Circular No. 05/2005/TT-NHNN guiding certain contents related to banking activities as prescribed in Decree No. 187/2004/NĐ-CP dated November 16, 2004 of the Government on the transfer of state-owned companies to joint-stock companies.

CIRCULAR

GUIDANCE ON CERTAIN ASPECTS RELATED TO BANKING ACTIVITIES

IN ACCORDANCE WITH THE PROVISIONS OF DECREE NO. 187/2004/NĐ-CP DATED NOVEMBER 16, 2004

OF THE GOVERNMENT ON TRANSFORMING STATE ENTERPRISES INTO JOINT-STOCK COMPANIES

BASED ON THE PROVISIONS OF ARTICLES 8, 12, 13, 36 AND 42 OF DECREE NO. 187/2004/NĐ-CP DATED NOVEMBER 16, 2004 OF THE GOVERNMENT ON TRANSFORMING STATE ENTERPRISES INTO JOINT-STOCK COMPANIES;

BASED ON THE PROVISIONS OF CLAUSE 2 OF DIRECTIVE NO. 04/2005/CT-TTg MARCH 17, 2005 OF THE PRIME MINISTER ON ACCELERATING THE TRANSFORMATION OF STATE ENTERPRISES INTO JOINT-STOCK COMPANIES;

THE STATE BANK OF VIETNAM GUIDES ON CERTAIN ASPECTS RELATED TO BANKING ACTIVITIES AS FOLLOWS:

1. REGARDING THE TRANSITION OF A JOINT-STOCK COMPANY FORMERLY A STATE ENTERPRISE (REFERRED TO AS THE JOINT-STOCK COMPANY) TO INHERIT LOAN CONTRACTS, GUARANTEE CONTRACTS FOR LOANS AND OTHER AGREEMENTS ENTERED INTO BY THE STATE ENTERPRISE PRIOR TO ITS TRANSFORMATION INTO A JOINT-STOCK COMPANY WITH CREDIT ORGANIZATIONS; AND THE RELATIONSHIP BETWEEN THE JOINT-STOCK COMPANY AND CREDIT ORGANIZATIONS:

a) THE JOINT-STOCK COMPANY SHALL INHERIT AND CONTINUE TO PERFORM ALL RIGHTS, OBLIGATIONS AND RESPONSIBILITIES OF THE STATE ENTERPRISE PRIOR TO ITS TRANSFORMATION INTO A JOINT-STOCK COMPANY ARISING FROM LOAN CONTRACTS, GUARANTEE CONTRACTS FOR LOANS AND OTHER AGREEMENTS ENTERED INTO BY THE STATE ENTERPRISE WITH CREDIT ORGANIZATIONS; PAY MATURING LOANS; PROCURE DEBT RECOGNITION PROCEDURES AND NEGOTIATE WITH CREDIT ORGANIZATIONS ON METHODS TO HANDLE PRINCIPAL AND INTEREST LOAN AMOUNTS.

b) IF THE JOINT-STOCK COMPANY INTENTIONALLY FAILS TO PERFORM AGREEMENTS ENTERED INTO BY THE STATE ENTERPRISE PRIOR TO ITS TRANSFORMATION INTO A JOINT-STOCK COMPANY WITH CREDIT ORGANIZATIONS, DOES NOT PROCURE DEBT RECOGNITION PROCEDURES AND PAY MATURING LOANS, THEN CREDIT ORGANIZATIONS SHALL IMPLEMENT THE SALE OF SECURED ASSETS ACCORDING TO THE METHODS AGREED UPON IN THE GUARANTEE CONTRACT FOR LOANS OR BRING SUIT BEFORE THE COURT TO RECOVER THE DEBT.

c) THE JOINT-STOCK COMPANY IS PERMITTED TO CONTINUE TO BORROW FUNDS FROM COMMERCIAL BANKS, FINANCIAL COMPANIES AND OTHER STATE CREDIT ORGANIZATIONS UNDER MECHANISMS APPLICABLE TO STATE ENTERPRISES.

2. REGARDING THE HANDLING OF PENDING LOAN DEBTS OF STATE ENTERPRISES AT STATE COMMERCIAL BANKS UNTIL THE TIME OF TRANSFORMATION INTO JOINT-STOCK COMPANIES ACCORDING TO THE DECISION OF AUTHORIZED STATE AUTHORITIES:

a) STATE COMMERCIAL BANKS AND STATE ENTERPRISES BEING TRANSFORMED INTO JOINT-STOCK COMPANIES SHALL IMPLEMENT THE HANDLING OF PENDING LOAN DEBTS ACCORDING TO THE PROVISIONS OF CIRCULAR NO. 05/2003/TT-NHNN FEBRUARY 24, 2003 OF THE STATE BANK OF VIETNAM GUIDING THE HANDLING OF PENDING DEBTS OF STATE ENTERPRISES AT STATE COMMERCIAL BANKS ACCORDING TO DECREE NO. 69/2002/NĐ-CP JULY 12, 2002 OF THE GOVERNMENT. SPECIFICALLY, THE LEGAL DOCUMENTS FOR HANDLING PENDING LOAN DEBTS OF STATE ENTERPRISES BEING TRANSFORMED INTO JOINT-STOCK COMPANIES SHALL BE IMPLEMENTED AS FOLLOWS:

- A WRITTEN REQUEST FOR HANDLING PENDING LOAN DEBTS OF THE STATE ENTERPRISE BEING TRANSFORMED INTO A JOINT-STOCK COMPANY.

- THE DECISION OF THE AUTHORIZED STATE AUTHORITY ON THE TRANSFORMATION OF THE STATE ENTERPRISE INTO A JOINT-STOCK COMPANY (COPY).

- FINANCIAL REPORTS AND AUDITED FINANCIAL REPORTS BY THE AUTHORIZED STATE AUTHORITY, IF ANY (COPY).

- DOCUMENTS PROVING THE INABILITY TO BALANCE CAPITAL TO PAY OVERDUE LOANS (COPY).

- A RECORD OF THE CAUSES OF PENDING LOAN DEBTS AND SUGGESTIONS FOR HANDLING THEM, CONFIRMED BY THE STATE COMMERCIAL BANK THAT PROVIDED THE LOAN AND THE SUPERIOR MANAGEMENT AUTHORITY OF THE STATE ENTERPRISE BEING TRANSFORMED INTO A JOINT-STOCK COMPANY.

- A COPY OF THE LOAN AGREEMENT OR DOCUMENTS PROVING THE STATE ENTERPRISE BEING TRANSFORMED INTO A JOINT-STOCK COMPANY STILL OWES LOANS FROM THE STATE COMMERCIAL BANK, CONFIRMED BY THE GUARANTOR.

b) FOR STATE ENTERPRISES BEING TRANSFORMED INTO JOINT-STOCK COMPANIES THAT ARE EXPERIENCING FINANCIAL DIFFICULTIES AND ARE UNABLE TO PERFORM THEIR LOAN REPAYMENT OBLIGATIONS, STATE COMMERCIAL BANKS SHALL IMPLEMENT THE RESTRUCTURING OF LOAN REPAYMENT TERMS AND OTHER APPROPRIATE MEASURES IN ACCORDANCE WITH THE GUIDELINES OF THE STATE BANK OF VIETNAM ON LOANS BY CREDIT ORGANIZATIONS TO CUSTOMERS.

3. REGARDING THE HANDLING OF THE RISK RESERVE FUND OF STATE COMMERCIAL BANKS WHEN IMPLEMENTING THE TRANSFORMATION INTO JOINT-STOCK COMPANIES:

a) STATE COMMERCIAL BANKS MUST DETERMINE THE ACTUAL VALUE OF THE BUSINESS AT THE TIME OF TRANSFORMATION INTO A JOINT-STOCK COMPANY ACCORDING TO THE GUIDELINES SET OUT IN CIRCULAR NO. 126/2004/TT-BTC DECEMBER 24, 2004 OF THE MINISTRY OF FINANCE GUIDING THE IMPLEMENTATION OF DECREE NO. 187/2004/NĐ-CP NOVEMBER 16, 2004 OF THE GOVERNMENT ON TRANSFORMING STATE ENTERPRISES INTO JOINT-STOCK COMPANIES. AT THE TIME OF DETERMINING THE BUSINESS VALUE, THE STATE COMMERCIAL BANK BEING TRANSFORMED INTO A JOINT-STOCK COMPANY SHALL IMPLEMENT THE ESTABLISHMENT AND USE OF RISK RESERVES ACCORDING TO THE PROVISIONS IN THE FOLLOWING DOCUMENTS: REGULATIONS ON CLASSIFICATION OF DEBTS, ESTABLISHMENT AND USE OF RISK RESERVES TO HANDLE CREDIT RISKS IN BANKING OPERATIONS OF CREDIT ORGANIZATIONS ISSUED PURSUANT TO DECISION NO. 493/2005/QĐ-NHNN APRIL 22, 2005 OF THE GOVERNOR OF THE STATE BANK OF VIETNAM; POINT 1.4 SECTION II OF CIRCULAR NO. 126/2004/TT-BTC; THE PLAN FOR HANDLING RISK RESERVES IN THE JOINT-STOCK TRANSFORMATION PROPOSAL OF THE STATE COMMERCIAL BANK ALREADY APPROVED BY THE AUTHORIZED STATE AUTHORITY.

HANDLING CASES WHERE THE BALANCE OF THE RISK RESERVE FUND DIFFERS FROM THE NEEDS AND THE AMOUNT OF RISK RESERVES TO BE ESTABLISHED AS FOLLOWS:

- IF THE RISK RESERVE AMOUNT IS INSUFFICIENT TO COVER ALL CREDIT RISKS OF THE LOANS TO BE HANDLED, THE STATE COMMERCIAL BANK SHALL DIRECTLY CHARGE THE SHORTFALL IN THE RISK RESERVE AMOUNT TO OPERATING EXPENSES;

- IF THE REMAINING RISK RESERVE AMOUNT AFTER ESTABLISHMENT IS GREATER THAN THE AMOUNT OF RISK RESERVES TO BE ESTABLISHED, THE STATE COMMERCIAL BANK SHALL REVERSE THE SURPLUS AMOUNT IN ACCORDANCE WITH THE LEGAL REGULATIONS ON THE FINANCIAL SYSTEM FOR CREDIT ORGANIZATIONS.

b) THE REMAINING RISK RESERVE FUND OF THE STATE COMMERCIAL BANK AFTER TRANSFORMATION INTO A JOINT-STOCK COMPANY SHALL BE TRANSFERRED TO THE JOINT-STOCK COMMERCIAL BANK TO CONTINUE MANAGING.

4. Implementation organization:

a) THIS CIRCULAR SHALL TAKE EFFECT FIFTEEN DAYS AFTER ITS PUBLICATION IN THE GAZETTE AND SHALL REPLACE CIRCULAR NO. 07/1998/TT-NHNN1 SEPTEMBER 28, 1998 GUIDING THE IMPLEMENTATION OF CERTAIN ASPECTS RELATED TO BANKING WHEN TRANSFORMING STATE ENTERPRISES INTO JOINT-STOCK COMPANIES ACCORDING TO DECREE NO. 44/1998/NĐ-CP JUNE 29, 1998.

b) THE HEAD OF THE OFFICE, DIRECTORS OF THE CREDIT POLICY DEPARTMENT, DIRECTORS OF THE MONETARY POLICY DEPARTMENT, HEADS OF UNITS UNDER THE STATE BANK OF VIETNAM, DIRECTORS OF THE STATE BANK OF VIETNAM BRANCHES IN PROVINCES AND CENTRALLY-GOVERNED CITIES, BOARDS OF MANAGEMENT, GENERAL DIRECTORS (DIRECTORS) OF CREDIT ORGANIZATIONS AND STATE ENTERPRISES BEING TRANSFORMED INTO JOINT-STOCK COMPANIES SHALL BE RESPONSIBLE FOR IMPLEMENTING THIS CIRCULAR./.