‘VP BANK VIETNAM CORPORATE GOVERNANCE I. Intreduction 1.1. Overview of the company VPBank, Vietnam Prosperity Joint-Stock Commercial Bank is one of the joint-stock commercial banks in Vietnam, which was established in 1993, Vision: VPBank has set the ambitious goal of becoming a consumer-friendly bank through technology and becoming one of the top three most valuable banks in Vietnam according to the 2018 — 2022 strategy, and the Top 100 Asia largest banks contributed part in promoting sustainable development stability and prosperity of the country and community. Missio VPBank believes that the bank with accomplish the mission of bringing the best benefits to customers, serving the best interests of shareholders and employees, developing a strong corporate culture, and contributing successfully towards the development of the community. Nowadays, VPBank consists of 6 main operations including: 1. The acquisition of funds and Short-term and Long-term deposits and lending 2. Foreign exchange transactions, intemational trade finance services, discounting of commercial bills, bonds, and other valuable papers 3. Credit extension in the form of a re-discount of negotiable instruments and other valuable papers and other banking services permitted by the SBV. Provision of payment and e-wallet services Asset management service Investment in securities and bonds and Investment in government bond futures aus In 2022, VPBank expanded its network to have one head office in Hanoi, 72 branches, and 178 transactions. Moreover, Entering the integration phase to fulfill the vision of positioning one of the top three most valuable banks in Vietnam, VPBank was successfully listed on the Ho C1 Minh Stock Exchange (HOSE) in 2017. In 2022, VPBank increased its authorized capital to 67 Thousand Billion VND, becoming the leading commercial bank in this section of Vietnam. In recent days, the stock of VPBank is about 18,600 thousand dong per share. 1.2, Market share In 2023, VPBank reached rank 173th in the top 500 in the world, as announced by Brand Finance, Besides the commercial bank, VPBank owns other 4 subsidiaries in © Insurance (OPES) © Stock (VPBanks) Finance (FE Credit)‘© Asset management services (VPB AMC). In which, FE Credit, a finance company providing loan and insurance services makes up 50% of the consumer market share in Vietnam, This makes this company become the leading finance brand in Vietnam. 1.3. Financial report 2018-2022 LOI NHUAN TRU'OC THUE (Ty déng) 2022 EET 2021 2020 2019 2018 onan Overall, the 5 years period from 2018 to 2022 saw the dramatic growth in the profit of VPBank. To be detailed, the profit before tax of this company was 9.199 Billion dong in 2019, before soaring to 13.019 Billion dong in the next 2 years. 2022 ended this substantial development in more than 21 Billion Dong, which assisted this bank to rank 6th in the top 10 banks with the largest profit after tax in Vietnam,TONG TAI SAN (Ty déng) 2022 2021 2020 2019 2018 eueds From 2018 to 2022, the total assets of VPBank always increased significantly, whereas this asset in 2022 was two times as much as that in 2018, compared to 631 Billion Dong and 323 Billion Dong. From then, it can be said that VPBank has been in the integrating and developing phase when this corporation has potential financial reports with remarkable rewards. 1.4, Overview of Board of Directors ‘The Corporate Governance of VPBank includes the General Meeting of Sharcholders, Board of Directors, Supervisory Board, and Board of Management, in which the General Meeting of Shareholders has the highest authority of this bank, having rights to elect and dismiss members of BOD, and Supervisory Board. The Board of Directors of VPBank consists of 5 members, whereas there are 2 vice presidents, 1 member (CEO), and 1 independent member, besides the chairman of VPBank Ngo Chi Dung. This Board of Directors is responsible for building strategies and monitoring banks’ operations, implementing management tasks, making decisions, and exercising the rights and obligations of the banks.alae jcmew | pet B6 nhiém lai Ngé Chi Diing Chi tich HDGT +t 29/05/2020 — B6 nhiém Iai 2 BuiHdi Quan Pho Chi tich HDT 10 29/05/2020 an . Bé nhiém lai 3 L6 Bang Giang Pho Chu tich HDQT + 29/05/2020 B6 nhiém lai 4 = Nguyén Bde Vinh Thanh vién HDQT +t 29/05/2020 5 Nguyén Van Phie Thanh vien déclepHpar Bo nhiém moi iguyer WIP tu 29/05/2020 Il. Analysis of CG policy 1/ Company charter 2/ Regulation of CG III, Analysis of CG practice 1/ Ownership structure and shareholder rights 2/ Board structure and board effectiveness 1.1. Board structure: ~ Board size: 05 members => meet the requirement of G20/OECD, LOE Article 109, Clause 1 - 01 Non-executive director => meet the requirements of %4 BOD are independent (CG Regulations, Article 11, Clause 1) 1.2. Board effectiveness: *In terms of conditions of BOD members according to Article 50 in the 2024 Charter: - Education: All have bachelor’s degrees, 01 member has a Ph.D. degree and 02 have Master's degrees - Experiences: + Mr. Ngo Chi Dung (Chairman of the BOD) has 4 years experience being Vice Chairman of Techeombank Mr. Lo Bang Giang has 3 years of experience being Head of the Supervisory Board of Delta Bank. Mr. Bui Hai Quan has been a member of BOD of VPBank since 2006 + Mr. Nguyen Duc Vinh (CEO) has 17 years of experience being CEO and member of BOD of Techcombankle $0 in the => All non-independent directors of VPBank have fully met the criteria of Arti company charter *In terms of conditions of BOD members according to Article 27 in the 2024 Charter: - There is no member of the Supervisory Board of VPBank concurrently; - There is no managerial officer of another credit institution concurrently, except otherwise, such institution shall be a subsidiary company of VPBank. = There is no BOD member at no more than five other different enterprises concurrently => All directors of VPBank have fully met the criteria of Article 50 in the company charter *In terms of the effectiveness of NED: Based on OECD international practices, through investigation, we conclude that VPBank’s BOD shows effective governance between independent directors and non-independent directors. Mr. Nguyen Van Phuc, the only NED of VPBank BOD has not received substantial financial or other benefits from VPBank in the last 3 years, specifically: - He has not been an employee of the company or a shareholder of 10% or more of the company - He has not paid to or received from the company a substantial amount, or been a major shareholder of a company that has paid to or received from the company a substantial amount - He has not been an External Auditor of the company The image below from the Corporate Governance Report 2023 is the evidence showing that Mr. Phuc has not received any shares outstanding or ownership ratio of VPBank: 5 PP ie — Mr. Ngo Chi Dzung BOD Chairman 328,553,699 2 MrBuiHai Quan BOD Vice Chairman 186,329,202 2.318% 3 MrLoBang Giang BOD Vice Chairman 82003315 onaz% 4 Mr Nguyen Van Phuc BOD Independent member . - = _ Responsibilities and activities of NED - Mr. Nguyen Van Phuc: According to G20/OECD PRINCIPLES OF CORPORATE GOVERNANCE © OE “Boards should consider assigning a suff of exercising independent judgment to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are ensuring the integrity of financial and non-financial reporting, the review of related party transactions, the nomination of board members and key “D 2015: ‘ient number of non-executive board members capableexecutives, and board remuneration. Through investigation, we have not found any documents that state clearly the responsibilities of VPBank’s only BOD independent member. => Therefore, we might infer that it is not sufficient to conclude that the NED of VPBank BOD is effective. *In terms of implementing BOD’s functions: a, Set a strategic vision The first function is to decide the strategy, medium-term development plan, and annual business plan of VPBank. BOD has fulfilled this task because, in the annual report 2023, the BOD had proposed the bank’s overall development strategy for the period of 2022-2026 and the divisional strategies. THE 3° FIVE-YEAR DEVELOPMENT STRATEGY (2022-2026) \VPBank has set its 3 five-year (2022-2026) development strategy goal to become bank with a solid position in the top 3 leading banks inVietnam and one of the top 100 largest banks InAsio, Tho act phases (2012-2017 and 2018-2 created o solid foundation and com; momentum for VPBank to confidently uphold its success In the new development phase, thereby continuing to promote the sustainable development and prosperity of the country and the community asawhole while delivering value ‘added to the bank's customers, shareholders ‘and investors. b, Decide and supervise risk management ‘The second function is to oversight of the company’s risk management which is specifying the types and degree of risk that a company is willing to accept in pursuit of its goals, and how it will manage the risks it creates through its operations and relationships. BOD of VPBank is supported by a Risk Management Committee including 5 members of BOD, a standing Deputy CEO, and the Head of the Risk Management Division. There are sub-committees such as the Operational Risk Committee, Credit Risk and Debt Collection Committee, and Market Risk Committee. In annual report 2022, the Risk Management Committee has done these tasks:OEDC guidelines VPBank practices Specifying the types and degree of risk that a company is willing to accept in pursuit of its goals Risk Appetite Statement for the 2022-2024 period and the top-down strategie risk indicators for 2022 ‘How it will manage the risks it creates through its operations and relationships Implemented a risk management framework with EY Vietnam to fit with domestic regulations, intemational standards, and practices on ESG risk management. = Held and executed ICAAP and ILAAP tests on war, inflation, and internal risks, The results of the stress tests were important inputs for the leadership to develop backup plans. In short, the BOD of VPBank has well collaborated with the Risk Management Committee by developing and overseeing the establishment and operations of the Risk Management Framework. They also provide strategic direction for ESG-related management and risk appetite. ¢, Monitor and control activities of the CEO and the BOM In annual report 2022 of the company, it stated BOD’s activities throughout the year as below: + Attended (12) monthly BOM meetings + Supervised the bank’s operations through daily, weekly, monthly, and quarterly business performance reports and the BOM’s other reports/proposals. * Considered and acted on the information from the SB and Internal Audit (1A) reports on the bank’s units. + Attended meetings/read reports of the Risk Management Committee, Human Resources Committee, ete. According to OCED G20 Principles, the BOD has the duty of monitoring and managing potential conflicts of interest of management, board members, and shareholders, including misuse of corporate assets and abuse in related party transactions (covering financial reporting and the use of corporate assets and guarding against abusive related party transactions.) © In the case of misusing corporate assets, in 2009, the CEO of VPBank at that time, Mr. Le Dac Son neglected the benefits of VP Bank and stole 19 billion VND of the company,“In December 2007, VP Bank Securities Company sold 26,000 shares of Mekong Bank at 2.05 times the face value, totaling 53.3 billion VND. In April 2008, they planned to transfer the remaining 29,004 shares to VPReit for 59.5 billion VND. However, under the direction of CEO Le Dac Son, the transactions were conducted through three individuals, with a significant portion of the funds ending up in Son's personal account. Authorities discovered misappropriation of over 19 billion VND, leading to Son's removal as CEO in July.” (tinnhanhchungkhoan, 2009) => In this case, the BOD of VPBank at that time did not completely fulfill the duty of monitoring and managing potential conflicts of interest of the CEO or the BOM, leading to misuse of a large amount of the company’s money by CEO Le Dac Son. 4d, Others G20/OECD guidelines VBank’s practices Encourage the reporting of unethical/unlawful behavior without fear of retribution. Issued Code of Conduct and Professional Ethics of VPBank, together with Decision No. 1192/2015/QD-HDQT dated 26 October 2015 and revised documents change or supplement if any. Ensuring the integrity of the corporation's accounting and financial reporting systems compliance with the Jaw and relevant standards. In accordance with the Accounting System applicable to Credit Institutions required under Decision No. 479/2004/QD-NHNN issued on 29 April 2004, Circular No. 10/2014/TTNHNN dated 20 March 2014, and Circular No. 22/2017/TT-NHNN dated 29 December 2017 amending and supplementing Decision No. 479/2004/QD-NHNN Selecting, compensating, monitoring, and, when necessary, replacing key executives and overseeing succession planning. The annual report 2022 listed activities of the HR committee including developing a strategy for compensation, retention, and development of people: critical roles, hot jobs, and suecession planning Ensuring a formal and transparent board nomination and election process. Information about VPBank's latest Board of Directors election from 2020 was formally announced to retail shareholders and appeared in major newspapere, Board self-evaluation and outside reviews: According to OECD G20 Principles, the Board should regularly carry out evaluations to appraise their performance and assess whether they possess the right mix of background and competencies. In order to improve board practices and the performance of its members, an increasing number of jurisdictions now encourage companies to engage in board training and voluntary board evaluation that mect the needs of the individual company. Particularly in large companies, board evaluation can be supported by external facilitators to increase objectivity. Currently, VPBank is lacking of self-assessment by boards of their performance as well as performance reviews of individual board members and the Chair and the CEO. In annual report 2022, it also stated very general about supervision activities that focus on: (i) VPBank’s management and governance, (ii), the BOD and BOM’s execution of the business directions and targets approved by the AGM. It may be concluded that the board training and board evaluation of the board itself and the Supervisory Board are not well implemented or publicly disclosed. 3/ Information disclosure & transparency 3.1. Business Registration: - VPBank has published its business registration since 1983 Since then it has changed and revised 45th times tinh dén nam 2023, each notice is published on the VPBank Investor Relations website (htips://www.vpbank.com, vn/quan-he-nha-dau-tu), in both Vietnamese and English Especially, the change in the certificate of business registration of VPBank from 2022 to 2023 and 2021 to 2022 was all about the increase in charter capital, which is required to be disclosed by the State Securities Commission of Vietnam and HoChiMinh Stock Exchange (HOSE). - Moreover, this change was also announced in online newspapers such as baochinhphu.vn, thoibaonganhang.vn, vietnambiz.vn....cot Pd GC ONO HOA XA HCHO NOMA ETNA S& Bao Dién tit Chinh phi je pFBIA2088 | Erich | RANG CHG CHNNTR KNHTE —VANHGA AHL KHOR QUECTE oe TiN KE "Ta tug Pg Minh Cin dy HG gh Cp exo Bg + cing TTOTCchin phi + Vanphingcninph)—£ kin TE VPBank dugc tang von diéu 1é (hinnphu.vn) - Non hang Nha nude Vigt Nam (NHN) dé van ban s6/5717/NHNN TGSNH chap thuén viee tang wen didulé cla NgBn nang thuong mal cé phan Viet Nam Thin Vong (VPBanio 3.2, Annual financial report - VPBank tun thi vige céng bé bao cdo tai chinh theo timg quy theo quy dinh cia SSC and has a correct structure to include business performance, cash-flow statement, financial statement. - Each financial report has a consolidated and separate version and is reviewed by an independent audit company (Ernst & Young Vietnam). - Annual financial reports and other reports must be published in a newspaper or the website of the company 3.3, List of related persons and/or transactions ~ Incorporate governance reports, the company lists all related persons, subsidiaries, and transactions among related persons with time, decisions, content, and amount of each transaction disclosed. 3.4, Decisions and minutes of the shareholder meeting ~ Inaccordance with Article 104-the law on enterprise (2020), decisions approved by the shareholder meeting should be disclosed to the newspapers. The decisions in the shareholder meetings of VPBank are published in some online newspapers such as tuoitre.com and also appear in annual report of the company. Moreover, VPBank alsopublished documents related to the regulations of the shareholder meetings on its main website yphank.com 3.5, Reports of the board of supervision: - Inannual report and corporate governance report of VPBank, there is some information mentioned about SB including SB information, SB’s supervision towards the BOD, BOM, and shareholders, cooperation of the SB in the activities of the BOD, BOM, and other managers; the SB set directions and instructed [A - However, when comparing to the OECD guidelines, VPBank do not disclose in detail and transparent about the process of nomination and appointment of the board, or succession planning. The background, experiences and skills related to supervisory and the number of independent directors in the SB are also not mentioned, => Itis very difficult for the investors to evaluate the effectiveness of the SB of VPBank when no information about the indepencency and detail backgrounds of members in the board. 4/ Role of stakeholder IV. Lesson learned/Recommendation REGULATION Law on Enterprises No. 59/2020/QH14 Law on Credit institutions No, 17/2017/QH14 Law on Credit institutions No. 47/2010/QH12. VPBank Charter 2024 OECD To evaluate VP Bank’s regulation, we based on the OECD Principles of Corporate Governance and other laws in Vietnam, which is considered a standard for establishing a Corporate Governance framework. OECD prineiples mention four key consideration factors. 1. The rights and equitable treatment of shareholders and key ownership functions According to Article 11, Section II, Chapter II, VPBank Charter 2024 and Article 115, Chapter V, Enterprise Law 2020. Shareholders have the following basic rights: © To attend and voice their opinions at the Annual General Meeting (AGM) and exercise their voting right in person or through their authorized representatives or in other forms as stipulated by laws; each common share carries one vote; To receive dividends as per Resolutions of the AGM. To be given priority to buy new offered shares corresponding to the proportion of common shares of each shareholder at VPBank. © To consider, look up and extract information in the list of shareholders entitled to vote and request for amendment of inaccurate information.2 To receive part of the remaining assets corresponding to the number of shares owned at VPBank when VPBank dissolves or goes bankruptcy. To transfer or sell their shares to VPBank in accordance with the provisions of this Charter and applicable laws; Require VPBank to repurchase shares in the cases specified in Article 132 of the Enterprise Law. Be treated equally. In case VPBank has preferential shares, the rights and obligations must be approved by the General Meeting of Shareholders and fully disclosed to shareholders. Have full access to periodic and unusual information published by VPBank in accordance with the law. Protect rights and legitimate interests. The responsibilities of the board According to Article 49, Section III, Chapter II, VPBank Charter 2024 and Article 153, Chapter V, Enterprise Law 2020: 3 ‘VPBank always focuses on and continuously strengthens corporate governance acti VPBank's Board of Directors has a minimum of five members and a maximum of eleven members, including at least one independent member; The specific number of members is decided by the General Meeting of Shareholders. The Board of Directors must have at least half of the total number of members who are independent members and members who are not VPBank executives. The Chairman of the Board of Directors can be an independent member. The term of a member of the Board of Directors shall not exceed 05 years and may be re-elected for an unlimited number of terms. An individual can only be elected as an independent member of the Board of Directors of a company for no more than 02 consecutive terms. Responsible for strategie direction for the Bank and has full authority on behalf of VPBank to decide and exercise the rights and obligations of VPBank, except for issues falling under the authority of the General Meeting of Shareholders and the Supervisory Board. The Board of Directors is allowed to establish Councils and Committees to help the Board of Directors carry out its duties and powers. The Committees include the Human Resources Committee, the Risk Management Committee and other Councils and Committees from time to time. The Board of Directors passes decisions by voting at meetings or collecting opinions in writing or through online conferences, electronic voting or other electronic forms according to VPBank's regulations from time to time. Each member of the Board of Directors has one vote. Disclosure and transparency enhance the role and effectiveness of governance. In there:4. According to Artie Information transparency, ensuring shareholder rights Corporate governance activities have always been focused on by VPBank and continuously enhanced and consolidated to further improve the role and effectiveness of governance activities at the bank, \VPBank always values transparency in information disclosure activities, therefore always proactively discloses information fully and promptly, ensuring compliance with regulations as well as increasing shareholders’ trust. Not only that, VPBank also ensures the quality and quantity of information published on the VPBank Investor Relations website (www. vpbank.com.vn/quan-he-nha-dau-tu), in both Vietnamese and Vietnamese. English, as well as on the websites of stock exchanges, the information disclosure system of the State Securities Commission, VPBank also actively updates new regulations and good corporate governance practices provided by consulting units. VPBank Investor Relations Department has actively supported and answered investors! questions and requests for information through communication channels such as email, phone and Investor Relations website. Remuneration of the Board of Directors and Supervisory Board 35, Section I, Chapter II, VPBank Charter 2024 and Article 66, Chapter I, Enterprise Law 2020: Comment Remuneration, bonuses and guest benefits of members of the Board of Directors and members of the Supervisory Board are considered and decided by the General Meeting of Shareholders on the basis of the actual situation, business performance of VPBank and ensuring compliance with regulations. provisions of law from time to time. Salary, bonus and other benefits of the General Director are considered and decided by the Board of Directors. VPBank Charter 2024 basically meets the regulations in the Enterprise Law 2020 on the responsibilities of the Board of Directors. VPBank Charter 2024 ensures the basic rights of shareholders such as the right to attend and vote at the General Meeting of Shareholders, the right to receive dividends, the right to have priority in purchasing newly issued shares,... This is appropriate, with the Enterprise Law 2020. However, OECD principles have higher requirements on. information disclosure and the right to request the convening of an extraordinary General Meeting of Shareholders, And there needs to be more specific regulations on protecting the rights of minority shareholders to ensure fair treatment of all shareholders according to OECD Principles. VPBank Charter 2024 generally meets the requirements for information disclosure and transparency under the Enterprise Law 2020. However, to comply with the OECD GoodCorporate Governance Principles, the Charter can be supplemented and Complete more detailed regulations related to information disclosure and transparency in the decision-making process. ¢ VPBank's Charter 2024 basically complies with the regulations on remuneration of the Board of Directors and Supervisory Board according to the Enterprise Law 2020. However, there are no specific regulations on publishing detailed information on remuneration of the Board of Directors. Board of Directors and Board of Supervisors. VPBank needs to supplement regulations on more detailed disclosure of remuneration levels, basis for determination and payment method. © VPBank Charter 2024 does not mention much about the roles and rights of related parties such as employees, customers, creditors, etc. It is necessary to add regulations on respecting and protecting the legal rights of stakeholders. related parties according to the Enterprise Law 2020 and OECD Principles. IV. RECOMMENDATION: VP Bank has fulfilled quite well the requirements for a company according to Vietnamese laws and G20/OECD. However, VP Bank can still do better in a few points based on G20/OECD as follows Firstly, VP Bank has a Non-Executive Director but does not have detailed information to show that they have worked effectively. Therefore, VP Bank BOD should consider assigning a sufficient number of non-executive board members capable of exercising independent judgment to tasks with potential conflicts of interest. Examples of such key responsibilities are ensuring the integrity of financial and non-financial reporting, reviewing related party transactions, nominating board members and key executives, and board remuneration. In addition, there needs to be a balance between Executive Directors and Non-Executive Directors (NED >=ED) to ensure that no individual or group can influence the decisions of the Board of Directors. Besides, VP Bank should have more policies for the Board of Directors to be more diverse in terms of gender and ethnicity. VPBank should disclose de 1g the Board of Directors or planning successors as well as qualifications, experience, and skills related to supervision and the number of independent members of the Board of Directors in the Board of Directors, Board of Supervisors. In addition, board training and voluntary board evaluation should be regularly organized to evaluate the performance of the Board of Directors. This assessment should also have the support of external facilitators. sand transparency about the process of nominating and appoit VP Bank has a feedb: ving channel on its website, however, the complaint resolution process has not been specifically publicized, making it difficult for relevant parties to resolve theproblem. VP Bank should develop and publish Regulations on receiving and handling customer feedback about VPBank and Regulations on receiving and handling complaints from related parties regarding information disclosure. VP Bank has mentioned the rights and obligations that a shareholder can receive and need to fulfill. However, VP Bank should have more specific regulations on protecting the rights of minority shareholders to ensure fair treatment for all shareholders and promote transparency and fairness in the market VP Bank should add regulations on respecting and protecting the legal rights of relevant parties: Board of Directors need to protect the rights of shareholders, not abusing shareholders for personal gain, VPBank should also have more information about laws or regulations related to the rights and obligations of employees, customers, etc. For example, there should be detailed disclosure of remuneration levels, the basis for the determination, and the payment method should be added for employees. Sita hai doan cudi thanh: VP Bank has mentioned the rights and obligations that a shareholder can receive and needs to fulfill. VP Bank should add regulations on respecting and protecting the legal rights of shareholders. The Board of Directors needs to protect the rights of shareholders, not abuse shareholders for personal. Moreover, VP Bank should have more specific regulations on protecting the rights of minority shareholders to ensure fair treatment for all shareholders and promote transparency and fairness in the market Finally, VPBank should also have more information about laws or regulations related to the rights and obligations of employees, customers, etc. For example, there should be detailed disclosure of remuneration levels, the basis for the determination, and the payment method should be added for employees.«