Directive No. 03/2007/CT-NHNN on controlling the scale and quality of credit and loans for investment and securities trading to control inflation and promote economic growth.

DIRECTIVE

On controlling the scale, quality of credit and loans for investment and securities trading

to control inflation and promote economic growth

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In the first months of 2007, the State Bank continued to implement flexible monetary policy to stabilize interest rates and exchange rates, control inflation, and promote economic growth. The banking credit activities towards the economy continued to expand effectively, the bad debt ratio decreased; the credit structure gradually changed according to the needs of the economy; loans for investment and securities trading were more strictly controlled. However, credit capital tends to grow at a higher rate than in previous years and the annual target, which may have unfavorable impacts on inflation control this year and in the future; the quality of credit in some sectors and fields has not been high; loans for investment and securities trading carry risks due to the securities market adjusting downward; information collection from the market for risk assessment and management remains inadequate.

Continuing to implement the directives of the Prime Minister at the conference deploying banking tasks for 2007 and strengthening management and supervision of securities-related activities (Notification No. 17/TB-VPCP dated January 26, 2007, Notification No. 20/TB-VPCP dated January 29, 2007 of the Government Office); the Governor of the State Bank requests credit organizations and units under the State Bank to implement measures to control the scale, quality of credit and loans for investment and securities trading as follows:

1. For credit organizations:

1.1. Continue to implement comprehensively and effectively measures to mobilize capital to expand lending and investment in the economy in 2007 and subsequent years; focus on adjusting the structure and term of mobilized capital to be consistent with the credit structure and term, ensuring safety in the business operations of credit organizations.

1.2. Expand credit effectively to the economy according to the following requirements:

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: Evaluate the situation of credit activities in the first months of 2007 to make appropriate adjustments regarding the scale, structure, and speed of credit growth, consistent with the capacity and structure of mobilized capital, and the orientation of the State Bank on credit growth for the economy in 2007 and subsequent years.

b. Comply with the State Bank's regulations on safety ratios in the operations of credit organizations; strictly control the quality of credit to reduce the bad debt ratio.

c. Expand credit while adjusting the credit structure by industry and field to diversify risks and meet various effective capital needs of the economy; focus on expanding credit for small and medium enterprises and production households.

d. State commercial banks, primarily the Vietnam Agriculture and Rural Development Bank, and the People's Credit Fund system should intensify efforts to expand effective credit for agriculture and rural areas; other commercial banks should actively expand their networks and allocate funds to expand credit for agriculture and rural areas.

) Vehicle registration certificate or certificate of vehicle deregistration or export certificate or ownership certificate of the vehicle issued by the competent authority of the exporting country or other documents of equivalent legal value: one certified Vietnamese translation from the original for cases of temporary import of movable property vehicles; Enhance the ability to collect information, recognize, measure, monitor, and control credit risks and other types of business risks; strictly control risks for loans for investment and securities trading, loans for investment and real estate trading, consumer loans, and foreign currency loans.

e. Continue to implement measures to expand and improve credit quality as stipulated in Directive No. 02/2006/CT-NHNN dated May 23, 2006 of the Governor of the State Bank on enhancing preventive measures to limit risks in the business operations of credit organizations and Directive No. 02/2005/CT-NHNN dated April 20, 2005 of the Governor of the State Bank on improving credit quality, credit growth consistent with capital mobilization capacity and risk control, ensuring systemic safety.

g. Implement notarization and registration of collateral transactions in accordance with the provisions of the law; closely monitor the status of collateral assets to prevent risks and handle collateral assets to recover debts if borrowers are unable to repay.

1. 3. To contribute to promoting sustainable development of the securities market while limiting risks of loans and discounting instruments for investment and securities trading, credit organizations shall implement the following safety measures:

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: Control the outstanding balance of loans and discounting for investment and securities trading below 3% of the total outstanding credit balance of the credit organization. The outstanding balance of loans and discounting for investment and securities trading includes: Loans and discounting for securities companies; Loans secured by stock pledges and/or other asset guarantees for investment and securities trading for other organizations and individuals; Discounting of instruments for organizations and individuals for investment and securities trading.

b. Implement loans and discounting for investment and securities trading, and loans secured by stock pledges in accordance with the relevant laws and guidelines of the State Bank, specifically:

- Implement stock purchase loans in accordance with the guidance of the State Bank in Circular No. 7318/NHNN-CSTT dated August 25, 2006 on stock purchase loans secured by stock pledges.

- Comply with the relevant regulations on loans for investment and securities trading in Decision No. 03/2007/QĐ-NHNN dated January 19, 2007 of the Governor of the State Bank amending and supplementing certain articles of the Regulations on Safety Ratios in the Operations of Credit Organizations issued pursuant to Decision No. 457/2005/QĐ-NHNN dated April 19, 2005 of the Governor of the State Bank. Proactively recover debts according to the schedule, ensuring full recovery within one year from the date Decision No. 03/2007/QĐ-NHNN takes effect for securities companies that credit organizations control.

- Carry out loans to securities companies that credit institutions do not control according to the regulations stipulated in the Credit Granting Charter for Customers of Credit Institutions issued pursuant to Decision No. 1627/2001/QĐ-NHNN dated December 31, 2001 of the Governor of the State Bank of Vietnam and other relevant legal documents; carefully appraise and monitor loan amounts to ensure timely capital recovery.

- Implement discounting of negotiable instruments for investment and securities trading in accordance with the Discounting and Re-discounting Charter for Customers of Credit Institutions issued pursuant to Decision No. 1325/2004/QĐ-NHNN dated October 15, 2004 of the Governor of the State Bank of Vietnam; shall not discount shares.

- Implement classification of debts, provision setting aside, and utilization for handling credit risks for loans for investment and securities trading, secured loans with collateral in the form of securities, and discounting of negotiable instruments according to the regulations of the State Bank of Vietnam.

 c. Strengthen internal audit and control over consumer loans, production and business loans secured by assets to promptly detect and handle loans misusing funds for investment and securities trading.

 d. Accurately record and detail statistics on loans for investment and securities trading, secured loans with collateral in the form of securities, meeting the requirements of business management and risk control of credit institutions, and report to the State Bank of Vietnam in accordance with the requirements set forth in Document No. 3224/NHNN-CSTT dated April 10, 2007 regarding the situation of loans for securities investment, securities collateral, and foreign direct investment capital flow.

2. For units under the State Bank of Vietnam:

2. 1. In accordance with their functions and tasks, units at the headquarters of the State Bank of Vietnam advise the Governor of the State Bank of Vietnam to implement the following tasks:

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: Continue to manage monetary policy, credit, and exchange rates prudently and flexibly to stabilize the currency, control inflation, and promote economic growth; keep interest rates no higher than the previous year, exchange rate fluctuations within reasonable limits, and control the growth rate of total means of payment and credit in line with the requirement to control inflation below economic growth in 2007 and subsequent years.

b. Promptly amend and issue new legal documents on foreign exchange management to strengthen supervision and monitoring, and promptly regulate indirect foreign investment flows into Vietnam.

c. Continue to study amendments to regulations on safety ratios in the operations of credit institutions towards increasing risk coefficients, setting aside provisions for risks for loans for investment and securities trading, distinguishing between loans for stock and bond investments; guide credit institutions to restructure debt in compliance with banking credit laws and international practices.

d. Strengthen inspection, supervision, and handling of violations by credit institutions in lending and discounting negotiable instruments for investment and securities trading.

) Vehicle registration certificate or certificate of vehicle deregistration or export certificate or ownership certificate of the vehicle issued by the competent authority of the exporting country or other documents of equivalent legal value: one certified Vietnamese translation from the original for cases of temporary import of movable property vehicles; Coordinate with functional units of relevant ministries and sectors to implement banking credit policies serving agricultural and rural development when the Prime Minister issues a Decision amending and supplementing Decision No. 67/1999/QĐ-TTg dated March 30, 1999 on certain banking credit policies serving agricultural and rural development; address issues related to banking credit activities due to land law regulations, loan guarantees, notarization, and registration of security transactions.

e. Coordinate with functional units of the Ministry of Finance to build and implement mechanisms for joint management, supervision, and information exchange on the securities market.

2. 2. Branches of the State Bank of Vietnam in provinces and centrally-administered cities shall perform the following tasks:

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: Continuously monitor the credit activities of credit institutions in their jurisdictions, proactively report to the Governor of the State Bank of Vietnam emerging issues in credit activities in their jurisdictions, and propose solutions for handling.

b. Conduct inspections, supervision, and audits within their authority on the implementation of legal regulations concerning credit activities of credit institutions to promptly identify any violations in credit activities affecting the economy and credit activities for investment and securities trading.

3. Implementation:

3. 1. This Directive takes effect fifteen days after its publication in the Official Gazette.

3. 2. The Director of the Office, Heads of the Monetary Policy Department and Heads of units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in provinces and centrally-administered cities; Boards of Directors and General Managers (Directors) of credit institutions are responsible for implementing this Directive.