Thông tư 14/2014/TT-NHNN

CIRCULAR

ON AMENDMENTS TO DECISION NO. 493/2005/QD-NHNN DATED APRIL 22, 2005 OF GOVERNOR OF THE STATE BANK ON CLASSIFICATION OF DEBTS, SETTING UP AND USE OF PROVISIONS AGAINST CREDIT RISKS IN THE BANKING OPERATIONS OF CREDIT INSTITUTIONS

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

Pursuant to the Law on credit institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Decree No. 156/2013/ND-CP dated November 11, 2013 of the Government defining the functions, tasks, entitlements and organizational structure of the State bank of Vietnam;

At the request of the Chief Inspector of Banking Supervisory agency,

The Governor of the State bank of Vietnam issues the Circular on amendments to Decision no. 493/2005/QD-NHNN dated April 22, 2005 of Governor of the State bank on classification of debts, setting up and use of provisions against credit risks in the banking operations of credit institutions (hereinafter referred to as Decision 493.)

Article 1. Supplement Clause 3a to Article 6 of Decision 493 (to be amended by Decision No. 18/2007/QD-NHNN dated April 25, 2007 of the Governor of the State bank) as follows:

“3a. Debt rescheduling and maintenance of debt category:

a) Cooperative banks and People's credit funds shall be considered for debt rescheduling and maintenance of debt category which has been classified before debt rescheduling if they meet all of requirements below:

(i) The credit extension does not violate legislation;

(ii) The debt rescheduling is conformable with the purpose of business plans in the credit agreement;

(iii) Clients use the loan for the purpose which is agreed in the credit agreement;

(iv) The debt rescheduling and maintenance of debt category may only carried out if the clients are unable to repay principal and/or interests on schedule by the loan term expiration or unable to pay off principal and/or interests on schedule as agreed in the credit agreement, there is a plan for debt repayment which is feasible and conformable with their condition of businesses;

(v) While rescheduling debt and maintaining debt category, the Cooperative Bank or People's credit fund must comply with regulations of the State bank on limitations and banking prudential ratios in the banking operations of the Cooperative Bank or People's credit fund 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) The Cooperative bank and People's credit fund which carry out the debt rescheduling and maintenance of debt category as prescribed in Point a of this Clause must meet the requirements below:

(i) There are rules and regulations on control and supervision on the debt rescheduling and maintenance of debt category in order to ensure the unity in entire system, there is a internal control mechanism for debt rescheduling and maintenance of debt category, ensuring strict and safe supervision, prevention against the exploitation of debt rescheduling and maintenance of debt category to reflect wrongly the credit quality;

(ii) The content and reason of debt rescheduling and maintenance of debt category for each debt must be controlled. The State bank shall request the Cooperative bank and People's credit fund to report specifically the content and reason of debt rescheduling and maintenance of debt category for each debt where necessary;

(iii) The cooperative bank or People’s credit fund makes decisions itself and takes responsibility for debt rescheduling and maintenance of debt category in accordance with this Circular.

(iv)The debt rescheduling and maintenance of debt category as prescribed in Point a of this Clause may only be carried out at once for one debt;

(v) The solvency of clients must be regularly checked and evaluated after their debts are rescheduled and kept in its category. Although the debts are rescheduled and kept in its category as prescribed in this Circular, the clients still have not repay due debts , the Cooperative Bank or People's credit fund shall classify such debts into equivalent group as prescribed in Article 6 and Article 7 of this Circular;

(vi) Within the first five days of each month or at the request of the State bank, the Cooperative Bank or People's credit fund must report the debt rescheduling and maintenance of debt category to the State bank (Bank Supervision and Inspection Agency using the Form No. 3 enclosed herewith”.

Article 2. Effect

This Circular shall take effect from May 22, 2014 and shall be annulled from April 1, 2015.

Article 3. Responsibility for implementation

The Chief officers, the Chief Inspectors of Banking Supervisory agency, Heads of the State bank affiliated units, Directors of the State bank branches in central-affiliated cities and provinces, Presidents of the Board of Directors, General Directors (Directors ) of Cooperative Banks or People's credit funds shall take responsibility for implementation of this Circular.

Form 3

REPORT ON DEBT RESCHEDULING AND MAINTENANCE OF DEBT CATEGORY

[Date]………………………………..

1. The debt rescheduling and maintenance of debt category:

Currency unit: Million dong

2. The total outstanding debts which are not moved to bad debt category because of debt rescheduling and maintenance of debt category: VND ………………………..million.

Guideline for making report:

1. Data of report is the accumulated figure till the end of month in which the report is made.

2. Column (3): The amount of outstanding debt that is rescheduled and kept in its category till the end of month, including the amount of outstanding debt that is rescheduled and kept in its category as prescribed in Decision 780/QD-NHNN dated April 23, 2012 of the Governor of the State bank on classification of rescheduled loans which is still in rescheduled duration up to the reported time and the amount of outstanding debt which is rescheduled and kept in its category as prescribed in Circular No. 14/2014/TT-NHNN.

3. Column (4): The specific provision which is required to set up because the amount of outstanding debt is rescheduled and kept in its category.

4. The outstanding debts which are not moved to bad debt category because of debt rescheduling and maintenance of debt category: the outstanding debts which are not moved to category 3, 4 and 5.

I.e. At the end of June 30, 2014, the Cooperatives bank has an outstanding debt of VND 1 billion which is classified into group 1, where undue outstanding debt of VND 500 million which is rescheduled and kept in category 1, including:

- VND 200 million which is the outstanding debt satisfying requirements for debt rescheduling and kept in category 1 as prescribed in Decision 780/QD-NHNN shall be still in rescheduled duration, if not it shall be classified into group 3 according to current regulations.

- VND 300 million is the outstanding debt which satisfy requirements for debt rescheduling and maintenance of category 1 as prescribed in Decision 14/2014/TT-NHNN, if not it shall be classified into group 3 according to current regulations.

The specific provision which is not required to set up with respect to the said VND 500 million and is rescheduled and kept in category 1 and not moved to category 3 shall be VND 10 million, where:.

-  VND 4 million is the amount which is not required to set up because the said VND 200 million shall be kept in category 1 as prescribed in Decision 780/QD-NHNN

- VND 6 million is the amount which is not required to set up because the said VND 300 million shall be kept in category 1 as prescribed in Decision 780/QD-NHNN

In Point 1 of Form 3 about report of Cooperative bank on debt rescheduling and maintenance of debt category in June shall be filled as follows:

- At the column (3):

 Line 1: 500.

 Line 1.1: 200.

 Line 1.2: 300.

- At the column (4):

 Line 1: 10.

 Line 1.1: 4.

 Line 1.2: 6.

 Line 2: 500.