Thông tư 10/2012/TT-NHNN

CIRCULAR

PROVIDING ON THE HANDLING AFTER INSPECTION AND SUPERVISION OF CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

Pursuant to the Law No. 46/ 2010/QH12 on the State Bank of Vietnam of June 16, 2010;

Pursuant to the Law No. 47/ 2010/QH12 on Credit Institutions of June 16, 2010;

Pursuant to the Law No. 56/2010/QH12 on Inspection of November 15, 2010;

Pursuant to the Government's Decree No. 96/2008/ND-CP of August 26, 2008, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Chief Inspector of the banking supervision and inspection agency;

The Governor of the State Bank of Vietnam (hereinafter referred to as the State Bank) issues the Circular on the handling after inspection and supervision of credit institutions and branches of foreign banks;

Chapter 1.

GENERAL PROVISIONS

Article 1. Scope of regulation

1. This Circular provides for handling after inspection and supervision of credit institutions and branches of foreign banks operating in Vietnam.

2. The handling after inspection and supervision of credit institutions and foreign bank’s branches stipulated in this Circular includes the following contents:

a) Handling the implementation of inspection results;

b) Handling after credit institutions and branches of foreign banks have been sanctioned for their administrative violations;

c) The handling in activities of supervision of credit institutions and branches of foreign banks.

3. The special control over credit institutions, the revocation of establishment and operation licenses of credit institutions and foreign bank’s branches, the blockage of capital and assets of foreign bank branches must comply with the regulations of the State Bank and relevant provisions of law.

Article 2. Subjects of application

This Circular applies to the following subjects:

1. Credit institutions.

2. Branches of foreign banks operating in Vietnam.

3. Organizations and individuals related to the handling of credit institutions, foreign bank’s branches after supervision and inspection.

Article 3. Interpretation of terms

In this Circular, the following terms shall be construed as follows:

1. Inspected subjects mean credit institutions, branches of foreign banks operating in Vietnam being inspected by the inspection and supervision agency.

2. Inspection and supervision agencies mean the banking supervision and inspection agencies, the banking supervision and inspection agencies of the State Bank in provinces and centrally-run cities.

3. A notice of violation mean an official document by the State Bank notifying the violations of law provisions on the organization, operation and safety committed by credit institutions and branches of foreign banks.

4. A warning of violation means an official document by the State Bank warning that credit institutions, foreign bank’s branches have further violated law provisions on the organization, operation and safety after owning the notice of violation from the State Bank.

5. Actual value of charter capital or allocated capital means the value of charter capital of credit institutions or of the allocated capital of branches of foreign banks deducting (adding) the retained profit, undistributed profit (losses not yet handled).

Article 4. Principles for the handling after inspection and supervision

1. The handling after inspection and supervision shall be conducted in accordance with law and in accurate, prompt, objective, honest and open manner.

2. All contents required by the Inspection and supervision agency for credit institutions, branches of foreign banks as stipulated in Clause 2 Article 1 of this Circular shall be implemented and remedied according to law.

3. The handling after inspection and supervision ensures the sound and healthy growth, as well as the compliance with monetary and banking laws of credit institutions and foreign bank’s branches, improving efficiency and effect of state management in the monetary and banking field.

Article 5. Mitigating circumstances, aggravating circumstances

In the course of handling of credit institutions and branches of foreign banks after inspection and supervision, the following are considered mitigating or aggravating circumstances:

1. Mitigating circumstances:

a) The violation consequences have been prevented, remedied, or voluntarily reported, or voluntarily and immediately remedied;

b) The violation is due to technical errors;

c) The violation is made due to objective reasons not deliberately committed by staff of credit institutions, branches of foreign banks.

2. Aggravating circumstances:

a) Systematic violations;

b) Intentional violations;

c) Violations causing serious consequences and damage to the material and prestige of credit institutions, branches of foreign banks;

d) Violations that have been committed many times or repeated of the same contents;

dd) Committing deliberate acts of hiding, avoiding, failing to implement or insufficiently implement; not taking measures, plans for eliminating the cause of violations and remedying the consequences under the conclusion and proposal from the inspection and supervision agency.

Article 6. Forms and measures of handling

1. The handling of credit institutions, foreign bank’s branches after inspection, supervision shall be done in the following forms:

a) Notices of violation;

b) Warnings of violation;

c) Administrative sanctions for violations;

d) Decisions compelling credit institutions and branches of foreign banks to carry out one or some of remedies stipulated in Clauses 2 and 3 of this Article.

2. The State Bank shall apply one or some measures to deal with credit institutions and branches of foreign banks as follows:

a) Restricting or disapproving the opening of new banking services in the following cases

(i) Failing to observe or fail to fully and promptly observe the contents required to be done within a specific period as stated in the inspection conclusion and decision of the Governor of the State Bank (if any);

(ii) Being sanctioned against violation;

(iii) Failing to observe the content or violate the content while the violation of such content has been warned by the inspection and supervision agency.

b) Disapproving the opening of new branches, representative offices and ATM locations; disapproving the application for establishment of subsidiaries, affiliated companies, or companies that contribute to or purchase their shares in cases credit institutions, foreign bank’s branches:

(i) Fail to observe or fail to observe fully the contents required in the inspection conclusion and decision of the Governor of the State Bank.

(ii) Fail to observe or violate the content while the violation of such content has been warned by the inspection and supervision agency.

c) Restricting, suspending, and temporarily suspending the provision of one or some banking professional services in case credit institutions and branches of foreign banks:

(i) Fail to satisfy the requirements in the inspection conclusion and decision of the Governor of the State Bank on sanctions against administrative violations (if any);

(ii) Fail to observe or violate the content while the violation of such content has been warned by the inspection and supervision agency.

d) Requesting credit institutions, foreign bank’s branches to increase their charter capital or supplement their allocated capital to ensure prudential ratios in banking operations when actual value of charter capital or allocated capital is lower than the legal capital as prescribed by Vietnam’s law.

dd) Restricting credit growth in cases credit institutions and branches of foreign banks:

(i) Have the minimum prudential ratios lower than that stipulated in Clause 1 Article 130 of the Law on credit institutions for 6 successive months or more;

(ii) Have the ratio of bad debt to total consumer outstanding credit of 10% or above for 3 successive months;

(iii) Break the limits on credit for one customer, a group of customer twice or more in one financial year;

(iv) Violate the credit extention to subjects being ineligible for credit extension prescribed in Article 126 of the Law on credit institution, or to subjects of credit restriction prescribed in Article 127 of the Law on credit institution

(v) Break limits and conditions for credit extension for securities investment and trading.

e) Applying higher capital prudential ratio than the general limit in cases credit institutions and branches of foreign banks:

(i) Break the limit on capital contribution and share purchase as stipulated in Article 129 of the Law on credit institutions;

(ii) Break the limit on the purchase of and investment into fixed assets directly serving for operation of credit institutions and branches of foreign banks as stipulated in Article 140 of the Law on credit institutions.

g) Performing one or some of independent audit services (operational audit, compliance audit) in cases credit institutions and branches of foreign banks:

(i) are requested by the State Bank to use one or some of independent audit services in one of the cases stipulated in Clause 2 Article 4 of the State Bank’s Circular No. 39/2011/TT-NHNN of December 15,2011 stipulating independent audit of credit institutions and foreign bank’s branches;

(ii) Forge accounting books and documents;

(iii) Open accounting books other than the official accounting book system of credit institutions and branches of foreign banks;

h) Suspending, temporarily suspending, dismissing position of the managers, administrators who have committed violations in cases credit institutions and branches of foreign banks:

(i) Violate Article 34 of the Law on credit institutions, other relevant provisions of law during fulfillment of their rights and assigned obligations;

(ii) Commit one of the violations stipulated in Clause 1 Article 36 of the Law on credit institutions.

k) Transferring the dossier of violation to the inspection agency upon finding signs of crimes; announce the violation publicly via mass media according to governing provisions of law.

3. In addition to measures stipulated in Clause 2 of this Article, for joint venture institutions, 100% foreign invested credit institutions, branches of foreign banks, the inspection and supervision agency shall consider and submit the decision to the Governor of the State Bank on providing information for foreign credit institutions or the Central Bank of the foreign country, or the inspection and supervision agency of the foreign country as prescribed by law.

Chapter 2.

HANDLING OF VIOLATIONS BY CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS AFTER SUPERVISION AND INSPECTION

SECTION 1. HANDLING IN IMPLEMENTATION OF THE INSPECTION CONCLUSION

Article 7. Inspection conclusion

Recommendations stated in the inspection conclusion that the inspected subjects are required to observe include:

1. The contents required to be done within a specific time limit.

2. The contents required to be done without any fixed time limit being the recommendations on mechanism, policy, organization, operation and risk management that the inspected subjects must study to make plans and implement them.

Article 8. Execution of inspection conclusions

1. For supervision and inspection agencies

a) Within a period of 15 days as from the date of issuance of inspection conclusion, units of the supervision and inspection agencies shall base on nature and extent of the recommendations stated in the inspection conclusion (if any) to request the Chief Inspector of the banking supervision and inspection agency, the Director of the State Bank’s branches in provinces and centrally – run cities:

(i) to submit to the Governor of the State Bank the decision on imposing one or a number of measures stipulated in Clauses 2 and 3 Article 6 of this Circular;

(ii) to issue the Decision on the confiscation or remittance of the amount or property acquired by inspected entities through violation and found through inspection;

(iii) Request the competent state administration agency to impose measures for improving and completing the legal mechanism and policies.

b) Monitoring and urging the inspected subjects to implement the recommendations in the inspection conclusion within a specific time limit as provided for in Article 7 and items (i) and (ii) point a clause 1 of this Article (if any);

e) Basing on the report made by the inspected subjects on the solutions and time limits in the plan for implementing recommendations in the inspection conclusion stipulated in Clause 2 Article 7 of this Circular, the supervision, inspection agency shall supervise and examine the execution by inspected entities.

2. Inspected entities shall be responsible for:

a) Implementing fully, promptly and duly required contents which must be done within a specific time limit as stated in the inspection conclusion and the handling decision of the Governor of the State Bank, the handling decision of the chief inspector of the banking supervision and inspection agency, of Directors of the State Bank’s branches in provinces and centrally-run cities after the inspection conclusion stated in items (i) and (ii) point a clause 1 of this Article (if any);

b) Submitting to the supervision and inspection agency the report on the solutions, time-limit and plan for execution of contents which must be done without a specific time limit as stated in the inspection conclusion stipulated in clause 2 Article 7 of this Circular.

3. While the requirements stipulated in point a clause 2 of this Article have not been implemented, the inspected subjects shall be liable for the measures stipulated at points a & b clause 2 Article 6 of this Circular.

4. The inspected subject failing to implement; or failing to implement fully and promptly the requests stipulated in Clause 2 this Article shall be administratively sanctioned as prescribed by law. If inspected subjects are not administratively sanctioned, the measures stipulated at points c and k Clause 2 Article 6 of this Circular shall be imposed.

SECTION 2. HANDLING AFTER CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS HAVE SUFFERED THE ADMINISTRATIVE SANCTIONS

Article 9. Imposition of administrative sanctions

Credit institutions and foreign bank’s branches that have violated provisions of law on state administration in the monetary field and banking operation shall be administratively sanctioned as prescribed by law.

Article 10. Handling after suffering administrative sanctions

1. The supervision and inspection agency shall be responsible for monitoring the compliance with the decision on administrative sanctions of the credit institutions and branches of foreign banks.

2. Administratively sanctioned credit institutions and branches of foreign banks are responsible for implementing fully, promptly, duly and legally the decision on administrative sanctions issued by the inspection and supervision agency.

3. Within 6 months as from the date of suffering administrative sanctions, credit institutions and branches of foreign banks shall be liable for the measures stipulated in point a clause 2 Article 6 of this Circular.

4. Within 1 year as from the date of suffering administrative sanctions, credit institutions, branches of foreign banks shall be liable for applying measures stipulated at point b clause 2 Article 6 of this Circular

5. In case the administratively sanctioned credit institutions and branches of foreign banks fail to implement or incompletely implement the decision on administrative sanctions, the supervision and inspection agency, depending on nature and extent of violation, shall request the Governor of the State Bank to order credit institutions, branches of foreign banks to implement the measures stipulated in point c Clause Article 6 of this Circular, or to dismiss, refuse to re-appoint, or refuse to appoint the violating individual to the management position of a similar or higher level.

SECTION 3. HANDLING IN THE SUPERVISION OF CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

Article 11. Contents of handling in the supervision activities

1. During the course of operation, credit institutions and branches of foreign banks shall obey the following provisions of law:

a) Provisions on the organization, management and administration of credit institutions and branches of foreign banks;

b) Provisions on compulsory reserve, statistics report, prudential ratios in the operation of credit institutions and branches of foreign banks;

c) Provisions on capital mobilization, credit extension, bank account payment service;

d) Provisions on banking services provided for in the license for establishment and operation or in the written approval by the State Bank;

dd) Provisions on money laundering prevention and fighting;

e) Provisions on control of foreign exchange and derivative products;

g) Provisions on shareholders, shares, capital contribution and purchase of shares;

h) Other business activities;

k) Other relevant provisions of law.

2. In case credit institutions and branches of foreign banks fail to obey the law provisions stated in Clause 1 this Article below the extent of applicable administrative sanction, depending on the nature and extent of violation, the supervision and inspection agency shall impose the following measures:

a) Notices of violation;

b) Warnings of violation.

Article 12. Handling in the supervision activity

1. The supervision and inspection agency shall monitor the compliance of credit institutions and foreign bank’s branches with the contents in the notice of violation or the warning of violation.

2. Credit institutions and branches of foreign banks liable to the handling measures stipulated in Clause 2 Article 11 of this Circular must implement fully, promptly and legally the request the notice of violation or the warning of violation issued by the supervision and inspection agency.

3. In the financial year, credit institutions and branches of foreign banks who have been warned of violation 3 times or more must implement the measures stipulated in points a and b clause 2 Article 6 of this Circular for 6 months of the next financial year.

4. For credit institutions, foreign bank’s branches that fail to remedy or continue to violate the contents in the warning of violation, the supervision and inspection agency shall impose one or a number of the following measures:

a) Imposing administrative sanctions as prescribed by law;

b) Organizing irregular inspections of the violations to put forward the proposal for disciplinary handling or request the Governor of the State Bank to restrict, suspend or temporarily suspend the professional services related to the act of violation;

c) Requesting the Governor of State Bank to impose one or some of the measures stipulated in Clauses 2 and 3 Article 6 of this Circular.

Chapter 3.

COMPETENCE TO HANDLE AFTER INSPECTION AND SUPERVISION

Article 13. Responsibilities of relevant units of the State Bank

Upon finding violations during the organization and operation of credit institutions and branches of foreign banks, relevant units of the State Bank shall be responsible for sending a written request to the banking supervision and inspection agency for consideration and handling of violations under provisions of law.

Article 14. Authority of the Chief Inspector of bank inspection and supervision and the banking inspection and supervision agency

1. Directing, inspecting, supervising and summarizing the handling activities after inspection and supervision conducted by units of the banking supervision and inspection agency and the inspection and supervision units of the State Bank’s branches in central-affiliated cities and provinces towards credit institutions, foreign bank’s branches after inspection and supervision.

2. Requesting credit institutions and branches of foreign banks to provide information and documents, making written reports and explanation about all issues related to the violation, the remedy for violation, the adjustment of operation and the application of handling measures by the banking supervision and inspection agency.

3. Applying measures of administrative sanctions, issuing the notice of violation and the warning of violation to credit institutions and foreign bank’s branches exercising violation acts.

4. Submitting proposals to the Governor of the State Bank to issue a decision on compelling credit institutions, foreign bank’s branches to implement one or some of the handling measures stipulated in Clause 2 Article 6 of this Circular.

Article 15. Competence of Directors, Chief Inspectors of inspection and supervision agencies of the State Bank’s branches in provinces and centrally-run cities

1. Chief Inspectors of inspection and supervision agencies of the State Bank’s branches in provinces and centrally-run cities shall have the following competence:

a) Directing, inspecting and supervising the handling of credit institutions and branches of foreign banks after inspection and supervision;

b) Requesting credit institutions and branches of foreign banks to provide information and documents, making written reports and explanation about the issues related to contents of violation, the remedy for violation, the adjustment of operation and the application of handling measures by the banking supervision and inspection agency;

c) Imposing administrative sanctions under its competence, issuing the notice of violation and the warning of violation to violating credit institutions, foreign bank’s branches. For the people’s credit funds, in addition to the above measures, the Chief Inspectors of the inspection and supervision of the State Bank’s branches in provinces and centrally-run cities shall impose measures stipulated in Clause 2 Article 6 of this Circular.

2. Directors of the State Bank’s branches in provinces and centrally-run cities shall have the following competence:

a) Applying handling measures on the people’s credit funds as stipulated at point c clause 1 of this Article;

b) Submitting proposals to the Governor of the State Bank (via the banking supervision and inspection agency) to issue the decision on compelling credit institutions and branches of foreign banks to implement one or some of handling measures stipulated in clauses 2 and 3 Article 6 of this Circular;

c) Sending the report on the result of handling credit institutions and branches of foreign banks after inspection and supervision to the banking supervision and inspection agency.

Chapter 4.

IMPLEMENTATION PROVISIONS

Article 16. Effect

This Circular takes effect on May 30, 2012.

Article 17. Implementation organization

Chief of the State Bank Office, the Chief Inspector of banking inspection and supervision agency, Heads of units of the State Bank, Directors of the State Bank’s branches in provinces and centrally-run cities, Chairpersons of the Boards of Directors, Chairpersons of the Members’ Councils and Directors (General Directors) of credit institutions and branches of foreign banks shall be responsible for implementing this Circular./.