Decision No. 03/2007/QD-NHNN on amending and supplementing certain provisions of the regulations on safety ratios in the operation of credit institutions issued together with Decision No. 457/2005/QD-NHNN dated April 19, 2005 of the Governor of the State Bank.

Pursuant to …;

Regarding amendments and supplements to certain provisions of the Regulations on safety ratios in the operations of credit institutions issued together with Decision No. 457/2005/QĐ-NHNN dated April 19, 2005 of the Governor of the State Bank of Vietnam

tỷ lệ bảo đảm an toàn trong hoạt động của tổ chức tín dụng

ban hành kèm theo Quyết định số 457/2005/QĐ-NHNN

ngày 19 tháng 04 năm 2005 của Thống đốc Ngân hàng Nhà nước

______________________________

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated December 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

Pursuant to the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

Pursuant to Decree No. 86/2002/NĐ-CP dated November 5, 2002 of the Government stipulating the functions, tasks, powers, and organizational structure of Ministries and ministerial-level agencies;

Pursuant to Decree No. 52/2003/NĐ-CP dated May 19, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Based on the proposal of the Director of the Department of Commercial Banks and Non-Bank Credit Institutions.

DECISION:

Article 1. Amend and supplement certain provisions of the Regulations on safety ratios in the operations of credit institutions issued together with Decision No. 457/2005/QĐ-NHNN dated April 19, 2005 of the Governor of the State Bank of Vietnam as follows:

1. Amend Clause 9 of Article 2 as follows:
"9. Foreign exchange transaction contracts include foreign currency swap contracts, foreign currency forward contracts, futures contracts, foreign currency option contracts, and other foreign exchange transaction contracts as prescribed by the State Bank of Vietnam."

2. Add Clauses 20 and 21 to Article 2 as follows:
"20. Capital contribution and share purchase refers to the act of credit institutions using their charter capital and reserve fund to contribute to the charter capital of enterprises and other credit institutions; to invest in funds and projects; including entrusting capital to other legal entities, organizations, and enterprises to carry out investments in the aforementioned forms.
21. Investments in the form of capital contributions and share purchases aimed at controlling enterprises include: Investments accounting for 25% or more of the charter capital of joint-stock companies; Investments accounting for 51% or more of the charter capital of limited liability companies."

3. Amend Point 3 and Point 4 of Clause 3 of Article 3 as follows:
"3.3. The total amount of capital of credit institutions invested in other credit institutions in the form of capital contributions and share purchases and total investments in the form of capital contributions and share purchases aimed at controlling enterprises operating in the insurance and securities sectors. 3.4. The portion exceeding 15% of the credit institution's own capital in relation to the capital contribution and share purchase of a credit institution in one enterprise, investment fund, or project. The portion exceeding 40% of the credit institution's own capital in relation to the total capital contributions and share purchases of a credit institution in enterprises, investment funds, and projects, excluding the portion exceeding 15% already deducted from the credit institution's own capital as mentioned above."

4. Amend Subpoint b of Point 1.1.4 of Clause 1 of Article 5 as follows:
"b) Other unconditional cancellable commitments."

5. Delete Point b of Clause 4 of Article 6.

6. Amend Point c of Clause 4 of Article 6 as follows:
"c) Claims against banks established in non-OECD countries with remaining terms of one year or more, and claims with remaining terms of one year or more guaranteed by these banks."

7. Add Clause 5 to Article 6 as follows:
"5. The asset category "Loans" with a risk weight of 150% includes:
a) Loans for investing in securities;
b) Loans to securities companies for business and trading in securities;
c) Loans to enterprises that credit institutions control;
d) Capital contributions and share purchases in enterprises, investment funds, and projects, excluding the portion already deducted from the credit institution's own capital according to Point 4 of Clause 3 of this Regulation."

8. Add Points 4 and 5 to Clause 1 of Article 8 as follows:
"1.4. Credit institutions shall not provide unsecured loans or loans with preferential conditions to enterprises they control, and must comply with the following restrictions: - The total amount of loans and guarantees provided by a credit institution to an enterprise it controls shall not exceed 10% of the credit institution's own capital. - The total amount of loans and guarantees provided by a credit institution to enterprises it controls shall not exceed 20% of the credit institution's own capital.1.5. Credit institutions shall not provide loans to securities trading enterprises they control; shall not provide unsecured loans for purposes of investing in or trading in securities."

9. Amend Clause 1 of Article 9 as follows:
"1. Loans from entrusted investment funds of the Government, organizations, and individuals. Financial lease transactions from entrusted funds of the Government, organizations, and individuals or lessees who are other credit institutions."

10. Amend Clause 3 of Article 9 as follows:
"3. Loans and guarantees to other credit institutions operating in Vietnam with terms of less than one year."

11. Amend Clause 5 of Article 9 as follows:
"5. Loans and guarantees fully secured by deposits, including savings deposits and pledged deposits at credit institutions."

12. Amend Clause 6 of Article 9 as follows:
"6. Loans and guarantees fully secured by negotiable instruments issued by the credit institution itself."

13. Amend Clause 2 of Article 12 as follows:
"2. A minimum ratio of 1 between the total assets "Loans" that can be settled within the next seven days and the total liabilities due for settlement within the next seven days."

14. Amend Article 16 as follows:
"1. Credit institutions may only use their charter capital and reserve fund to contribute capital and purchase shares in enterprises, investment funds, projects, and other credit institutions in accordance with this Regulation and other relevant laws.2. Decisions on capital contributions and share purchases by credit institutions must be thoroughly reviewed and evaluated by the Management Board and approved by the Board of Directors."

15. Amend Article 17 as follows:
"1. The level of capital contribution or share purchase by a credit institution in a business, investment fund, investment project, or another credit institution shall not exceed eleven percent (11%) of the charter capital of such business, investment fund, investment project, or credit institution.
2. The total level of capital contribution or share purchase by a credit institution in all businesses, investment funds, investment projects, or other credit institutions shall not exceed forty percent (40%) of the charter capital and reserve fund of the credit institution.
3. If a credit institution contributes capital or purchases shares exceeding the ratios specified in Clause 1 and Clause 2 of this Article, it must obtain prior written approval from the State Bank with the condition that the capital contribution or share purchase is reasonable and the credit institution has complied with other safety ratios in banking operations and has a non-performing loan ratio (NPL) of three percent (3%) or less."

16. Amend Article 18 as follows:
"Article 18.
1. Credit institutions that have contributed capital or purchased shares in businesses, investment funds, investment projects, or other credit institutions beyond the levels prescribed in Article 17 of these Regulations shall not continue to contribute capital or purchase shares during the period when the ratios exceed the prescribed levels; at the same time, within a maximum period of two (2) years from the date this Decision takes effect, they must take measures to self-adjust to comply with the regulations, except where approved by the State Bank. 2. Credit institutions that have provided credit to businesses in which they control activities in the securities trading sector within a maximum period of one (01) year from the date this Decision takes effect must take measures to self-adjust to comply with the regulations."

17. Replace Appendix A and Appendix B of the Regulations on Safety Ratios in the Operations of Credit Institutions issued together with Decision No. 457/2005/QĐ-NHNN with Appendix A and Appendix B attached to this Decision.

Article 2. This Decision shall take effect fifteen (15) days from the date of publication in the Official Gazette.

Article 3. The Director of the Office, Heads of Departments of Banking and Non-Bank Financial Institutions under the State Bank, Heads of Units under the State Bank, Directors of Branches of the State Bank in provinces and centrally-administered cities, Chairmen of Management Boards and General Managers (Directors) of credit institutions are responsible for implementing this Decision.