Circular No. 03/2021/TT-NHNN Amending and supplementing certain provisions of Circular No. 01/2020/TT-NHNN dated March 13, 2020, issued by the Governor of the State Bank of Vietnam on the restructuring of debt repayment terms, reduction or exemption of interest and fees, and maintenance of the loan classification for customers affected by the COVID-19 pandemic

CIRCULAR

Amending and supplementing certain provisions of Circular No. 01/2020/TT-NHNN dated March 13, 2020 of the Governor of the State Bank of Vietnam on the restructuring of debt repayment terms, interest and fee waivers, and retention of loan classification categories to support customers affected by the COVID-19 pandemic

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010; the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

Decree No. 16/2017/NĐ-CP dated Credit institutions, foreign bank branches restructure repayment terms for the principal balance and/or interest of a debt (including debts within the scope of adjustment under Decree No. 55/2015/NĐ-CP dated June 9, 2015 of the Government on credit policies to serve the development of agriculture and rural areas (as amended and supplemented)) when meeting all of the following conditions: of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

After reaching consensus with the Ministry of Finance;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain provisions of Circular No. 01/2020/TT-NHNN dated March 13, 2020 of the Governor of the State Bank of Vietnam on the restructuring of debt repayment terms, interest and fee waivers, and retention of loan classification categories to support customers affected by the COVID-19 pandemic (hereinafter referred to as Circular No. 01/2020/TT-NHNN).

2. Arising payment obligations for principal and/or interest during the period from January 23, 2020 to June 30, 2022.

1. AMENDING AND SUPPLEMENTING ARTICLE 3 AS FOLLOWS:

"Article 3. Application of relevant legal regulations

The restructuring of debt repayment terms, interest and fee waivers, and retention of loan classification categories to support customers affected by the COVID-19 pandemic shall be carried out in accordance with the provisions of this Circular; matters related to the restructuring of debt repayment terms, interest and fee waivers, loan classification, provision for risk, and utilization thereof not specified in this Circular shall be implemented in accordance with other relevant legal documents.

"Article 4. Restructuring of debt repayment terms

Credit institutions and foreign bank branches may restructure the debt repayment term for the outstanding balance of a loan (including loans within the scope regulated by Decree No. 55/2015/NĐ-CP dated June 9, 2015 of the Government on credit policies to serve agricultural and rural development (as amended and supplemented)) when they fully meet the following conditions:

1. Arising before June 10, 2020 from lending or financial leasing activities.

2. Due for principal and/or interest repayment during the period from January 23, 2020 to December 31, 2021.

d) The outstanding balance of the debt arising from June 10, 2020 to July 31, 2021 and overdue from July 17, 2021 to September 7, 2021.

a) The outstanding balance that is still within the due date or overdue up to 10 days from the payment due date or the repayment term stipulated in the contract or agreement, except for cases provided for in points b and c of this clause;

b) The outstanding balance of a loan arising before January 23, 2020 and overdue during the period from January 23, 2020 to March 29, 2020;

c) The outstanding balance of a loan arising from January 23, 2020 and overdue before May 17, 2021.

4. Being assessed by credit institutions and foreign bank branches as having no ability to repay principal and/or interest on time according to the contract or agreement due to a decrease in revenue and income caused by the impact of the COVID-19 pandemic.

5. Customers requesting to restructure the debt repayment term and being assessed by credit institutions and foreign bank branches as having the ability to fully repay principal and/or interest according to the restructured repayment term.

6. Credit institutions and foreign bank branches shall not restructure the repayment terms for debts that violate legal provisions.

7. The restructuring period of the debt repayment term (including extensions) must be appropriate to the extent of the impact of the COVID-19 pandemic on the customer and shall not exceed 12 months from the date credit institutions and foreign bank branches implement the restructuring of the debt repayment term. 8. The implementation of the restructuring of the debt repayment term for customers shall be carried out until December 31, 2021."

"Article 5. Waiving or reducing interest and fees

1. Credit institutions and foreign bank branches decide to waive or reduce interest and fees according to their internal regulations for the outstanding balance of a loan arising before June 10, 2020 from credit activities (excluding bond purchase and investment activities) where the obligation to repay principal and/or interest is due for payment during the period from January 23, 2020 to December 31, 2021 and the customer has no ability to repay principal and/or interest on time according to the contract or agreement due to a decrease in revenue and income caused by the impact of the COVID-19 pandemic. 2. The implementation of waiving or reducing interest and fees for customers according to this Circular shall be carried out until December 31, 2021."

4. AMENDING AND SUPPLEMENTING ARTICLE 6 AS FOLLOWS:

Article 6. Retaining the loan classification category and classifying loans

1. Credit institutions and foreign bank branches may retain the loan classification category already classified according to the regulations of the State Bank of Vietnam on loan classification in the operations of credit institutions and foreign bank branches at the latest point before January 23, 2020 for the outstanding balance of a loan arising before January 23, 2020 as follows:

a) The outstanding balance subject to the restructuring of the debt repayment term as stipulated in Article 4 of this Circular;

b) The outstanding balance subject to the waiver or reduction of interest as stipulated in Article 5 of this Circular;

c) The outstanding balance as stipulated in points a and b of this clause includes the portion of the outstanding balance that has been restructured for the debt repayment term, waived or reduced interest, and adjusted to a higher risk classification category according to the regulations of the State Bank of Vietnam during the period from January 23, 2020 to March 29, 2020.

2. Credit institutions and foreign bank branches may retain the loan classification category already classified according to the regulations of the State Bank of Vietnam on loan classification in the operations of credit institutions and foreign bank branches for the outstanding balance subject to the restructuring of the debt repayment term and the waiver or reduction of interest as stipulated in Articles 4 and 5 of this Circular for loans arising from January 23, 2020 to before June 10, 2020 as follows:

a) Retain the original loan classification group at the nearest point in time prior to the first implementation of debt repayment term restructuring as stipulated in Point a, Clause 3, Article 4 of this Circular;

b) Retaining the loan classification category already classified at the latest point before the loan became overdue for the outstanding balance as stipulated in point c of Clause 3 of Article 4 of this Circular;

c) Retaining the loan classification category already classified at the latest point before the first waiver or reduction of interest for the outstanding balance as stipulated in Article 5 of this Circular.

3. For the outstanding balance remaining within the restructured debt repayment term and retaining the loan classification category according to the provisions of Clauses 1 and 2 of this Article, credit institutions and foreign bank branches are not required to apply the principle of adjusting and reclassifying into a higher risk loan classification category according to the regulations of the State Bank of Vietnam on loan classification in the operations of credit institutions and foreign bank branches.

4. For the outstanding debt balance after restructuring the repayment term and maintaining the original loan classification group pursuant to Clause 1 and Clause 2 of this Article, if such debt remains overdue beyond the restructured repayment period and is not further restructured by the credit institution or foreign bank branch in accordance with this Circular, the credit institution or foreign bank branch must classify the debt according to the State Bank of Vietnam’s regulations on loan classification in the operations of credit institutions and foreign bank branches.

5. As for the interest receivable on the outstanding debt that has been restructured in terms of repayment period, waived, reduced, and maintained in the standard loan classification group (Group 1) pursuant to this Circular, from the date of restructuring, the credit institution or foreign bank branch shall not recognize income (provisional income) but shall monitor the collection outside the balance sheet; it shall recognize the income upon actual receipt in accordance with the financial regulations applicable to credit institutions and foreign bank branches.

6. From January 1, 2024, the credit institution or foreign bank branch shall base its classification of all outstanding debts and off-balance-sheet commitments of customers, including the outstanding debt that has been restructured in terms of repayment period, waived, reduced, and maintained in the original loan classification group pursuant to this Circular, on the State Bank of Vietnam’s regulations on loan classification in the operations of credit institutions and foreign bank branches.

5. Supplement Article 6a following Article 6 as follows:

"Article 6a. Provision for Loan Losses

The credit institution or foreign bank branch shall establish specific provisions for customers with outstanding debt that has been restructured in terms of repayment period, waived, and reduced interest pursuant to this Circular as follows:

1. Based on the State Bank of Vietnam’s regulations on establishing provisions for loan losses in the operations of credit institutions and foreign bank branches, the credit institution or foreign bank branch shall establish specific provision amounts for the entire outstanding debt of the customer according to the loan classification results stipulated in Article 6 of this Circular for the portion of the outstanding debt maintained in the original loan classification group and the loan classification results for the remaining outstanding debt of the customer according to the State Bank of Vietnam’s regulations on loan classification in the operations of credit institutions and foreign bank branches.

2. The credit institution or foreign bank branch shall determine the specific provision amount to be established for the entire outstanding debt of the customer based on the loan classification results according to the State Bank of Vietnam’s regulations on loan classification in the operations of credit institutions and foreign bank branches (without applying the regulation to maintain the original loan classification group as stipulated in Article 6 of this Circular).

3. The credit institution or foreign bank branch shall determine the additional specific provision amount to be established according to the following formula: Specific provision amount to be established additionally = A - B Where: - A: The specific provision amount to be established as stipulated in Clause 2 of this Article. - B: The specific provision amount already established as stipulated in Clause 1 of this Article.

4. In case the specific provision amount to be established additionally is determined to be positive according to the provisions of Clause 3 of this Article, the credit institution or foreign bank branch shall establish additional specific provisions as follows:

a) By December 31, 2021: At least 30% of the specific provision amount to be established additionally;

b) By December 31, 2022: At least 60% of the specific provision amount to be established additionally;

c) By December 31, 2023: 100% of the specific provision amount to be established additionally. 5. From January 1, 2024, the credit institution or foreign bank branch shall base its establishment of loan loss provisions for all outstanding debts and off-balance-sheet commitments of customers, including the outstanding debt that has been restructured in terms of repayment period, waived, reduced, and maintained in the original loan classification group pursuant to this Circular, on the State Bank of Vietnam’s regulations on establishing provisions for loan losses in the operations of credit institutions and foreign bank branches.

Article 2. Transitional provisions

For contracts and agreements for restructuring the repayment term signed before the effective date of this Circular, the credit institution or foreign bank branch may continue to implement them according to the agreed restructuring terms regarding the repayment period as stipulated in Circular No. 01/2020/TT-NHNN. Any amendments or supplements to these contracts or agreements shall be made if the amended or supplemented content complies with the relevant laws and regulations of this Circular.

Article 3. Implementation Organization

The Director of the Office, the Director of Banking Inspection and Supervision, the Heads of Units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam Branches in provinces and centrally-administered cities, and the credit institutions or foreign bank branches are responsible for implementing this Circular.

Article 4. Implementation provisions

This Circular takes effect from May 17, 2021./.