Thông tư 14/2015/TT-NHNN

CIRCULAR

AMENDMENTS TO SOME ARTICLES OF CIRCULAR NO. 19/2013/TT-NHNN DATED SEPTEMBER 06, 2013 OF THE GOVERNOR OF THE STATE BANK OF VIETNAM ON PURCHASE, SALE, AND SETTLEMENT OF BAD DEBTS OF VIETNAM ASSET MANAGEMENT COMPANY

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 Law on Enterprises No. 68/2014/QH13 dated November 26, 2014;

Pursuant to the Government's Decree No. 156/2013/NĐ-CP on August 11, 2013 defining the functions, tasks, powers and organizational structure of the State bank of Vietnam;

Pursuant to the Government's Decree No. 53/2013/NĐ-CP on the establishment, organization and operation of Vietnam Asset Management Company;

Pursuant to the Government's Decree No. 34/2015/NĐ-CP dated March 31, 2015 on amendments to the Government's Decree No. 53/2013/NĐ-CP on the establishment, organization and operation of Vietnam Asset Management Company (hereinafter referred to as the Decree No. 34/2015/NĐ-CP);

At the request of the Chief Banking Inspector,

The Governor of the State bank of Vietnam promulgate a Circular on amendments to some Articles of Circular No. 19/2013/TT-NHNN dated September 06, 2013 of the Governor of the State bank of Vietnam on purchase, sale, and settlement of bad debts of Vietnam Asset Management Company (VAMC).

Article 1. Amendments to some Articles of Circular No. 19/2013/TT-NHNN dated September 06, 2013 of the Governor of the State bank of Vietnam on purchase, sale, and settlement of bad debts of VAMC

Article 1 is amended as follows:

“Article 1. Scope

This Circular deals with the purchase, sale, and settlement of bad debts; issuance, management, and redemption of special bonds and bonds directly issued to debt-selling credit institutions to purchase bad debts at market prices of VAMC."

2. Clause 5 Article 2 is amended as follows:

“5. Other entities involved in the purchase, sale, and settlement of bad debts; issuance, management, and redemption of special bonds and bonds directly issued to debt-selling credit institutions to purchase bad debts at market prices of VAMC."

3. Clause 8a is added to Clause 8; Clause 9 Article 3 is amended as follows:

“8a. Bonds directly issued to debt-selling credit institutions to purchase bad debts at market prices (hereinafter referred to as bonds) are limited-term valuable papers issued by VAMC directly to debt-selling credit institutions when purchasing bad debts at market prices.

9. Date of issue of bonds or special bonds is the day on which the bonds or special bonds come into operation and is the basis for determining the day to redeem bonds.”

4. Point b Clause 1 Article 4 is amended as follows:

“b. Issuance, management and redemption of bonds and special bonds;”

5. Point dd and Point e are added to Article 4 as follows:

“dd) Internal regulations on making and using provisions to control risks to the bad debts purchased at market prices.

e) Internal regulations on valuation of bad debts and collateral for such bad debts.”

6. Article 4a is added after Article 4 as follows:

“Article 4a. Management of foreign currencies when purchasing, selling bad debts of VAMC

1. VAMC; debt-selling credit institutions, entities that purchase debts from VAMC, borrowers, and involved parties have the responsibility to comply with regulations of law on restricted use of foreign currencies within Vietnam’s territory when purchasing, selling bad debts, and collecting purchased debts.

2. When trading in debts with VAMC:

a) The debt purchaser shall use a payment account in VND to pay VAMC for the purchased debts and relevant costs under the debt purchase contract if the currency used for purchasing debts is VND;

b) The debt purchaser who is a non-resident shall use a payment account in a foreign currency opened at a credit institution or branch of a foreign bank permitted to do credit activities in within Vietnam’s territory, or a foreign currency account opened overseas to pay VAME for the purchased debts and relevant costs under the debt purchase contract if the currency used for purchasing debts is a foreign currency.

3. When collecting the debts purchased from VAMC, the collected debts must be transferred to 01 payment account in VND and 01 payment account in a foreign currency (for the debts collected in foreign currency) opened by the debt purchaser at commercial banks or branches of foreign banks permitted to do credit activities within Vietnam’s territory.

4. When purchasing or selling a debt derived from overseas lending or repayment for a non-resident principal debtor:

a) The debt seller (VAMC or the credit institution that sells the debt to VAMC) shall register a change to the overseas loan and collection of guaranteed debts according to applicable regulations on foreign currency management applied to overseas lending and collection of guaranteed debts for non-residents principal debtor.

b) The debt purchaser (VAMC or the entity that purchases the debt from VAMC) shall register a plan for debt collection according to applicable regulations on foreign currency management applied to collection of foreign debts derived from purchase or sale of debts.”

7. The title of Section 2 of Chapter II is changed into:

“SECTION 2. ISSUANCE OF BONDS AND SPECIAL BONDS OF VAMC”

8. Article 10 is amended as follows:

“Article 10. Issuer, purposes and principles of issuance of bonds and special bonds

1. The issuer of bonds and special bonds is VAMC. VAMC shall authorize the Exchange of the State bank to organize the issuance of bonds and special bonds in accordance with this Circular.

2. VAMC shall issue bonds and special bonds to pay credit institutions for the purchase of their bad debts.

3. Bonds and special bonds for purchase of bad debts of debt-selling credit institutions shall be issued separately depending on the actual demand and plan for bond issuance in the Scheme for purchasing bad debts at market prices, Scheme for issuance of special bonds approved by the State bank.

4. Each bond and special bond mentioned in Clause 3 of this Article corresponds to a bad debt that is purchased. If the purchased bad debt is a syndicated loan, VAMC shall issue bonds and special bonds to each of the credit institutions that provide in the syndicated loan.”

9. Article 11 is amended as follows:

“Article 11. Terms and conditions of bonds and special bonds

1. Face value of bonds and special bonds

a) The face value of a bond is equal to the purchase price of the bad debt. The face value of a special bond equals the purchase price of the bad debt according to Clause 1 Article 14 of the Decree No. 53/2013/NĐ-CP.

b) If the purchased bad debt is a syndicated loan, the face value of bonds/special bonds to each of the credit institutions that provide in the syndicated loan will be:

(i) Book value of outstanding principal of the bad debt after deducting the unused reserve for such bad debt which is monitored by the credit institutions that provides the syndicated loan in case VAMC purchases the bad debt with special bonds.

(ii) The purchase price of bad debt according to the holding of each of the credit institutions that provide the syndicated loan if VAMC purchases bad debts at market prices with bonds.

2. Bonds and special bonds are issued in VND. Special bonds may be transferred between the State bank and credit institutions and among credit institutions. Special bonds must not be transferred.

3. Bonds and special bonds shall be issued in the form of book entries or identified electronic data. VAMC shall decide the forms of bonds and special bonds.

4. The interest rate of bonds and special bonds is 0%.

5. Duration of bonds and special bonds:

a) VAMC and the debt-selling credit institution shall reach an agreement on the duration of bonds, which is at least 01 year.  If the collected debt is not sufficient to redeem bonds when they mature, VAMC shall extend the duration of bonds for up to 03 more years, unless otherwise accepted by the organization that owns the bonds.

b) The maximum duration of special bonds is 05 years. In case special bonds are issued to purchase bad debts of credit institutions that are undergoing restructuring or having financial difficulties, the maximum duration of special bonds shall be 10 years.

6. Bonds and special bonds must be deposited at the State bank according to regulations of the State bank on depositing valuable papers, and used for refinancing. Bonds are used for open market operation as prescribed by law.

7. Bonds and special bonds are deposited at the State bank free of charge.

8. Credit institutions holding bonds are not required to make provision for bond-related risks.”

10. Article 14 is amended as follows:

“Article 14. Elements of a bond/special bond

1. A bond/special bond shall contain at least:

a) The name, address, number of the Decision on establishment, and business registration number of VAMC;

b) The face value;

c) Interest rate;

d) Duration;

dd) Issuance date;

e) Information about the debt purchase contract and bad debts;

g) Information about the credit institution that holds the bonds/special bonds: Name of the credit institution, number of the license for establishment or Certificate of Business registration, address.

h) If the bonds or special bonds are issued in the form of certificates, they must bear the symbol, serial numbers, signature of the legal representative of VAMC, other signatures required by VAMC, and the seal of VAMC.

2. Apart from the information in Clause 1 of this Article, VAMC may add more information on the bonds or special bond as long as it does not contravene the law.

11. Article 15 is amended as follows:

“Article 15. Rights and obligations to the management and use of bonds and special bonds

1. Rights and obligations of VAMC:

a) Establish a system to manage and monitor the bonds, special bonds issued;

b) Perform the rights and duties pertaining to bonds and special bonds;

c) Receive and redeem bonds and special bonds as prescribed by law;

d) Report the issuance and redemption of bonds and special bonds to the State bank;

dd) Fully pay the organization holding bonds when they have to be redeemed as prescribed in Clause 1 Article 44a of this Circular;

e) Repay refinancing loans based on bonds on behalf of the credit institution holding bonds according to Point c Clause 1 Article 43a and Point c Clause 2 Article 44a of this Circular, and regulations of the State bank on refinancing based on bonds.

g) Use collected bad debts that were purchased with special bonds by VAMC to repay refinancing loans based on the special bonds as prescribed in Point b Clause 1 Article 43 and Clause 3 and 44 of this Circular, and regulations on the State bank on refinancing loans based on special bonds.

h) Extend the duration of bonds as prescribed in Point a Clause 5 Article 11 of this Circular.

2. Rights and obligations of credit institutions holding bonds/special bonds:

a) Perform the rights and duties pertaining to bonds and special bonds;

b) Transfer and bonds/special bonds with VAMC for redemption as prescribed by law;

c) Set the risk factor of bonds to 0% and that of special bonds to 20% when calculating their capital adequacy ratio;

d) Use special bonds to repurchase the bad debts sold to VAMC as prescribed by this Circular;

dd) Use bonds and special bonds for refinancing at the State bank as prescribed by the State bank; use bonds to participate in open market operation.

e) Do not transfer bonds to other entities except for the case in Clause 2 Article 11 of this Circular.”

12. Article 17a is added after Article 17 as follows:

“17a. Application and procedures for extending duration of special bonds to more than 5 years

1. With regard to a credit institution undergoing restructuring according to a scheme approved by a competent authorities, or facing financial difficulties, when it sells its bad debts to VAMC, it may submit an application to the State bank as prescribed in Clause 2 of this Article for permission to apply a specific duration of special bonds issued by VAMC to the credit institution in that year.

2. The credit institution shall submit an application directly or by post to foreign contractor (Bank Supervision and Inspection Agency), which consists of:

a) A written request for permission to apply a specific duration to special bonds when selling bad debts to VAMC;

b) An explanation of the credit institution for the duration of special bonds, which contains:

(i) Its financial condition, operation, limits, and adequacy ratio;

(ii) The amount of bad debts that have been sold and intended to be sold to VAMC; provisions for risks to special bonds that have been made and will be made corresponding to the amount of bad debts intended to be sold;

(iii) A plan for making provision for special bonds for the proposed duration that is considered appropriate for the credit institution’s business plan;

(iv) Necessity of the specific duration of special bond period;

(v) Impact of selling bad debts to VAMC to receive special bonds on cost contingency, financial conditions, ratios, and safety limits of the credit institution in case 05-year duration is applied and in case the proposed duration is applied.

(vi) Other contents required by the State bank.

3. Within 15 working days from the day on which the satisfactory application is received according to Clause 2 of this Article, the State bank shall send VAMC a written response as to the specific duration of special bonds proposed by the credit institution in the following order:

a) Within 03 working days from the receipt of the satisfactory application from the credit institution, Bank Supervision and Inspection Agency shall documents mentioned in Clause 2 of this Article to the Financial policy department and VAMC to obtain their opinions about the duration of special bonds. Within 03 working days from the receipt of documents from Bank Supervision and Inspection Agency, the Financial policy department and VAMC must send a written response TO Bank Supervision and Inspection Agency.

B) Within 07 working days from the receipt of the response from the Financial policy department and VAMC, Bank Supervision and Inspection Agency shall request the Governor of the State bank to consider sending a response to the credit institution and VAMC regarding the specific duration of special bonds proposed by the credit institution.

4. According to the response of the State bank, the credit institution and VAMC shall sell/purchase bad debts with special bonds with the approved duration.”

13. Clause 1 Article 23 is amended as follows:

“1. A bad debt shall be purchased by VAMC at market prices when all of the conditions below are satisfied:

a) It meet all the conditions in Clause 1 Article 16 of this Circular;

b) VAMC considers the investment in purchasing bad debts as completely collectable;

c) The collateral for bad debts is liquid or the borrower has the possibility of recovering their solvency.”

14. Clause 2 Article 24 is amended as follows:

“2. The plan for purchasing debts at market prices shall specify the following information:

a) The bad debts being purchased at market prices (sort by borrower, field, and type of collateral);

b) Estimated of total amount of bad debts to be purchased, sources of capital (money, bonds, other sources), and financial condition of VAMC;

c) The plan for issuing bonds to purchase bad debts at market prices (if any);

d) Analyses and assessment of effectiveness, risks, and probability of recovering the investment in purchasing debts at market prices;

dd) Measures for selling, settling debts and collateral.”

15. Article 26 is amended as follows:

“Article 26. Purchasing bad debts at market prices

1. According to the plan for purchasing bad debts at market prices approved by the State bank, financial capacity, economic effectiveness, and market developments, VAMC shall decide and take responsibility for the purchase of bad debts at market prices.

2. VAMC may only purchase a bad debt at market price after the following tasks have been fulfilled:

a) Determining whether the bad debt meets the conditions in Clause 1 Article 23 of this Circular;

b) Determining the market price of the bad debt, including collateral for such bad debt;

c) Analyzing the e effectiveness, risks, and probability of investment recovery;

d) Analyzing and assessing the status and potential of the bad debt, the borrowers, guarantors, debt payers, and agreements with the debt-selling credit institution;

dd) Drawing up feasible plans for settling debts and their collateral.”

16. Article 27 is amended as follows:

Article 27. Principles for restructuring bad debts purchased

1. The restructuring of bad debts must conform to the Decree No. 53/2013/NĐ-CP Decree No. 34/2015/NĐ-CP this Circular, terms and conditions of the credit contract, entrustment contract, corporate bond purchase contract, or debt purchase contract.

2. VAMC shall consider, decide, and take responsibility for restructuring of the bad debts purchased at market prices according to borrowers’ written request and this Circular.

3. It is prohibited to take advantage of debt restructuring for illegal self-seeking purposes.

4. VAMC shall restructure bad debts purchased with special bonds according to borrowers’ written request and this Circular.

17. Article 28 is amended as follows:

“Article 28. Adjusting interest rates of bad debts purchased

1. VAMC shall decide and take responsibility for adjustment of interest rates to make them reasonable, conformable with law, and interest rates on the market at that time.

2. Every quarter, VAMC shall announce the reasonable interest rates and the basis for determining them.

3. VAMC shall consider reducing the interest rate of the bad debt when the borrower meets the conditions below:

a) The borrower fully cooperates with VAMC and the authorized credit institution in providing documents, information, transfer of collateral, and other issues related to the debts and collateral;

b) The borrower is facing temporary financial difficulties and the reduction in interest rate of the bad debt helps the borrower alleviate their difficulties and restore their business performance;

c) The bad debt does not violate Articles 126, 127, and 128 of the Law on credit institutions at the time of conclusion of the credit contract.

4. After purchasing the bad debt VAMC shall consider adjusting its interest rate to the level mentioned in Clause 2 of this Article. Within 05 working days from the date of adjustment of interest rate, VAMC shall notify it to the borrowers and the debt-selling credit institution (if bad debts are purchased with special bonds).”

18. Article 29 is amended as follows:

“Article 29. Exemption, reduction of fines, fee, and overdue interest

1. VAMC shall consider reducing or exempting the fine, fee and overdue interest that is not paid by the borrower when the borrower meets the conditions below:

a) The borrower meets all the conditions in Clause 3 Article 28 of this Circular.

b) The borrower has a feasible plan for paying debts, financial or operational restructuring;

2.  VAMC shall discuss the exemption, reduction of fines, fee, and overdue interest on the bad debts purchased with special bonds with the debt-selling credit institution before making the decision.

The debt-selling credit institution shall provide its opinions about the issues raised by VACM within 10 working days from the day on which VAMC makes a written request for opinions. After that, VAMC shall decide and take responsibility for the exemption, reduction of fines, fee, and overdue interest.

3. Within 05 working days from the date of deciding the exemption, reduction of fines, fee, and overdue interest, VAMC shall send a written notification to the borrowers and the debt-selling credit institution (if bad debts are purchased with special bonds).”

19. Article 30 is amended as follows:

“Article 30. Measures for rescheduling bad debts purchased

1. VAMC shall consider rescheduling the debts in the form of adjusting the repayment term or debt rescheduling when the borrower meets the conditions below:

a) The borrower has a feasible repayment plan;

b) In case of adjusting the repayment term of principle and/or interest, the borrower is incapable of duly repaying the principal and/or interest by the repayment deadline stated in the credit contract, entrustment contract, or corporate bond purchase contract, and is considered by VAMC as capable of repaying debts in the next period after the debt is rescheduled;

b) When rescheduling debts, the borrower is incapable of duly repaying the principal and/or interest within the repayment period stated in the credit contract, entrustment contract, corporate bond purchase contract, and is considered capable of paying debts within a certain period of time after the agreed repayment deadline;

d) The rescheduling of bad debts must not exceed the remaining duration of the corresponding special bonds. In case the rescheduling of bad debts exceeds the remaining duration of corresponding special bonds, VAMC shall reach a written agreement with the debt-selling credit institution on the excess time.

2. VAMC shall discuss with the debt-selling credit institution before deciding the rescheduling of bad debts purchased with special bonds.

The debt-selling credit institution shall provide its opinions about the issues raised by VACM within 10 working days from the day on which VAMC makes a written request for opinions. After that, VAMC shall make decision and take responsibility for the rescheduling of debt.

3. Within 05 working days from the date of debt rescheduling, VAMC shall send a written notification to the borrowers and the debt-selling credit institution (if bad debts are purchased with special bonds).”

20. Article 34 is amended as follows:

“Article 34. VAMC selling bad debts purchased

1. VAMC shall sell bad debts on the following principles:

a) Compliance to law and the debt purchase contract;

b) Openness and transparency;

c) Maximum collection of debts, including interest and fees payable (if any);

d) It is prohibited to take advantage of bad debt transaction for illegal self-seeking purposes;

dd) The sale price of the debt is the highest price in comparison to other offers or the price of an equivalent debt, or the value of the ad debt determined by VAMC or an independent valuating organization in order to reduce loss during the settlement of bad debts.

e) VAMC must sell the bad debts purchased at auction or competitive offering. If the first auction or competitive offering is not successful, VAMC may reach an agreement with the debt buyers, including those who participated in the auction or submitted their offers, and sell the debt to the one that offer the highest price.

2. The sale of a bad debt at auction shall comply with this Circular and regulations of law on selling assets of VAMC at auction.

3. The sale of bad debts in the form of competitive offer must be participated by at least two buyers that are not related to each other according to the Law on credit institutions and follow these steps:

a) VAMC sets the price or hires an independent valuating organization to do it.

b) VAMC announces information about the sale of the bad debt on the website of the State bank, VAMC, and debt-selling (if the bad debt is purchased with special bonds). VAMC shall decide the information announced, ensure openness and transparency, including detailed information about the bad debt and collateral for it, the starting/selling price; location, time for information announcement and examination of legal documents; location and time for submitting offers.

The minimum duration of information announcement and examination of legal documents 05 working days if the bad debt is secured with movable properly, and 15 working days if the bad debt is secured with real estate. Offers shall be submitted within 03 working days from the end of the period of information announcement and examination of legal documents.

c) Within 03 working days from the deadline for submitting offers, VAMC shall sell the bad debt to the entity that offers the highest price. If the highest price is offered by more than one entity, VAMC shall draw lots to select the buyer.

d) The competitive offering is considered unsuccessful in the following cases:

(i) There is only one offer;

(ii) The highest offer is still lower than the starting price set by VAMC.

dd) VAMC shall provide written instructions on procedures and documents for selling bad debts by competitive offering.

4. The sale of debts shall be made into a written contract.

5. VAMC may authorize a credit institution to sell bad debts under the requirements and conditions imposed by VAMC in accordance with this Circular.

21. Clause 1 Article 35 is amended as follows:

“1. VAMC shall reach an agreement with the debt-selling credit institution on the method that is conformable with Point e Clause 1 Article 34 of this Circular and conditions for selling the bad debt (including starting price in case of auction or competitive offering, or selling price in case of direct agreement with debt buyer), except for the case in Clause 3 of this Article.  If VAMC and the debt-selling credit institution fails to reach an agreement on method and conditions for selling the bad debt, VAMC shall sell the bad debt at auction in accordance with Clause 2 Article 34 of this Circular.”

22. The title of Chapter IV is changed into:

“Chapter IV

SETTLEMENT OF DEBT REPAYMENT, REDEMPTION OF BONDS/SPECIAL BONDS, AND REPURCHASE OF BAD DEBTS WITH SPECIAL BONDS”

23. The title of Article 42 is changed as follows:

“Article 42. Order of priority for repayment of bad debts purchased

24. Point a Clause 1 of Article 43 is amended as follows:

“a) If the debt-selling credit institution does not take a refinancing loan based on special bonds, within 05 working days from the date of occurrence of the debt repayment, VAMC shall leave it at the debt-selling credit institution in the form of deposit without interest and shall not withdraw it before the redemption of special bonds, except for the case in Article 19 of this Circular;”

25. Article 43a is added after Article 43 as follows:

“Article 43a. Settling repayments of bad debts purchased with bonds at market prices

1. VAMC shall settle the money earned when a bad debt is purchased at market price as follows:

a) If bonds are held by the State bank, VAMC shall follow instructions of the State bank.

b) If the debt-selling credit institution does not take a refinancing loan based on the bonds issued to purchase the bad debt, within 05 working days from the day on which the money or property is obtained from debt repayment, VAMC shall leave an amount of money equivalent to the money or property obtained from debt repayment at the debt-selling credit (up to the face value of bonds) institution in the form of deposit without interest and shall not withdraw it before the redemption of bonds;

c) If the debt-selling credit institution takes a refinancing loan based on the bonds issued to purchase the bad debt, within the first 05 working days of the next quarter, VAMC shall use the amount of money to the money or property is obtained from debt repayment within the quarter to repay the refinancing loan and deduct it from the total amount payable to credit institution by VAMC when bonds are redeemed.

2. If the money or property obtained from debt repayment is not lower than face value of bonds, VAMC and the bond-holding organization shall redeem bonds as prescribed in Article 44a of this Circular.”

26. Clause 2 of Article 44 is amended as follows:

“2. Within 05 working days from the maturity date of special bonds prescribed in Clause 1 of this Article, the debt-selling credit institution shall fully repay the refinancing loan based on corresponding special bonds (if any), have the special bonds unblocked by the State bank (transaction offices), and cooperate with VAMC to redeem the special bonds as follows:

a) In case the bad debt is not fully collected (including principal, interest, and relevant financial obligations) under the credit contract, entrustment contract, or corporate bond purchase contract, the debt-selling credit institution shall use corresponding special bonds to repurchase the bad debt from VAMC at book value of outstanding principal according to VAMC’s accounting records and the stake/shares in the borrower at book value according to the balance sheet of VAMC in case part of the bad debt is converted into charter capital or shares capital of the borrower (if any); the debt-selling credit institution shall receive an amount on the debt repayment from VAMC according to Point b Clause 2 Article 43 of this Circular (if any);

b) In case the bad debt is fully collected (including principal, interest, and relevant financial obligations) under the credit contract, entrustment contract, or corporate bond purchase contract (even if the bad debt is sold to another entity), the debt-selling credit institution shall use corresponding special bonds to repurchase the stake/shares in the borrower at book value according to the balance sheet of VAMC in case part of the bad debt is converted into charter capital or shares capital of the borrower (if any); the debt-selling credit institution shall receive an amount on the debt repayment from VAMC according to Point b Clause 2 Article 43 of this Circular (if any);

c) If the whole bad debt is converted into charter capital, share capital of the borrower that is an enterprise, the debt-selling credit institution shall use corresponding special bonds to repurchase the stake/shares in the borrower at book value according to the balance sheet of VAMC, and pay the VAMC an amount from the debt repayment to which VAMC is entitled according to Point a Clause 2 Article 43 of this Circular.”

27. Article 44a is added after Article 44 as follows:

“Article 44a. Redemption of bonds

1. Bonds shall be redeemed in the following cases:

a) The amount collected from the bad debt is not lower than the face value of bonds;

b) VAMC sells the bad debt, converts part or all of the bad debt into stake or shares in another enterprise;

c) VAMC has paid for the full face value of bonds;

d) The bonds are mature.

2. Within 05 working days from the redemption date of bonds prescribed in Clause 1 of this Article, VAMC shall pay for the full face value of bonds as follows:

a) If bonds are held by the State bank, VAMC shall follow instructions of the State bank.

b) If bonds are held by a credit institution which does not take a refinancing loan based on bonds, VAMC shall pay the credit institution for the face value of bonds and credit institution shall return the bonds to VAMC;

c) If bonds are held by a credit institution which takes a refinancing loan based on bonds, VAMC shall repay the refinancing loan to the State bank on behalf of credit institution; VAMC shall pay the remaining redemption amount (if any) to the credit institution and have bonds returned by the State bank. If the redemption amount is not sufficient to repay the refinancing loan, the credit institution has the responsibility to pay the difference according to regulations of the State bank on refinancing based on bonds to buy debts of VAMC at market price.”

28. Clause 2 Article 46 is amended as follows:

“2. Every year, within 05 working days before the maturity date of special bonds, the debt-selling credit institution shall make a specific provision for each special bond using the formula below:

Where:

X_(m) : minimum provision for special bonds in the m^th year;

X_m-1 specific accrued provision for special bonds in the m-1^th year;

Y: face value of special bonds;

n: duration of special bonds (years);

m: number of years from issuance of special bonds to provision time;

Z_m : accrued bad debt repayment up to provision time (m^th year). The debt-selling credit institution shall cooperate with VAMC to determine the repayment.

If (Z_m + X_m-1) ≥ ( X m) , the specific provision (X_(m)) will be 0.”

29. Clause 2a enterprise Clause 2b is added to Article 46 as follows:

“2a. The debt-selling credit institution shall decide whether to gradually add annual provision for each special bond to the periods in the year so that 05 working days before the maturity date of special bonds, the provision for each special bonds reaches the minimum level according to the formula in Clause 2 of this Article.

2b. The credit institutions undergoing restructuring or facing financial difficulties and are not able to make annual provision for special bonds as sufficiently as prescribed in Clause 2 of this Article shall submit reports to the State bank for consideration. The State bank shall ensure that they have sufficient provision to settle all bad debts after redeeming special bonds with VAMC.”

30. Clause 5 Article 46 is amended as follows:

“5. The debt-selling credit institution shall reverse the provision for special bonds that remains after all risks are controlled as other revenues according to Clause 4 of this Article, or include the difference to expense if the provision made is not sufficient to control risks according to Clause 4 of this Article.

31. Clause 8 is added to Article 46 as follows:

“8. Documents about risk control of the debt-selling credit institution after using the provision for special bonds to control risks to the bad debt after it is purchased from VAMC include:

a) Documents about the bad debt transaction between the debt-selling credit institution and VAMC;

b) Documents about the debt restructuring, conversion of debt into stake or shares in another enterprise by VAMC.

c) Documents proving repayment of the bad debt after has been sold to VAMC;

d) Documents proving the provision for risks to special bonds corresponding to the bad debt sold to VAMC;

dd) A decision or approval of Risk Control Council of the credit institution about the risk control;

e) Debt purchase contract between VAMC and the debt-selling credit institution when redeeming special bonds.

g) Relevant documents.”

32. Article 47 is amended as follows:

“Article 47. Classifying, making, and using provisions to control risks to the bad debts purchased at market prices

1. The Board of members of VAMC shall decide and take responsibility for making and using provisions to control risks to bad debts in accordance with its regulations on making and using provisions to control risks to bad debts purchased at market price, this Circular, and relevant regulations of law.

2. After risks are controlled, VAMC must record the unsettled debts as an off-balance entry and monitor, urge their collection. The use of provision for controlling risks is the work of VAMC. It does not affect the borrower’s obligation to pay the risk-controlled debts.

3. After at least 05 years from the day on which provision is used to control risk and after all necessary measures taken to collect debts are unsuccessful, VAMC may decide to remove the risk-controlled debts from its balance sheet after the Ministry of Finance and the State bank grant an approval in writing.

4. The amount collected from the risk-controlled debts shall be included in the VAMC’s revenue of the period."

33. Article 47a is added after Article 47 as follows:

“Article 47a. Making provisions for bad debts purchased at market price

1. VAMC shall make provision for each bad debt purchased at market price (R) using the following formula:

R = (A - C) x r

Where:

a) A is book value of outstanding principal of the bad debt at VAMC on December 15 every year; C is deducted value of collateral for the bad debt; r is the provision ratio decided by the Board of members which is now lower than 5%.

b) R will be 0 if C > A.

c) If a piece of property is put up as collateral for multiple bad debts, VAMC shall determine the ratio of collateral for each bad debt. C equals (=) deducted value of collateral multiplied by (x) ratio of collateral for the bad debt.

2. Every year before December 15, VAMC shall re-evaluate collateral for each bad debt, determine the annual provision for each bad debt according to Clause 1 of this Article, and perform the following tasks:

a) If the necessary annual provision is smaller than the actual provision, VAMC may reverse the difference.

a) If the necessary annual provision is higher than the actual provision, VAMC shall make additional provision.

3. Collateral to be deducted when calculating provision (R) mentioned in Clause 1 of this Article must satisfy all of the following conditions:

a) VAMC is entitled to liquidate collateral according to the contract and regulations of law if the borrower fails to fulfill their obligations as agreed.

b) The collateral must satisfy conditions for secured transactions as prescribed by law;

c) Collateral of which the value is VND 200 billion and above must be valuated by a professional valuation organization as prescribed by law. In case the valuation organization is not capable of valuating such collateral, VAMC shall carry out the valuation according to its rules and regulations.

If the collateral fails to satisfy all conditions in Point a, Point b, and Point c of this Clause, its deducted value is zero (0).

4. The deducted value of collateral equals (=) the value of collateral prescribed in Clause 5 of this Article multiplied by (x) deduction ratio of each type of collateral prescribed in Clause 6 of this Article.

VAMC shall determine the deduction ratio of each type of collateral itself based on assessment of possibility of recovery when liquidating such collateral. Nevertheless, the deduction ratio must not exceed the maximum deduction ration of each type of collateral prescribed in Clause 6 of this Article.

5. Value of collateral is determined as follows:

a) Gold bullions: Buying price at the headquarter of the enterprise or credit institution owning gold bullions at the end of the day preceding the day on which specific provision is made. If buying price is not posted, value of gold bullion shall be determined in accordance with Point do of this Clause.

b) Government bonds listed at the Stock Exchange: Reference price at the Stock Exchange at the end of the day preceding the day on which specific provision is made (or an earlier time if reference price is not available on that day) Government bonds that are not listed at the Stock Exchange: Face value.

c) Securities issued by enterprises (including credit institutions) listed at the Stock Exchange: Reference price at the Stock Exchange at the end of the day preceding the day on which specific provision is made (or an earlier time if reference price is not available on that day). Securities that are not listed at the Stock Exchange, other valuable papers issued by enterprises (including credit institutions): Face value.

d) Movable property, real estate, and other collateral: If property is one of those mentioned in Point c Clause 3 of this Article, its value shall comply with Point c Clause 3 of this Article; In other cases, value of collateral shall be determined in accordance with regulations of VAMC.  If there are no documents about valuation of collateral, value of collateral shall be zero (0);

dd) Finance lease property: remaining amount (value of finance lease property under finance lease contract minus (-) the rent) according to contract on the date of making provision or a value determined by a professional valuation organization as prescribed by law.

6. Maximum deduction ratio of collateral:

a) Customers’ deposit in VND: 100%

b) Gold bullions other than gold bullions mentioned in Point I of this Clause; customers’ deposit in foreign currencies: 95%

c) Government bonds, saving cards, certificates of deposit, exchange bills, treasury bills issued by credit institutions:

- Remaining term less than 1 year: 95%

- Remaining term from 1 to 5 years: 85%

- Remaining term more than 5 years: 80%

d) Securities issued by credit institutions and listed at the Stock Exchange: 70%

dd) Securities issued by other enterprises and listed at the Stock Exchange: 65%

e) Securities that are not listed at the Stock Exchange, valuable papers issued by credit institutions having securities listed at the Stock Exchange other than those mentioned in Point c of this Clause: 50%

Securities that are not listed at the Stock Exchange, valuable papers issued by credit institutions without securities listed at the Stock Exchange other than those mentioned in Point c of this Clause: 30%

g) Securities that are not listed at the Stock Exchange, valuable papers issued by credit institutions having securities listed at the Stock Exchange: 30%

Securities that are not listed at the Stock Exchange, valuable papers issued by credit institutions without securities listed at the Stock Exchange: 10%

h) Real estate: 50%

i) Gold bullion without fixed prices, other types of gold and other type of collateral: 30%.”

34. Article 47b is added after Article 47a as follows:

“Article 47b. Using provisions to control risks to the bad debts purchased at market prices

1. VAMC shall use provision to control risks in the following cases:

a) The debt is sold by VAMC at a lower price than its book value of outstanding principal at VAMC at the time of risk control, or

b) The borrower is an organization that has been dissolved or bankrupt, or a dead/missing person.

2. Risk control documents include:

a) Documents about purchase, restructuring, collection, and sale of risk-controlled debts;

b) Documents about collateral and relevant documents;

c) A decision or approval of the Board of members about the provision for risk control;

d) A decision or approval of the Board of members for the use of provision for risk control;

dd) If the borrower is an organization that has been dissolved or bankrupt, apart from the documents mentioned in Points a, b, c, d of this Clause, it is required to have a certified true copy of a court’s declaration of bankruptcy or decision on enterprise dissolution as prescribed by law.

e) If the borrower is an individual who is dead or missing, apart from the documents mentioned in Points a, b, c, d of this Clause, it is required to have a death certificate or declaration of missing person as prescribed by law.

g) Relevant documents.

3. Using provision to control risks:

a) VAMC may only use provision for the debts that meet all conditions in Clause 1 and Clause 2 of this Article.

b) VAMC shall use provision to settle:

(i) The difference between the selling price and book value of outstanding principal of the debt at VAMC at the time of risk control in the case mentioned in Point a Clause 1 of this Article, or

(ii) Book value of outstanding principal of the debt at the time of risk control in the case mentioned in Point b Clause 1 if this Article.

c) VAMC may include the provision that remains after risk control prescribed in Point b of this Clause in its income in the period.

If the provision is not sufficient for settlement as prescribed in Point b of this Clause, VAMC may include the difference in its expense in the period.”

35. Article 47c is added after Article 47b as follows:

“Article 47c. Recording and reporting the making and use of provisions for control of risks to bad debts purchased at market prices

1. VAMC shall record the amount of provision, the amount use, the amount reversed, (including unused provision that is reversed) as prescribed by law.

2. VAMC must report the result of making and use of provisions for risk control in accordance with regulations on statistical reports applied to VAMC issued by the State bank and at the request of the State bank.”

36. Clause 7 and Clause 8 are added to Article 49 as follows:

“7. Cooperate with debt-selling credit institutions to promptly provide information about bad debts to the State bank when proposing issuance, refinancing, redemption of bonds or special bonds.

8. Filing lawsuits against borrowers, debt payers, or guarantors within the time limit for filing lawsuits as prescribed by law.”

37. Point b Clause 4 Article 50 is amended as follows:

“b. Use the provisions for the bad debt to make up for the difference between the book value of outstanding principal and the selling price of such bad debt when it is sold to VAMC. Risk control documents include:

(i) Documents proving the unused provision for the bad debt sold to VAMC;

(ii) A decision or approval of Risk Control Council of the credit institution about the risk control;

(iii) The debt purchase contract between VAMC and the debt-selling credit institution.”

38. Point dd is added to Clause 4 Article 50 as follows:

“dd. Debt-selling credit institutions that receive special bonds with terms longer than 5 years shall not receive dividends in order to create a source for settling bad debts until such special bonds are redeemed.”

39. Clause 7 is added to Article 50 as follows:

“7. In case a credit institution purchases the bad debt at market price or repurchases its bad debt from VAMC as prescribed in Clause 3 Article 35 of this Circular, such credit institution must sort the payment for the debt into the group with a level of risk not lower than the group into which the debt was sorted before being sold to VAMC.”

Article 2. Effect

1. This Circular takes effect on September 15, 2015.

2. With regard to special bonds that are redeemed before the effective date of this Circular but are not fully collected (including principal, interest, and relevant financial obligations) under credit contracts, entrustment contracts, or corporate bond purchase contracts, VAMC and debt-selling credit institutions shall apply Point a Clause 2 Article 44 of this Circular.

Article 3. Implementation

Chief of Office, Chief Inspector, heads of units of the State bank, Directors of branches of the State bank in provinces, the Chairperson of the Executive Board, the Chairperson of the Board of members, and General Director/Director of Vietnamese credit institutions; the Chairperson of the Board of members and General Director of VAMC are responsible for organizing the implementation of this Circular./.