PROVIDING FOR AMOUNTS AND METHODS OF ESTABLISHING RISK PROVISIONS AND USE OF PROVISIONS FOR MANAGEMENT OF RISKS ARISING FROM OPERATIONS OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES AND CASES IN WHICH CREDIT INSTITUTIONS ALLOCATE FORGIVABLE INTEREST

1. This Decree provides for:

a) Amounts and methods of establishing risk provisions and use of provisions for management of risks arising from operations of CIs and FBBs as prescribed in clause 3 Article 147 of the Law on Credi Institutions for the assets specified in clause 2 Article 3 of this Decree;

b) Cases where the period of allocation of forgivable interest by CIs exceeds 05 years but does not exceed 10 years as prescribed in point b clause 2 Article 159 of the Law on Credi Institutions.

2. The establishment and use of provision against devaluation of goods in stock, the provision for losses from financial investments, and the provision for losses from bad debts, except for those specified in clause 2 Article 3 of this Decree, shall be subject to law on establishment and settlement of provisions for devaluation of goods in stock, losses from investments, bad debts and warranties of products, goods, services or construction works at an enterprise.

3. The establishment and use of risk provisions for special bonds issued by Vietnam Asset Management Company to buy bad debts of CIs shall be subject to regulations of law on the purchase, sale and settlement of bad debts of the Vietnam Asset Management Company.

4. If debts are governed by specific regulations of the Government on amounts and methods of establishing risk provisions and use of provisions for management of risks other than the regulations laid down in this Circular, CIs and FBBs shall comply with the former.

5. If debts are governed by the decision of the Prime Minister on amounts and methods of establishing risk provisions and use of provisions for management of risks as prescribed in clause 4 Article 147 of the Law on Credi Institutions, CIs and FBBs shall comply with the former.

This Decree applies to:

1. Credit institutions (hereinafter referred to as “CI”): commercial banks, non-bank CIs, CIs being cooperatives (cooperative banks, people’s credit funds) and microfinance institutions.

2. Foreign bank branches (hereinafter referred to as “FBB”), except for FBBs entitled to apply risk provision policies of foreign banks as specified in Article 16 of this Decree.

3. Other related organizations and individuals.

For the purposes of this Circular, the terms below shall be construed as follows:

1. “credit risk from operations of a CI or FBB” (hereinafter referred to as “risk”) refers to the possibility of loss resulting from a customer’s failure to partially or fully repay debts to a CI or FBB under a contract or agreement (hereinafter referred to as “agreement”) that the customer enters into with that CI or FBB.

2. “asset” (hereinafter referred to as “debt") of a CI or FBB is derived from the following operations:

a) Lending;

b) Finance lease;

c) Discounting and rediscounting of negotiable instruments and other valuable papers;

d) Factoring;

dd) Credit extension by issuance of credit cards;

e) On-behalf payments under off-balance sheet commitments (including payments made on behalf of customers under guarantee agreements and in letter of credit operations (except for the cases specified in point n of this clause) and other on-behalf payments under off-balance sheet commitments);

g) Purchase and trusted purchase of corporate bonds (including bonds issued by other CIs) which have not yet been listed on securities market or have not yet been registered for trading on the Upcom trading system (hereinafter referred to as “unlisted bonds”), excluding the purchase of unlisted bonds with trusted funds to which the trustee bears the risk;

h) Credit extension trust;

i) Making deposits (except for demand deposits made at CIs and FBBs, deposits made at social policy banks in accordance with the regulations of the Governor of the State Bank of Vietnam on state CIs’ maintenance of balance of deposits at social policy banks) at CIs and FBBs as prescribed by law and making deposits (except for demand deposits) at overseas CIs;

k) Buying and selling debts according to regulations of the Governor of the State Bank of Vietnam (hereinafter referred to as “SBV”);

l) Repos of government bonds on the securities market in accordance with law on issuance, registration, depositing, listing and trading of government debt instruments on securities market;

m) Purchases of certificates of deposit issued by other CIs and FBBs;

n) Issuance of deferred payment letters of credit containing a provision that the beneficiary is entitled to receive sight payment or advanced payment before the L/C due date and reimbursement of letters of credit in the form of an agreement with the customer to make payment using the reimbursing bank’s funds from the date on which the reimbursing bank pays the beneficiary; negotiating payment of letters of credit;

o) Outright purchase without recourse of sets of documents presented under letters of credit, except where a CI or FBB outright purchases a set of document presented under a letter of credit issued by the CI or FBB itself.

3. “debt” refers to an amount of money that a CI or FBB remits, pays or disburses in installment (in case the repayment term or due date varies with each disbursement) or an amount of money that a CI or FBB already disburses under a contract (in case the repayment term does not vary with multiple disbursements) with respect to the debt that a customer does not repay yet.

4. “risk provision” refers to an amount of money that is set aside to provide against potential risks to debts of a CI or FBB. Risk provisions are classified into specific and general provisions.

5. “specific provision” refers to an amount of money that is set aside to provide against potential risks to each debt.

6. “general provision” refers to an amount of money that is set aside to provide against potential risks that are not determined yet when a specific provision is established.

7. “customer” refers to an organization (including CIs, FBBs), individual or any other entity bound by the civil legislation to incur or give rise to agreed-upon repayment or payment obligations to a CI or FBB.

8. “use of provisions for risk management” refers to an instance where a CI or FBB changes accounting for debts, record the debts subject to risk management as off-balance sheet entries or items; the use of provisions for risk management does not change debt repayment obligations of customers to the debts to which risks are managed by using provisions, and a responsibility of organizations and individuals related to debts.

9. “group 1, group 2, group 3, group 4 and group 5 debts” specified in this Decree refer to the debts classified according to the regulations set forth in clause 2 Article 147 of the Law on Credi Institutions.

1. The provision amount specific to each customer of a CI or FBB is calculated according to the following formula:

Where:

R refers to the total customer-specific provision amount;

: refers to the total provision amount for the customer owing the outstanding amounts ranging from 1 to n.

Ri refers to the amount of provision for the outstanding balance of the debt i. Ri is calculated according to the following formula:

Ri = (Ai - Ci) x r

Where:

Ai refers to the outstanding principal i. If payment for the sold debt is not fully collected, Ai is the payment for the sold debt that is not fully collected.

Ci refers to the deductible value of the collateral, finance leased assets, negotiable instruments and other valuable papers used in discounting and repos of Government bonds (hereinafter referred to as “collateral”) of the debt i.

r refers to the provisioning rates specific to groups prescribed in clauses 2 and 3 of this Article.

Where Ci > Ai, Ri is calculated as 0.

2. Provisioning rates specific to debt classified into groups 1 to 5 of CIs (except for microfinance institutions) and FBBs are as follows:

a) Group 1: 0%;

b) Group 2: 5%;

c) Group 3: 20%;

d) Group 4: 50%;

dd) Group 5: 100%.

3. Provisioning rates specific to debt classified into groups 1 to 5 of microfinance institutions are as follows:

a) Group 1: 0%;

b) Group 2: 2%;

c) Group 3: 25%;

d) Group 4: 50%;

dd) Group 5: 100%;

4. The collateral used as a deduction for calculation of the specific provision amount (R_i) specified in clause 1 of this Article must satisfy the following conditions:

a) Collateral (except for finance leased assets, negotiable instruments and other valuable papers used in discounting and repos of Government bonds) shall comply with regulations of law on security for fulfillment of obligations and other relevant laws; finance leased assets, negotiable instruments and other valuable papers used in discounting and repos of Government bonds shall comply with relevant regulations of law;

a) CIs and FBBs may dispose of collateral under agreements and in accordance with law when customers fail to perform their agreed obligations.

5. The deductible value of collateral must be deemed 0 in the following cases:

a) The collateral fails to satisfy the conditions set out in clause 4 of this Article;

b) It has been more than 01 year if the collateral is not an immovable property and more than 02 years if the collateral is an immovable property from the date on which CIs or FBBs have the right to dispose of collateral under agreements and regulations of law;

6. The deductible value of collateral is determined by multiplying the value of collateral specified in clause 5 of this Article by the deduction rate for each type of collateral as provided in Article 6 of this Decree.

7. Where the Government or the Prime Minister has promulgated regulations or decisions on classification of assets of CIs and FBBs save regulations on establishment of risk provisions, CIs and FBBs shall establish risk provision as prescribed in this Decree on the basis of the debts classified into groups under regulations and decisions of the Government or the Prime Minister.

8. CIs subject to early intervention are entitled to establish risk provisions as prescribed in clause 2 Article 159 of the Law on Credit Institutions after obtaining a written approval from SBV.

9. CIs placed under special control shall establish risk provision as prescribed in clause 1 Article 166 of the Law on Credit Institutions.

Value of collateral used as basis for calculation of the deduction during the process of establishing a risk provision shall be determined as follows:

1. Gold bars: Their value is determined at the buying price at the head office of an enterprise or CI that owns the gold bar brand at the end of the trading day prior to the specific provisioning date.

2. Listed securities (including stocks, fund certificates, derivatives, covered warrants that are already listed): Their value is determined at the closing price quoted on the latest trading day prior to the specific provisioning date. In case where securities already listed on the stock exchange are not traded in 30 days before the provisioning date, or are delisted or suspended from trades or cease being traded on the provisioning date, CIs or FBBs shall value the collateral in accordance with clause 6 of this Article.

3. Stocks registered for trades on Upcom: Their value is determined at the reference price at the latest trading day promptly before the provisioning date announced by the Stock Exchange. In case where a joint-stock company’s security already listed on Upcom is not traded in 30 days before the specific provisioning date or is delisted or suspended from trades or cease being traded on the provisioning date, CIs or FBBs shall value the collateral in accordance with clause 6 of this Article.

4. Government bonds listed on Stock Exchanges: Their value is determined at the average price by averaging trading prices in the firm-commitment offering session in accordance with the Government's regulations on issuance, registration, depositing, listing and trading of government debt instruments on securities market; guiding documents of the Ministry of Finance and other amending, supplementing documents or replacement ones (if any). In case where there is no trading price in the above-mentioned firm-commitment offering session, the bond price applied to calculation of the deduction is the average of the trading prices on the secondary market within the last 10 working days till the date of establishment of the provision for risk. In case where no trade takes place within the last 10 working days till the date of establishing the provision for risk, CIs or FBBs shall use the par value of the collateral.

5. Municipal bonds, government-guaranteed bonds and corporate bonds (including CIs) listed and registered for trades: Their value is determined at the price defined by averaging trading prices on the secondary market within the last 10 working days before the provisioning date according to the announcement of the Stock Exchange. In case where no trade takes place within the last 10 working days till the specified provisioning date, CIs or FBBs shall use the par value of the collateral.

6. Securities not listed on the Stock Exchanges, certificates of deposit issued by enterprises (including CIs, FBBs): Their par value is used.

In case where, on the specific provisioning date, the equity value is lower than the actual investment capital value of the owners at the issuing organization, the value of collateral shall be determined as follows:

The par value of securities or valuable papers multiplied by (x) the equity of the issuing organization and then divided by (:) the actual investment capital of owners at the issuing organization.

Where: The actual investment capital of the owners at the issuing organization and the equity of the issuing organization are determined on the latest balance sheet prior to the specific provisioning date in accordance with regulations of the Ministry of Finance providing instructions about the corporate accounting regime.

In case where the equity of the issuing organization is negative or 0, the value of collateral used for deduction (Ci) must be deemed 0.

7. Finance leased assets: Their value uses the value determined according to clause 10 of this Article, or the value of the finance leased asset remaining over lease periods is calculated according to the formula:

Value of finance leased assets divided by (:) the lease period agreed upon under the contract multiplied by (x) the remaining lease term under the contract.

8. Deposits and certificates of deposits: principal balance of deposits and certificates of deposit on the latest date prior to the specific provisioning date.

9. The value of collateral under the debt purchase and sale contract (if any) shall be the basis for deduction in case the payment for such sale is not fully collected.

10. The value of collateral used as deduction for calculation of the specific provision for movable assets, immovable property and other types of collateral, except for the assets specified in clauses 1 through 8 of this Article is calculated as follows:

a) CIs or FBBs must hire legally licensed valuing organizations to value collateral used as deduction for calculation of the specific amount of provision at the end of the fiscal year in the following cases:

Collateral valued by CIs or FBBs at VND 50 billion or more is provided to secure debts of customers who are related to CIs or FBBs and other persons subject to restrictions on credit extension as prescribed in Article 135 of the Law on Credit Institutions; collateral is valued by CIs or FBBs at VND 200 billion or more.

Results of valuation of collateral issued by the legally licensed valuing organization are used by CIs or FBBs for valuation of collateral used as deduction for calculation of the specific amount of provision.

If there is no written document on the valuation of the collateral from the valuing organization, the value of the collateral used as deduction must be deemed 0.

b) Except for the case specified in point a of this clause, CIs or FBBs may value the collateral as deduction when calculating the specific amount of provision according to their internal regulations.

1. Every CI or FBB shall determine the specific deduction rate of each type of collateral itself on the basis of the assessment of recoverability when disposing of that collateral; the lower the liquidity of the collateral and the greater the price fluctuation, then the lower the collateral deduction rate; the maximum deduction rate applied to each type of collateral in accordance with clause 2 of this Article.

2. The maximum deduction rate of the collateral is determined as follows:

a) Deposit balance (including compulsory saving deposits, voluntary deposits regarding microfinance institutions), certificate of deposit in Vietnamese dong at the CI or FBB: 100%;

b) Government bonds, gold bars in accordance with law on gold trading activities; deposit balance, certificate of deposit in foreign currency at the CI or FBB: 95%;

c) Municipal bonds, Government-guaranteed bonds; negotiable instruments, bonds issued by the CI; balance of deposits, certificates of deposit issued by other CIs or FBBs:

The time left to maturity of less than 1 year: 95%;

The time left to maturity of 1 year - 5 years: =85%;

The time left to maturity of more than 5 year: 80%.

d) Securities issued by other CIs and listed on the Stock Exchanges: 70%;

dd) Securities issued by enterprises (except CIs) and listed on the Stock Exchanges: 65%;

e) Securities that have not yet been listed on the Stock Exchanges, valuable papers, except those specified in point c of this clause, issued by other CIs that have registered for listing securities on the Stock Exchanges: 50%;

Securities that have not yet been listed on the Stock Exchanges, valuable papers, except those specified in point c of this clause, issued by other CIs that do not register for listing their stocks on the Stock Exchanges: 30%;

g) Securities that have not yet been listed on the Stock Exchanges, valuable papers issued by enterprises that register for listing their stocks on the Stock Exchanges: 30%;

Securities that have not yet been listed on the Stock Exchanges, valuable papers issued by enterprises that do not register for listing their stocks on the Stock Exchanges: 10%;

h) Immovable property: 50%;

i) Others: 30%.

1. For CIs (excluding microfinance institutions) and FBBs, the general provision amount shall account for 0.75% of total outstanding balance of debts classified into groups 1 to 4, except the following:

a) Deposits made at CIs and FBBs in accordance with regulations of law and at overseas CIs;

b) Loans, forwards of valuable papers between CIs and FBBs in Vietnam;

c) Purchases of certificates of deposit or bonds issued by CIs and FBBs onshore.

d) Repos of government bonds on the securities market in accordance with law on issuance, registration, depositing, listing and trading of government debt instruments on securities market;

dd) Other debts derived from the operations specified in clause 2 Article 3 of this Decree between CIs and FBBs in Vietnam as prescribed by law.

2. For microfinance institutions, (except for microfinance institutions) and FBBs, the general provision amount shall account for 0.5% of total outstanding balance of debts classified into groups 1 to 4 (excluding deposits made at CIs and FBBs in line with regulations of law).

1. In case the residual amounts of specific provisions and general provisions in the previous accounting period are smaller than the amounts to be set aside for the specific provisions and general provisions in the provision accounting period, CIs or FBBs must establish additional amounts to replenish the deficit.

2. In case the residual amounts of specific provisions and general provisions in the previous accounting period are greater than the amounts to be set aside for the specific provisions and general provisions in the provision accounting period, CIs or FBBs must make a reversal of the surplus.

1. Every commercial bank, non-bank CI or FBB shall establish risk provision as follows:

a) Within the first 07 days of the month, the commercial bank, non-bank CI or FBB shall establish risk provision by the end of the last day of the preceding month for the following debt groups, whichever has higher risk:

Debt groups based on the results of self-classification of debts by the end of the last day of the preceding month in accordance with regulations of SBV’s Governor on classification of assets in operations of commercial banks, non-bank CIs and FBBs; and

Debt groups adjusted according to the debt groups on the list of customers provided by the National Credit Information Center of Vietnam (CIC) in accordance with regulations of SBV’s Governor on classification of assets in operations of commercial banks, non-bank CIs and FBBs (CIC) at the most recent time.

b) For the first month of the quarter, within 03 days from the date of receiving the list of customers provided by CIC by the end of the last day of the preceding month, the commercial bank, non-bank CI or FBB shall, according to the results of classification of debts adjusted according to debt groups on the list of customers provided by CIC in accordance with regulations of SBV’s Governor on classification of assets in operations of commercial banks, non-bank CIs and FBBs, adjust the amount set aside as the provision for risk by the end of the last day of the preceding month and then present such provision amount on its financial statement by the end of the last day of the preceding month.

2. The CI being a cooperative or microfinance institution shall establish risk provision as follows:

Within the first 07 days of the month, the CI being a cooperative or microfinance institution shall rely on the results of debt classification in accordance with regulations of SBV’s Governor on classification of assets in operations of CIs being cooperatives or microfinance institutions to establish risk provision by the end of the last day of the preceding month.

1. Composition of a Risk Management Board:

a) Each commercial bank must establish a Risk Management Board joined by 01 Chair who is a member of the Board of Directors or the Board of Members; 01 member of the Risk Management Committee; 01 member who is the General Director (Director) and at least 02 other members decided by the Board of Directors or the Board of Members;

b) Each FBB or non-bank CI must establish its own Risk Management Board consisting of a Chair who is the General Director (Director) and at least 02 other members decided by the General Director (Director);

c) Each microfinance institution must establish a Risk Management Board joined by 01 Chair who is a member of the Board of Members; 01 member of the Risk Management Committee; 01 member who is a member of the Risk Management Committee; 01 member who is the General Director (Director) and at least 02 other members decided by the Board of Members;

d) Each CI being a cooperative must establish a Risk Management Board joined by 01 Chair who is a member of the Board of Directors; 01 member who is the General Director (Director) and at least 02 other members decided by the Board of Directors.

2. Responsibilities of the Risk Management Board of the CI or FBB for the debts to which risks are managed by using provisions:

a) Approve an all-inclusive report on the results of recovery of debts to which risks are managed by using provisions, including the results of disposal of collateral, and give clear explanations about the bases for grant of approval;

b) Decide or approve the classification of debts, establishment of risk provisions and use of provisions for risks arising in the entire system for the debts to which risks are managed by using provisions;

c) Decide or approve measures for recovery of debts to which risks are managed by using provisions in the entire system, including the disposal of collateral.

3. The Risk Management Board operates only when at least two-thirds of the total number of members attend and issues decisions under the majority rule.

1. CIs (except microfinance institutions) and FBBs may use provisions for management of risks in the following cases:

a) Customers that are an entity dissolved or bankrupt; individuals that are dead or have gone missing;

b) Debts classified into group 5.

2. Microfinance institutions may use provisions for management of risks in the following cases:

a) Customers are not those specified in clause 1 of this Article;

b) Customers that are individuals having permanent disability which causes loss of their earning capacity.

3. CIs and FBBs may use provisions for management of risks according to the following principles:

a) In case where they have disposed of collateral to recover debts as agreed upon by the parties and in accordance with the provisions of law, they may use specific provisions to manage risks from the remaining outstanding balance of debt; In case where the specific provision is not enough to compensate for the risks of debt, the general provision must be used for risk management;

b) In case where they have not yet disposed of collateral for recovery of debts, they can use provisions for management of risks according to the following principles:

(i) Use the specific provision established for management of risks to these debts;

(ii) Promptly dispose of collateral as agreed upon with the customer and according to the provisions of law to recover debts;

(iii) In case where the specific provision is used and the proceeds from the disposal of collateral are not enough to compensate for the risks of debts, the general provision shall be used to manage the risks.

c) CIs and FBBs shall record the outstanding debts subject to risk management by using specific and general provisions as off-balance sheet items or entries as provided in points a and b of this clause.

4. The use of provisions against risks is a way to change accounting for debts, record the debts subject to risk management as off-balance sheet entries or items; is an internal duty of CIs and FBBs; does not change debt repayment obligations of customers to the debts to which risks are managed by using provisions, and a responsibility of organizations and individuals related to debts. CIs and FBBs are not allowed to inform customers of their debts to which risks are managed by using provisions. After managing risks, CIs and FBBs must monitor and take adequate and thorough debt recovery measures for debts subject to risk management, except for those debts subject risk management that are sold by CIs and FBBs to organizations and individuals to collect payments for the sale of debts under the debt purchase and sale contracts.

5. Documentation requirements for risk management includes:

a) Credit extension and debt collection file for debts to which risks are managed by using provisions;

b) Collateral file and other relevant documents (if any);

c) Decision or approval of debt classification and risk provisioning results by Risk Management Board for the debts to which risks are managed by using provisions;

d) Decision or approval of use of risk provisions by Risk Management Board;

dd) In case where a customer is an organization or an enterprise that goes bankrupt or is dissolved, in addition to the documents mentioned in points a, b, c and d of this clause, the original or the certified copy or the copy from the master register of the court’s decision on declaration of bankruptcy or the decision on dissolution of the enterprise in accordance with law must be provided;

e) In case where an individual customer is dead or has gone missing, in addition to those specified in points a, b, c and d of this clause, the original or the certified copy or the copy from the master register of the Death Certificate or Death Certificate substitute issued by a competent authority as prescribed by law or the decision that declares that the individual has gone missing in accordance with law must be provided;

g) In case a microfinance institution’s customer is an individual having permanent disability which causes loss of his/her earning capacity, in addition to the documents mentioned in points a, b, c and d of this clause, the copy of the document proving the permanent disability which causes loss of his/her earning capacity issued by a competent authority must be provided.

1. After a minimum period of 05 years, from the date of use of risk provisions, and after taking all possible measures to recover debts, in case of failure to recover these debts, CIs and FBBs may decide to remove debts already subject to risk management from the group of off-balance sheet commitments.

Debts that are charged off from the group of off-balance sheet commitments must be monitored in the management systems of CIs and FBBs in accordance with regulations on establishment and disposal of provisions for devaluation of goods in stock and losses of investments, bad debts and warranties for products, goods and construction services at enterprises for a minimum period of 10 years from the date of decision on charge-off of debts already subject risk management from the group of off-balance sheet commitments, except for those debts owed by borrowing entities that are bankrupt or dissolved in accordance with law; those debts still outstanding after liquidation or disposal of all assets; or those debts owed by borrowing individuals that have died or declared missing according to the court's decision, and after their estates and obligations have completely disposed of in accordance with law.

2. For commercial banks over 50% of charter capital or total number of voting shares of which is held by the State, the charge-off of debts from the group of off-balance sheet commitments as specified in clause 1 of this Article can be carried out only when the conditions mentioned hereunder are satisfied:

a) They have records and documents proving that all debt recovery measures have been taken but failed;

b) They must obtain SBV’s written approval of such charge-off after receipt of the Ministry of Finance’s opinions;

c) Such charge-off must be approved by the General Meeting of Shareholders and Board of Members.

3. For CIs that are joint-stock companies, except for CIs specified in clause 2 of this Article, the charge-off of debts from the group of off-balance sheet commitments as specified in clause 1 of this Article can be carried out only when the conditions mentioned hereunder are satisfied:

a) They have records and documents proving that all debt recovery measures have been taken but failed;

b) Such charge-off must be approved by the General Meeting of Shareholders.

4. For CIs that are limited liability companies, except for CIs specified in clause 2 of this Article, the charge-off of debts from the group of off-balance sheet commitments as specified in clause 1 of this Article can be carried out only when the conditions mentioned hereunder are satisfied:

a) They have records and documents proving that all debt recovery measures have been taken but failed;

b) Such charge-off must be approved by the Board of Members.

5. For FBBs, the charge-off of debts from the group of off-balance sheet commitments as specified in clause 1 of this Article can be carried out only when the conditions mentioned hereunder are satisfied:

a) They have records and documents proving that all debt recovery measures have been taken but failed;

b) Such charge-off must be approved by parent foreign banks.

6. For CIs being cooperatives, the charge-off of debts from the group of off-balance sheet commitments as specified in clause 1 of this Article can be carried out only when the conditions mentioned hereunder are satisfied:

a) They have records and documents proving that all debt recovery measures have been taken but failed;

b) Such charge-off must be approved by the Board of Members.

7. Documentation requirements for the charge-off prescribed in clause 1 of this Article shall include:

a) Risk management file prescribed in clause 5 of Article 11 herein;

b) Decision or approval of the CI or FBB regarding the charge-off of debts to which risks are managed by using provisions from the group of off-balance sheet commitments; SBV’s written approval specified in point b clause 5 of this Article; SBV's written approval specified in point b clause 2 of this Article for the commercial bank over 50% of charter capital or total number of voting shares of which is held by the State;

c) Decision or approval of measures for recovery of debts to which risks are managed by using provisions;

d) Proof that all measures have been taken to recover debts, but failed, according to reality and relevant regulations of law.

Documentation on charge-off of debts already subject to risk management from the group of off-balance sheet commitments must be deposited by CIs and FBBs in accordance with regulations of law.

1. Collected debts that have been covered by provisions for risk management, even including proceeds from disposal of collateral, shall be deemed as revenues earned within the accounting period of CIs and FBBs, except for the regulations in clause 2 of this Article.

2. Collected debts that have been (i) covered by provisions for risk management with respect to the outstanding balance of off-balance sheet debts and (ii) excluded from the value of enterprise upon equitization of equitized state-owned commercial banks shall be handled in accordance with the Prime Minister's Decision on fee rate to which equitized CIs are entitled when recovering the off-balance-sheet debts retained and guidelines of the Ministry of Finance.

If physical losses of assets are available, CIs and FBBs shall take remedial actions according to the following principles:

1. Disposing of collateral (if any) according to agreements between parties and regulations of law.

2. Identifying causes and liabilities and dealing with physical losses of assets in accordance with the Government’s regulations on financial regimes applicable to CIs and FBBs.

1. CIs and FBBs shall keep accounting records of amounts set aside for, use, replenishment and reversal of specific provisions and general provisions according to regulations of law on accounting regimes of CIs and FBBs.

2. CIs and FBBs shall report the establishment and use of provisions for risk management as follows:

a) CIs and FBBs shall report the establishment and use of provisions for risk management in accordance with regulations on statistical reporting regulations applicable to CIs and FBBs issued by SBV.

b) CIs and FBBs shall report the establishment and use of provisions for risk management to the General Department of Taxation and Departments of Taxation of provinces and cities where CIs and FBBs are headquartered in accordance with regulations of law on tax reporting.

c) On an annual basis, CIs and FBBs shall report the establishment and use of provisions for risk management to the General Meeting of Shareholders (for joint-stock CIs), the General Meeting of Members (for CIs that are cooperatives), owners (for CIs that are limited liability companies), capital-contributing members (for CIs that are multi-member limited liability companies) and parent banks (for FBBs).

1. SBV will approve the FBB's proposal to apply the foreign bank's risk provision policy to classify its debts, establish and use provisions for risk management if the total annual risk provision amounts determined according to the foreign bank’s risk provision policy over the last 03 years before the proposal date are not smaller than the annual risk provision amount determined according to this Decree.

2. An application for approval consists of:

a) An application form for SBV’s approval for application of foreign bank's risk provision policy;

b) A copy of the foreign bank's risk provision policy;

c) Written confirmation of the FBB and documents proving its satisfaction of the condition set out in clause 1 of this Article.

3. Procedures for granting approval

a) The FBB shall prepare an application as prescribed in clause 2 of this Article in person at the Single-Window Section or by post to SBV. If the application is inadequate and invalid, within 05 working days from the receipt of the application, SBV shall request the FBB in writing to supplement it;

b) Within 30 days from the date of receiving a valid application prescribed in clause 2 of this Article, SBV shall issue a document stating whether to grant approval for application of the foreign bank's risk provision policy to the FBB. In case of refusal, SBV shall provide a written explanation.

4. For an FBB whose proposal to apply the foreign bank's risk provision policy has been approved by SBV, in case of making any amendment to the foreign bank's risk provision policy approved by SBV, the FBB shall submit a report on such amendment to SBV including the assessment of the principle that the total risk provision amounts determined according to the foreign bank’s risk provision policy are not smaller than the annual risk provision amount determined according to this Decree for the first fiscal year in which the amended risk provision policy is applied. In case this principle fails to be adhered to, the FBB shall classify its debts, establish and use provisions for risk management in accordance with Vietnam’s laws.

5. For an FBB whose proposal to apply the foreign bank's risk provision policy has been approved by SBV, according to the results of audit, inspection and supervision, if SBV judges that the foreign bank's risk provision policy does not fully cover all levels of credit risk from banking operations in reality in Vietnam, SBV may request the FBB to establish and use provisions for risk management in accordance with this Circular.

1. SBV shall consider and approve the period of allocation of forgivable interest exceeding 05 years but not exceeding 10 years for the CI subject to early intervention pending the implementation of the remedial plan on the basis of the proposal and report of the CI on the causes and potential failure to completely allocate forgivable interest within 05 years, necessity of allocating forgivable interest within the period exceeding 05 years but not exceeding 10 years and the recoverability according to the road map under the remedial plan formulated in accordance with regulations of the Law on Credit Institutions when the CI falls into any of the following cases:

a) The assistance measure specified in point b clause 2 Article 159 of the Law on Credit Institutions has been applied by SBV to the CI subject to early intervention for the period of allocation of forgivable interest up to 05 years from the date of obtaining SBV’s approval and the CI has adhered to the principle specified in clause 2 of this Article but fails to completely allocate forgivable interest according to the SBV’s written approval after the 05-year period, SBV shall consider approving the extended period of allocation provided that the period of allocation does not exceed 10 years;

b) The CI subject to early intervention has an accrued loss of 100% or more of its charter capital and reserve funds stated in its latest audited financial statement or under the inspection or audit conclusion given by a competent authority.

2. The CI shall allocate forgivable interest within its financial capacity on the principle that the total forgivable interest allocated and the mandatory risk provision amounts are equal to the difference between annual revenues and expenditures of the CI and the allocation shall only apply to the interest recorded as receivables before the date on which SBV makes the written request specified in clause 2 Article 156 of the Law on Credit Institutions.

1. Audit, inspect and supervise the establishment and use of provisions by CIs and FBBs for risk management as prescribed in this Decree; impose penalties for violations arising from the establishment and use of provisions for risk management under its authority and regulations of law.

2. Process FBBs’ applications for approval for application of foreign bank’s risk provision policy.

3. Preside over and cooperate with the Ministry of Finance and relevant ministries and central authorities in reporting the review and assessment of implementation of this Decree to the Government to request it to amend or replace this Decree where necessary.

Cooperate with SBV in reporting the review and assessment of implementation of this Decree to the Government to request it to amend or replace this Decree where necessary.

1. CIs that already obtain decisions from the Prime Minister and SBV’s Governor on specific measures relating to establishment and use of provisions for risk management before the effective date of this Circular shall comply with these decisions.

2. FBBs obtaining SBV’s approval for application of foreign bank’s risk provision policy before the effective date of this Circular may continue to establish and use provisions for risk management according to the foreign bank’s risk provision policy approved by SBV, except for the cases specified in clauses 4 and 5 Article 16 of this Decree.

3. The establishment and use of provisions for management of risks to promissory notes and treasury bills issued by CIs and FBBs before the effective date of this Decree shall be carried out in the same manner as the establishment and use of provisions for management of risks to certificates of deposit as prescribed in this Decree.

4. For the debts eligible for debt group retention in the case of debt rescheduling according to SBV’s regulations promulgated before the effective date of this Decree, CIs and FBBs may continue to establish provisions in accordance with regulations of SBV’s Governor.

This Decree comes into force from July 11, 2024.

Ministers, heads of ministerial agencies, heads of Governmental agencies; CIs, FBBs, organizations and individuals concerned are responsible for the implementation of this Decree.