/ND-CP as follows:

Use of capital and assets

1. The Development Bank may use operating capital to:

a) Implement credit policies according to the provisions of law;

b) Implement other forms of credit granting as prescribed in the Charter of organization and operation of the Development Bank and decisions of competent authorities according to the provisions of law;

c) Grant post-investment support according to the provisions of law for Contracts arising before Decree No. 32/2017/ND-CP takes effect;

d) Carry out credit guarantee obligations for small and medium-sized enterprises to borrow capital from commercial banks according to the provisions of law;

d) Entrust credit institutions to carry out a number of activities of the Development Bank in accordance with the provisions of law;

e) Lending under authorization/trust, allocating capital under trust; Guarantee under authorization/trust;

g) Entrust and receive entrustment to provide financial and banking services to customers according to the provisions of law;

h) Buy, sell, discount, rediscount valuable papers according to the provisions of law;

i) Contribute capital, establish subsidiaries or participate in the establishment of domestic affiliated companies in accordance with the provisions of law and the Charter of organization and operation of the Development Bank;

k) Investing in capital construction and purchasing assets to serve the operations of the Development Bank according to the provisions of this Decree;

l) Use idle capital to deposit at credit institutions and foreign bank branches. The Development Bank selects credit institutions and foreign bank branches to deposit money to ensure safety and not lose capital;

m) Perform a number of other tasks assigned by the Government and Prime Minister.

Thus, according to regulations, the Vietnam Development Bank can use operating capital to contribute capital, establish subsidiaries or participate in establishing domestic affiliated companies in accordance with the provisions of law and the Bank’s Charter of organization and operations.

What is the responsibility of the Vietnam Development Bank in ensuring the safety of operating capital?

According to the provisions of Article 9 of Decree 46/2021/ND-CP, the Development Bank is responsible for implementing regulations on ensuring operating capital safety, specifically:

– Manage and use capital and assets, distribute financial results, implement financial management and accounting regimes as prescribed in Decree 46/2021/ND-CP and relevant legal regulations.

– Buy property insurance according to the provisions of law.

– Accounting into operating expenses risk provisions according to the provisions of Decree 46/2021/ND-CP and relevant legal regulations.

– Buy back and exchange valuable papers issued by the Development Bank according to the provisions of law.

– Handle property losses according to the provisions of Article 14 of Decree 46/2021/ND-CP.

– Implement other measures to preserve capital according to the provisions of law.

What agency guarantees the solvency of the Vietnam Development Bank?

Ensuring the solvency of the Vietnam Development Bank is stipulated in Clause 2, Article 4 of Decree 46/2021/ND-CP as follows:

Principles of financial management

1. Development Bank is a policy bank, operating under the model of a one-member limited liability company with 100% charter capital held by the State, with legal status, charter capital, balance sheet, seal, and the right to open accounts at the State Bank of Vietnam, the State Treasury, and domestic and foreign commercial banks in accordance with the provisions of law. The Development Bank is the centralized accounting unit for the entire system; Financial autonomy, self-responsibility for their activities before the law; proceed to self-compensate for costs and risks in operations. The Development Bank performs financial management in accordance with the provisions of this Decree. For contents not specified in this Decree, it shall comply with the provisions of law for single-member limited liability companies with 100% charter capital held by the State.

2. The Development Bank operates not for profit to implement the State’s credit policy and other tasks according to the regulations of the Government and the Prime Minister; receive compensation for interest rates and management fees from the state budget in accordance with the provisions of law and this Decree; exempted from paying taxes and state budget payments; solvency guaranteed by the Government; The mandatory reserve ratio is applied at 0% (zero percent) and is not required to participate in deposit insurance.

Thus, according to the above regulations, the Vietnam Development Bank is guaranteed its solvency by the Government and is subsidized by the state budget for interest rates and management fees.