Directive No. 01/2006/CT-NHNN on accelerating the implementation progress of the restructuring plan for state-owned commercial banks

DIRECTIVE

Regarding the acceleration of the implementation progress of the restructuring plan for state-owned commercial banks

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In Resolution No. 01/2005/NQ-CP dated January 14, 2005, the Government instructed the State Bank of Vietnam to promptly implement the directives of the Prime Minister regarding enhancing the financial capacity and competitiveness of commercial banks as stated in Circular No. 988/VPCP-KTTH dated December 13, 2004 of the Government Office, and to accelerate the restructuring process of state-owned commercial banks.

After nearly five years of implementing the restructuring plan for state-owned commercial banks approved by the Prime Minister (hereinafter referred to as the Plan), state-owned commercial banks have gradually improved their management capabilities and financial health, but the results achieved still do not meet the requirements for growth and regional and international economic integration.

To accelerate the implementation of the restructuring of state-owned commercial banks, thereby strengthening their financial capacity and competitiveness, the Governor of the State Bank of Vietnam requests the Chairmen of the Boards of Directors, General Directors of state-owned commercial banks, and Heads of relevant units under the State Bank of Vietnam to implement the following contents:

1. For state-owned commercial banks

1.1. Continue to disseminate the objectives, requirements, and contents of the Plan approved by the Prime Minister to all leaders and staff within their banking systems to create consistency in action goals, focusing on intensifying the implementation of the Plan; enhancing the proactivity and autonomy of each state-owned commercial bank in implementing Plans approved by the Prime Minister, based on ensuring safe and sustainable development.

1.2. Continue to implement the Plan, focusing on the following contents:

- Continuing to implement measures to supplement own capital, resolve definitively all outstanding debts arising before December 31, 2000, according to the debt resolution plan approved by the Prime Minister at Decision No. 149/2001/QD-TTg dated October 5, 2001; developing and submitting to the State Bank for approval policies on loan classification and risk provision consistent with Decision No. 493/2005/QD-NHNN dated April 22, 2005 of the Governor of the State Bank on regulations concerning loan classification, risk provision, and utilization for credit risk management in banking operations of credit institutions and any subsequent amendments or supplements (if any);

- Promptly implementing business strategies and credit manuals throughout the banking system.

- Establishing, perfecting, and operating internal inspection and control systems within the management structure;

- Establishing, perfecting, and operating the audit function and procedures within the supervisory board of state-owned commercial banks;

- Establishing and operating risk management systems, asset-liability management systems, ensuring gradual and effective application of international practices in bank governance and operation, meeting the requirements of regional and international economic integration in banking activities;

- Applying accounting standards as prescribed by the Ministry of Finance and guided by the State Bank.

1.3. The Vietnam Commercial Joint Stock Bank and the Vietnam Development Joint Stock Bank shall prepare reports summarizing the implementation of the restructuring plan for the period 2001-2005 to be submitted to the State Bank (Department of Banking Strategy Development) in the first quarter of 2006.

1.4. State-owned commercial banks shall develop plans to accelerate the implementation of restructuring in accordance with the contents specified in Point 1.2 above, to be submitted to the State Bank before February 15, 2006 (Department of Banking Strategy Development) for approval. The content of the Plan must include specific tasks, solutions, and timeframes for each restructuring component of the bank.

State-owned commercial banks shall report the results of implementing this Plan to the State Bank (Department of Banking Strategy Development) every six months.

2. For relevant units under the State Bank of Vietnam

To guide, support, and promote state-owned commercial banks in implementing the restructuring plan according to the approved policy by the Prime Minister, relevant units under the State Bank of Vietnam are responsible for actively researching, developing plans, and implementing the following tasks:

2.1. Departments and Bureaus under the Central State Bank.

a. Department of Banking Strategy Development.

- Serving as the focal point for monitoring, urging, and coordinating with relevant units of the State Bank and state-owned commercial banks in continuing to implement the restructuring plan and the plan to accelerate the restructuring process of state-owned commercial banks;

- Leading the development and submission to the Governor for approval of proposals to supplement charter capital and ensure sources for implementing the privatization solution of state-owned commercial banks; proposals for handling bad debts of commercial banks;

- Leading the development and submission to the Governor for approval of policies and directions for the privatization of state-owned commercial banks; serving as the focal point for advising the Governor on organizing the implementation of privatization policies and directions for state-owned commercial banks after approval;

- Directing, inspecting, and urging state-owned commercial banks to implement credit manuals and business strategies.

b. Department of Banks and Non-Bank Credit Institutions.

- Perfecting and submitting to the Governor for issuance regulations on safety ratios; on loan classification, risk provision, and utilization for credit risk management in banking operations of credit institutions.

- Promptly developing and submitting to the Governor for issuance regulations on internal auditing of credit institutions; regulations on bank governance.

- To take the lead in coordinating with the Monetary Policy Department, the Banking Technology Information Department, and related units to study and understand the management information systems (MIS) of credit institutions in order to develop and submit to the Governor for issuance regulations on the minimum internal management information systems of credit institutions.

c. The State Bank Inspectorate.

Based on the assigned tasks (as stated in Point 2d, Section II of Directive No. 02/2005/CT-NHNN dated April 20, 2005 of the State Bank Governor on improving the quality of credit, credit growth commensurate with capital mobilization capacity and risk control, ensuring system safety), to take the lead in coordinating with the Commercial Banks Department and related units to promptly develop and submit to the Governor for issuance regulations on the minimum requirements for internal risk management systems of commercial banks.

d. The Accounting and Finance Department.

To take the lead in coordinating with related units to study accounting standards issued by the Ministry of Finance and international accounting standards, and to submit to the Governor for issuance accounting systems and guidelines applicable to credit institutions.

e. The International Cooperation Department.

- The International Cooperation Department shall act as the focal point to coordinate with related units of the State Bank to mobilize technical assistance from international donors to support state-owned commercial banks during the restructuring process.

- To coordinate with related units within the State Bank and state-owned commercial banks to implement technical assistance projects aimed at promoting the implementation of the restructuring plan for each state-owned commercial bank approved by the Prime Minister.

g. The Monetary Policy Department, the Banking Technology Information Department.

To coordinate with the Commercial Banks and Non-Bank Financial Institutions Department and related units to study and understand the management information systems (MIS) of credit institutions in order to develop and submit to the Governor for issuance regulations on the minimum internal management information systems of credit institutions.

2.2. The State Bank Branches in provinces and centrally-administered cities.

a. To closely coordinate with related units at the headquarters of the State Bank of Vietnam, subordinate units of state-owned commercial banks in their respective areas to monitor, supervise, and propose solutions to accelerate the implementation of the restructuring of state-owned commercial banks.

b. To monitor and supervise the implementation of this Directive by subordinate units of state-owned commercial banks in their respective areas; based on that, to propose solutions and report to the Governor for decision-making.

3. Organization of Implementation

3.2. This Directive shall take effect fifteen days after its publication in the Official Gazette.

3.2. The Director of the Office, Heads of the Legal Affairs Department, the Strategic Development of Banking Department, Heads of related units under the State Bank, Governors of State Bank Branches in provinces and centrally-administered cities; Chairmen of the Board of Directors and General Managers of state-owned commercial banks are responsible for implementing this Directive./.