Directive No. 04/2008/CT-NHNN on Rectifying the Operations of People's Credit Funds

DIRECTIVE

on rectifying the operations of People's Credit Funds

In the first months of 2008, due to fluctuations in commodity prices, there were impacts on the operations of credit institutions (CIs), including the People's Credit Fund system (PCFs); Abnormal fluctuations in interest rates in the market caused difficulties for PCFs, particularly those at the grassroots level in terms of capital mobilization, affecting their ability to pay and operate. To ensure stable, safe, and developing operations of PCFs, the Governor of the State Bank requests the State Bank branches in provinces and centrally-administered cities and PCFs to implement the following tasks:

1. For the State Bank branches in provinces and centrally-administered cities

a) Concentrating on directing PCFs within their jurisdiction to comply with legal regulations in their operations;

b) Proactively inspecting and supervising the activities of PCFs within their jurisdiction to promptly identify and handle according to their authority cases of violations of laws on currency, credit, and banking operations to ensure safe and stable operations of PCFs; reporting and proposing measures to address difficulties and obstacles in the operations of PCFs to the State Bank (Department of Cooperative Credit Institutions);

c) The establishment of new PCFs shall only be carried out based on meeting all current conditions to ensure that newly established PCFs have sufficient financial capacity, management capabilities, and operate safely and effectively;

d) Adhering to timely and accurate provision of information and statistical reports as stipulated by the State Bank.

2. For People's Credit Funds

a) Complying strictly with the main objectives of operation which are mutual assistance among members, enhancing the spirit of mutual assistance, leveraging collective strength and individual member capabilities to effectively carry out production, business, service activities, and improve living standards;

b) Vigorously promoting capital mobilization efforts, setting reasonable deposit and lending interest rates in line with the market interest rate level and in accordance with Decision No. 16/2008/QĐ-NHNN dated May 16, 2008 of the Governor of the State Bank on the mechanism for managing basic interest rates in Vietnamese dong; avoiding unhealthy competition in interest rates that disrupts and destabilizes other PCFs and CIs in the area;

c) Timely adjusting the structure and growth rate of credit in line with the available capital and management capacity of PCFs; complying with the State Bank's regulations on lending and credit growth. Strictly controlling loan amounts, actively urging the recovery of overdue loans to reduce the ratio of overdue and bad debts, focusing on lending to members;

d) Strengthening the management of available capital, proactively balancing sources of capital and usage to ensure payment capability and liquidity. Strictly adhering to the regulations on safety ratios in CI operations, implementing loan classification, provisioning, and using reserves to manage credit risks as prescribed; Central PCFs have the responsibility to use and manage borrowed rediscount funds from the State Bank for its intended purpose, supporting capital needs to ensure the liquidity of the PCF system; implementing lending and managing rediscount funds according to the State Bank's regulations;

đ) Reviewing, amending, and perfecting internal regulations on governance, control, management, internal procedures for credit operations, accounting, treasury; monitoring and assessing potential risks in each business process to take preventive and timely handling measures;

e) Paying attention to planning, training, and improving the professional skills, management capabilities, and moral qualities of the managerial staff of PCFs, adhering to the provisions of Decision No. 31/2006/QĐ-NHNN dated July 18, 2006 of the Governor of the State Bank on the criteria for members of the Board of Directors, members of the Supervisory Board, and managers of PCFs;

3. Organization of Implementation

a) This Directive takes effect fifteen days after its publication in the Official Gazette;

b) The Heads of the Office, Department of Cooperative Credit Institutions, and heads of units under the State Bank, Governors of State Bank branches in provinces and centrally-administered cities; Boards of Directors, General Managers of Central PCFs; Boards of Directors, Managers of grassroots-level PCFs are responsible for implementing this Directive./.