ON AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF CIRCULAR NO. 02/2013/TT-NHNN DATED 21/01/2013 OF GOVERNOR OF THE STATE BANK PROVIDING ON CLASSIFICATION OF ASSETS, LEVELS AND METHOD OF SETTING UP OF RISK PROVISIONS, AND USE OF PROVISIONS AGAINST CREDIT RISKS IN THE BANKING ACTIVITY OF CREDIT INSTITUTIONS, FOREIGN BANKS’ BRANCHES

The Governor of the State bank of Vietnam promulgates Circular amending and supplementing a number of articles Of Circular No. 02/2013/TT-NHNN dated 21/01/2013, on classification of assets, levels and method of setting up of risk provisions, and use of provisions against credit risks in the banking activity of credit institutions, foreign banks’ branches (Circular 02).

1. To supplement clause 4 into Article 1 as follows:

“4. The setting up and use of risk provisions for special bonds which are issued by the Asset Management Company for Vietnamese credit institutions for purchasing bad debts of credit institutions shall comply with Circular No. 19/2013/TT-NHNN dated 06/09/2013 of the Governor of the State bank, the purchase, sale and settlement of bad debts of Vietnam Asset Management Company for Vietnamese credit institutions (Circular 19) and documents amending, supplementing, replacing Circular 19 (if any)."

2. To amend, supplement point h clause 2 into Article 5 as follows:

“h) Having provision on self assessing collateral, including principles of defining terms, methods, process and duties of each unit, individual involving the evaluation of collateral as prescribed by law in order to ensure that the value of collateral is suitable with market value when calculating the specific amount of setting up provision as prescribed in this Circular;”

3. To amend, supplement clause 9 and Clause 10 into Article 9 as follows:

“9. For debts of which supply of loans, credit extension have been implemented according to consent, direction of Government, the Prime Minister, credit institutions, foreign banks’ branches shall classify debts, set up and use provisions for risk handling according to decisions of Governor of the State bank for each specific case.

10. For debts violating law specified at point c(iv) Clause 1 Article 10 of this Circular, at time of detecting violation, credit institutions and foreign banks’ branches must immediately issue decision on recovering the outstanding balance violated

For debts which must be recovered according to inspection conclusions, credit institutions and foreign banks’ branches must immediately issue decision on recovering the outstanding balance according to inspection conclusions.

For debts violating law specified at point c(iv) Clause 1 Article 10 of this Circular, debts which must be recovered according to inspection conclusions, credit institutions and foreign banks’ branches are not permitted restructuring time limit for debt payment and in duration debts have not yet been recovered according to decision on recovery, credit institutions and foreign banks’ branches shall classify debts, appropriation of risk provision as prescribed in this Circular.”

4. To supplement clause 10a into Article 9 as follows:

“If a debt violating law specified at points c(iv), d(iv), dd(v) Clause 1 Article 10 of this Circular or a debt which must be recovered according to inspection conclusion specified in points c(v), d(v), dd(vi) Clause 1 Article 10 of this Circular is classified in group with various risk level, credit institutions and foreign banks’ branches must classify such debt into group of debts with highest risk level."

5. To amend, supplement point c(iv) and point c(v) into Clause 1 Article 10 as follows:

“(iv) Debts in the following cases which have not yet been recovered within 30 days from the day of decision on recovery:

- Debts violating regulations at Clauses 1, 3, 4, 5, 6 Article 126 of Law on credit institutions;

- Debts violating regulations at Clauses 1, 2, 3, 4 Article 127 of Law on credit institutions;

- Debts violating regulations at Clauses 1, 2, 5 Article 128 of Law on credit institutions;

(v) Debts in time limit for recovery according to inspection conclusion;”

6. To supplement point c(vii) into Clause 1 Article 10 as follows:

“(vii) Debts must be classified into group 3 as prescribed at Clause 11 Article 9 of this Circular.”

7. To amend, supplement point d(iv) and d(v) clause 1 Article 10 as follows:

“(iv) Debts specified in point c (iv) clause 1 this Article which have not yet been recovered within a period of between 30 days and 60 days after decisions on recovery have been issued;

(v) Debts which must be recovered under inspection conclusions but have not yet been recovered although recovery term according to inspection conclusion was overdue from 60 days ago;”

8. To supplement point d(vii) into Clause 1 Article 10 as follows:

“(vii) Debts must be classified into group 4 as prescribed at Clause 11 Article 9 of this Circular.”

9. To amend, supplement point dd(v) and point dd(vi) Clause 1 Article 10 as follows:

“(v) Debts specified at point c (iv) clause 1 this Article which have not yet been recovered within a period of more than 60 days after decisions on recovery have been issued;

(vi) Debts which must be recovered under inspection conclusions but have not yet been recovered although recovery term according to inspection conclusion was overdue from more than 60 days ago;”

10. To supplement point dd(ix) clause 1 Article 10 as follows:

“(ix) Debts must be classified into group 5 as prescribed at Clause 11 Article 9 of this Circular.”

11. To supplement clause 3a into Article 10 as follows:

“3a. Restructuring time limit for debt payment and keeping intact group of debt:

a) Credit institutions, foreign banks’ branches are permitted to consider and restructure time limit for debt payment and keep intact group of debt as group already been classified before restructuring time limit for debt payment when all following conditions are satisfied:

(i) Debts of which credit extension does not violate legislations;

(ii) Restructure of time limit for debt payment is conformable with purpose of project which needs loan in credit contract;

(iii) Customers using capital for an improper purpose;

(iv) The restructure of time limit for debt payment and keeping intact of debt group are permitted to be carried out only in case where customer, who fails to be able to pay debt in term of paying the principle and /or interest of loan in scope of loan term or fails to be able to pay debt including the principle and/or interest of loan according to term of loan as agreed in credit contract, has a plan on debt payment which is feasible and conformable with conditions of production, business and service;

(v) When restructuring time limit for debt payment and keeping intact debt group, credit institutions and foreign banks’ branches must satisfy regulations of the State bank on limitations, rate of safety assurance in banking activities of credit institutions and foreign banks’ branches, including the maximum rate of short-term capital sources used for medium-term and long-term loans in case of restructuring short-term loans into medium-term or long-term loans.

b) Credit institutions, foreign banks’ branches which are permitted to restructure time limit for debt payment and keep intact group of debt as prescribed at point a this Clause must ensure implementation of the following requirements:

(i) Credit institutions and foreign banks’ branches have promulgated internal rules on control and supervision on the restructure of time limit for debt payment and keeping intact of debt group in order to perform uniformly in entire system, have a mechanism for internal control involving restructure of time limit for debt payment and keeping intact of debt group, ensuring strict and safe examination and supervision, prevention against misusing of restructuring time limit for debt payment and keeping intact of debt group to reflect wrongly on credit quality;

(ii) Credit institutions, foreign banks’ branches must control content, reason of restructure of time limit for debt payment and keeping intact of debt group for each debt. The State bank requests credit institutions, foreign banks’ branches to report specifically content, reason of restructure of time limit for debt payment and keeping intact of debt group for each debt as necessary.

(iii) Credit institutions, foreign banks’ branches may take the initiative in, self decide and take responsibility for the restructure of time limit for debt payment and keeping intact of debt group in accordance with this Circular.

(iv) For a debt, the restructure of time limit for debt payment and keeping intact of debt group as prescribed at point a this Clause are permitted performing once only;

(v) Credit institutions, foreign banks’ branches must regularly review, assess solvency of customers after debts have been restructured time limit for debt payment and kept intact debt group. In case where debts have been restructured time limit for debt payment and kept intact debt group as prescribed in this Circular but customers still fail to pay debts overdue according to the restructured time limit, credit institutions and foreign banks’ branches are not permitted further keeping intact debt group and must classify such debts into respective debt groups as prescribed in Article 10, Article 11 of this Circular;

(vi) Within 05 (five) first days of each month, or as requested by the State bank, credit institutions and foreign banks’ branches must send reports to the State bank (Banking Inspection and Supervision Agency) on situation of restructuring time limit for debt payment and keeping intact debt group according to the set form in Annex No. 01 attached to this Circular."

12. To amend, supplement point dd clause 3 Article 12 as follows:

“d) Security assets specified in point d, clause 5 this Article must be valued by an organization which have function on price appraisal as prescribed by law in the following cases:

(i) Security assets with value of 50 billion dong or more for debts of customers who are persons related to credit institutions, foreign banks’ branches and customers who are subjects restrained for credit extension as prescribed in Article 127 of Law on credit institutions;

(ii) Security assets with value of 200 billion dong or more, except for cases specified at point d(i) this clause.

Result of evaluating collateral of organization which have function on price appraisal as prescribed by law shall be used by credit institutions and foreign banks’ branches to determine value of collateral deducted upon calculating the specific amount of setting up provision and have use value for 12 months maximally since organization which have function on price appraisal as prescribed by law has signed on written evaluation.

If organization which has function of price appraisal has insufficient capability for valuation or if there is no organize which has function of price appraisal  for security assets specified in points d(i), d(ii) this clause, credit institutions, foreign banks’ branches may implement valuation according to internal regulation specified in point h, clause 2 Article 6 of this Circular.

If a security asset fails to meet fully conditions specified in points a, b, c, d this clause, the deducted value of such asset must be considered as zero.”

13. To supplement Article 24a as follows:

“To amend and supplement clause 1 Article 1 of regulation on debts classification, the provisioning and use of provisions against credit risks in the banking activities of credit institutions promulgated together with Decision No. 493/2005/QD-NHNN dated 22/4/2005 of the Governor of the State bank as follows:

“1- Cooperative banks and people’s credit funds (hereinafter abbreviated to credit institutions) shall be obliged to carry out the classification of debts, the provisioning and use of provisions to deal with credit risks in the banking activities under this regulation.”

14. To amend, supplement Article 25 as follows:

“1. This Circular takes effect on 01/6/2014, except for Clause 2, Clause 3 of this Article.

2. Clause 3a Article 10 of this Circular takes effect on 20/3/2014 and ceases to be effective on 01/04/2014.

3. Clause 3 Article 8 and Clause 1 Article 9 of this Circular takes effect on 01/01/2015.

4. Directive 05/2005/CT-NHNN dated 26/4/2005 of the Governor of the State bank, on the implementation of debts classification and setting up of risk provisions in accordance with the Decision No. 493/2005/QD-NHNN dated 22/4/2005 of the Governor of the State bank shall cease to be effective on 01/06/2014.

5. The Chief of office, the Chief of Banking Inspection and Supervision, heads of units of the State bank, Directors of the State bank’s branches in provinces and central-affiliated cities, presidents of Board of Directors, presidents of Members' Council and General Directors (Directors) of credit institutions and foreign banks’ branches shall implement this Circular.”   

1. This Circular takes effect on 20/3/2014.

2. To annul the following documents:

- Directive No. 04/CT-NHNN dated 17/9/2013 of the Governor of the State bank, on debt classification for debts which are restructured time limit for debt payment and handling of bad debts.

- Circular No. 12/2013/TT-NHNN dated 27/5/2013, of the Governor of the State bank, amending a number of Articles of Circular 02.

- Decision No. 780/QD-NHNN dated 23/4/2012 of the Governor of the State bank, on debt classification for debts which are adjusted time limit for debt payment and extended debt.

The Chief of office, the Chief of Banking Inspection and Supervision, heads of units of the State bank, Directors of the State bank’s branches in provinces and central-affiliated cities, presidents of Board of Directors, presidents of Members' Council and General Directors (Directors) of credit institutions and foreign banks’ branches shall organize implementation of this Circular. 

 

Month…….year………..

1. Situation of restructuring time limit for debt payment and keeping intact group of debt

2. Total outstanding balance of debts which are not turned into bad debt group because they are kept intact debt group: …………… million VND.

……………, date…………………..

1. Data of report is the number accumulated till the report month.

2. Column (2): balance of scheduled debts and kept intact debt group as prescribed at Clause 3a Article 10 of this Circular.

3. Column (3): the specific amount of provision which credit institution or foreign banks’ branch is not required to set up because debts are restructured time limit for debt payment and kept intact debt group as prescribed at Clause 3a Article 10 of this Circular.

4. Total outstanding balance of debts which are not turned into bad debt group because they are kept intact debt group as prescribed at Clause 3a Article 10 of this Circular: means total outstanding balance of debts due to implementation of Clause 3a Article 10 of this Circular without classification into groups 3, 4, 5.

 (This translation is for reference only)