Directive No. 03/2008/CT-NHNN on Strengthening Inspection and Supervision Work of the State Bank

DIRECTIVE

regarding strengthening the inspection and supervision work of the State Bank

At the beginning of 2008, the domestic and global economic situation had complex developments affecting the pace of economic growth and controlling inflation according to the targets set by the National Assembly. To ensure safe, healthy, and sustainable development of the credit organization system and to implement the Prime Minister's directives in documents number 75/TTg-KTTH dated January 15, 2008, and number 319/TTg-KTTH dated March 3, 2008 on enhancing measures to control inflation in 2008, the Governor of the State Bank requests units under the State Bank and credit organizations to strengthen the State Bank's inspection and supervision work and improve the management and operation capabilities of credit organizations as follows:

1. For units at the headquarters of the State Bank

a) Regarding the Banking Inspection Department

- Proactively review the inspection and supervision program for 2008 to adjust and supplement appropriately with new tasks and situations, ensuring that banking inspection and supervision activities effectively implement the State Bank's policies, solutions aimed at controlling inflation, and promoting safe, healthy, and sustainable development of the credit organization system.

- Take the lead in coordinating with relevant units to assess the operations of the entire credit organization system as well as each individual credit organization over the past period, classify credit organizations based on their level of safety, and develop appropriate inspection and supervision measures for each credit organization in the future.

- Regularly prepare monthly and quarterly Supervision Reports to compile and analyze the operational status of each credit organization as well as the entire credit organization system. The Supervision Report of the previous month must be completed before the 20th day of the following month; the Supervision Report of the previous quarter must be available before the first 20th day of the next quarter.

- Allocate sufficient staff to monitor each credit organization to continuously update their operational status and all developments of the monitored credit organization.

- Continue to closely inspect and supervise lending activities for securities investment in accordance with Decision No. 03/2008/QĐ-NHNN dated February 1, 2008 of the Governor of the State Bank on lending and discounting negotiable instruments for securities investment and trading; promptly complete the inspection round on lending activities for real estate business of credit organizations. Conduct a comprehensive analysis and evaluation of the current state of mortgage lending using real estate collateral by credit organizations and launch an inspection round on consumer lending by credit organizations.

- Conduct inspections on certain credit organizations regarding governance and management; compliance with safety ratios; risk management; audit and internal control activities; implementation of independent audit recommendations; conclusions of inspection teams.

- Inspect the expansion of branch networks and increase in registered capital of credit organizations to ensure that such expansions and increases are consistent with operational conditions, management and operational capabilities, technological levels, feasible development and business plans.

- Review and evaluate compliance with information and reporting regulations by credit organizations; take decisive measures to compel credit organizations to comply fully and timely as stipulated by the State Bank.

- The Banking Inspection Department will resolutely handle violations within its authority or refer them to competent authorities for strict handling according to the severity of the violations, from disciplinary actions against bank employees at various levels, suspending or revoking certain business activities, restricting network expansion and scale of operations, revoking banking licenses, and applying current laws.

- Closely coordinate with law enforcement agencies to monitor market developments and take synchronized measures to address any issues.

b) For other units at the headquarters of the State Bank

- The Department of Banks and Non-Bank Credit Organizations must allocate sufficient staff to monitor each credit organization to continuously update their operational status and all developments of the monitored credit organization.

- The Department of Banks and Non-Bank Credit Organizations shall serve as the focal point to coordinate with relevant units of the State Bank to rigorously and strictly appraise applications for permits, ensuring that newly established credit organizations have adequate financial capacity, business management capability, feasible operational plans, qualified personnel, and technology levels meeting current regulations.

2. For provincial and centrally-administered city branches of the State Bank

a) Bear responsibility before the Governor of the State Bank for implementing inspection and supervision work to ensure the safe and sound operations of credit organizations in their jurisdiction.

b) Timely identify and handle within their authority; report and propose measures to address violations and risks affecting the safety of credit organizations' operations.

c) Report and propose opinions to the provincial Party Standing Committee and People's Council to promptly consider and resolve issues related to the safety of credit organizations' operations in their jurisdiction.

d) Enhance the advisory and supervisory role of provincial and centrally-administered city branches of the State Bank in expanding branch networks and scaling up operations of credit organizations in their jurisdiction in line with local practical needs, human resources, and management and operational capabilities of credit organizations.

d) Conduct a comprehensive review of the entire staff of the State Bank branch to promptly supplement and strengthen qualified and virtuous officers to serve inspection and supervision work, ensuring that each credit organization in the area has at least one dedicated officer from the State Bank. Assign one Deputy Director to be solely responsible for directing inspection and supervision activities; for Hanoi City and Ho Chi Minh City, allow the addition of one or two Deputy Directors to focus on improving inspection and supervision work and monitoring the activities of credit organizations in the area.

3. For credit organizations

a) Strictly comply with the policies, measures of the State regarding curbing inflation as stipulated in Document No. 75/TTg-KTTH dated January 15, 2008, and Document No. 319/TTg-KTTH dated March 3, 2008, concerning strengthening measures to curb inflation in 2008.

b) Implement lending and securities investment in accordance with Decision No. 03/2008/QĐ-NHNN dated February 1, 2008, of the Governor of the State Bank on lending and discounting negotiable instruments for securities investment and trading.

c) Expanding the network, increasing the scale of operations, including increasing capital, must be aligned with the annual business plan, medium- and long-term business strategy, consistent with the financial capacity, business management, human resources, and technology currently available to each credit organization, and in line with the orientation of the Government and the State Bank.

d) Focus on enhancing management and operational capabilities; internal control and auditing towards healthy practices and effective risk management. Strictly adhere to the State Bank's regulations on safety ratios in credit organization operations: improve organizational models and operational mechanisms suitable for the characteristics and current status of each credit organization, proactively build and develop high-quality human resources to meet the safe operation requirements of each credit organization.

đ) Review all existing business procedures to amend, supplement, or establish new ones as appropriate, particularly focusing on high-risk business areas, while ensuring that each business unit and each employee fully understand and strictly follow these regulations.

e) Carry out loan classification and risk reserve provisioning in accordance with current regulations; implement customer credit rating; classify markets to set appropriate credit limits.

g) Emphasize investment in information technology to modernize products and services, reduce costs, enhance operational efficiency, and ensure security and confidentiality. Only launch new monetary, credit, foreign exchange, payment, and transfer-related products and services when risks can be analyzed and controlled, sufficient qualified human resources are available, and strict compliance with the State Bank's regulations on information technology system security and confidentiality is ensured.

h) Review independent audit recommendations and rectification suggestions from the State Bank Inspectorate to address issues promptly.

i) Strictly implement statistical reporting systems as prescribed by the State Bank.

4. Implementation organization

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

b) The Head of the Office, the Head of the State Bank Inspectorate, and the Heads of units under the State Bank, the Governors of State Bank branches in provinces and centrally-administered cities, the Boards of Directors and General Managers (Directors) of credit organizations are responsible for implementing this Directive./.