Circular No. 06/2012/TT-NHNN on special loans for credit institutions

CIRCULAR

Provisions on special loans for credit institutions

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Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Organizations No. 47/2010/QH12 dated June 16, 2010;

Pursuant to Decree No. 96/2008/NĐ-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Upon the proposal of the Head of the Legal Department;

The Governor of the State Bank of Vietnam issues the Circular stipulating special loans for credit institutions.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the issuance of special loans by the State Bank of Vietnam (hereinafter referred to as the State Bank) and other credit institutions to credit institutions that have fallen into a state of inability to pay, affecting the stability of the system of credit institutions, or credit institutions at risk of inability to pay due to other serious incidents.

Article 2. Applicability

Credit institutions established and operating under the Law on Credit Institutions, and related organizations and individuals.

Article 3. Principles of special loans

1. Special loans shall be prioritized for repayment before all other debts of credit institutions, including secured debts.

2. Credit institutions may only use special loans to repay deposits of individual depositors at credit institutions. The use of special loans to repay deposits of other entities shall be decided by the Governor of the State Bank in specific cases.

3. It is strictly prohibited for credit institutions to use these special loans to repay deposits of related parties of the credit institution as provided for in Clause 28, Article 4 of the Law on Credit Institutions.

Article 4. Authority to decide on special loans

The State Bank decides on special loans for credit institutions or requests other credit institutions to provide special loans to credit institutions.

Article 5. Authority to sign documents requesting special loans

The authority to sign documents requesting special loans from credit institutions is the legal representative of the credit institution as prescribed in Article 12 of the Law on Credit Institutions.

In the case where the legal representative of the credit institution is suspended or temporarily suspended from performing rights and obligations, signing these documents will be carried out by the representative of the credit institution as prescribed by the law on special supervision.

Article 6. Procedure for considering special loans

1. Credit institutions requesting special loans submit four sets of files directly or through postal service to the State Bank (Department of Monetary Policy).

2. Within one working day from the date of receipt of complete loan request files, the Department of Monetary Policy sends the files to the Banking Supervision Agency, the Credit Department, and the State Bank branch in the province/city where the credit institution's main office is located (hereinafter referred to as the State Bank branch in the province/city) for comments.

3. Within two working days from the date of receiving the request from the Department of Monetary Policy:

a) The Banking Supervision Agency provides comments on the operational situation, liquidity, and loan request of the credit institution;

b) The State Bank branch in the province/city provides comments on the operational situation, liquidity, and loan request of the credit institution (except in cases specified in Section 2, Chapter II of this Circular);

c) The Credit Department provides comments on the loan request of the credit institution.

4. Based on the loan request file and comments from relevant units, within two working days from the date of receiving comments from the units,

the Department of Monetary Policy submits to the Governor for consideration and decision:

a) The State Bank provides special loans to the credit institution, in this case, the State Bank issues a Decision on Special Loan as stipulated in Article 7 of this Circular; or

b) Designates another credit institution to provide special loans to the credit institution. In this case, the State Bank issues a document designating another credit institution to provide special loans. The designation document includes the following basic contents: name of the credit institution requesting special loans; name of the credit institution providing special loans; amount of loan; term of loan; interest rate on loan; rights and obligations of the credit institution requesting the loan; rights and obligations of the credit institution providing the loan.

The credit institution designated by the State Bank to provide special loans must enter into a special loan agreement with the credit institution requesting the loan. The special loan agreement must comply with the provisions of civil contract laws, relevant laws, and be made in four copies, each party retains one copy and two copies are transferred to the State Bank (one copy to the Department of Monetary Policy and one copy to the State Bank branch in the province/city).

5. In the case of not granting special loans, the State Bank issues a document stating the reasons.

Article 7. Decision on Special Loan from the State Bank

1. The Governor of the State Bank shall issue the Decision on Special Loan. The Decision on Special Loan shall be made in five copies, with the State Bank (Department of Monetary Policy, Trading Department, Supervisory Authority, Branches of the State Bank in provinces and cities) retaining four copies and the credit institution requesting the loan retaining one copy.

2. The Decision on Special Loan shall include the following main contents:

a) Name of the credit institution receiving the special loan;

b) Amount of the loan and interest rate;

c) Term of the loan, repayment period, disbursement term;

d) Rights and obligations of the credit institution;

đ) Rights and obligations of units under the State Bank;

e) Termination of the loan.

3. Based on the Decision on Special Loan and the provisions of this Circular, the Trading Department or the State Bank branch in provinces and cities shall implement the disbursement of the loan, monitor and recover the loan.

Article 8. Amount of the Special Loan

The State Bank decides the amount of the special loan for credit institutions based on their inability to pay.

Article 9. Debt Collection and Handling of Special Loans that Credit Institutions Fail to Repay on Time

1. When there is a source of repayment, the credit institution shall proactively repay the State Bank and the lending credit institution, including cases where loans have not yet reached their repayment deadlines.

2. Upon the repayment deadline, the credit institution shall be responsible for fully repaying the principal and interest to the State Bank and the lending credit institution.

3. Any outstanding balance of the special loan not repaid on time will be transferred to overdue debt by the State Bank and the lending credit institution from the day it becomes overdue.

4. If the credit institution cannot repay the principal and interest upon the repayment deadline, the State Bank or the lending credit institution may request the State Bank to take the following measures to recover the principal and interest:

a) Deduct funds from the credit institution's deposit account at the State Bank for repayment;

b) From other sources of the credit institution.

5. The special loan may be converted into capital contribution or share purchase of the State Bank or another credit institution at the credit institution according to the Prime Minister's decision.

Article 10. Termination of Special Loan

1. The credit institution shall fully repay the principal and interest of the special loan.

2. At the request of the Special Control Board, in cases where a credit institution is in a state of inability to pay, threatening the stability of the system of credit institutions.

3. The special loan shall be converted into capital contribution or share capital of the State Bank or another credit institution at the credit institution.

Chapter II

SPECIFIC PROVISIONS

Section 1

SPECIAL LOAN FOR CREDIT INSTITUTIONS IN A STATE OF INABILITY TO PAY,

THREATENING THE STABILITY OF THE SYSTEM OF CREDIT INSTITUTIONS

Article 11. Conditions for Special Loan

Credit institutions eligible for special loans from the State Bank or other credit institutions must meet the following conditions:

1. The credit institution is in a state of inability to pay, threatening the stability of the system of credit institutions.

2. The credit institution is placed under special control.

Article 12. Documents for Requesting a Special Loan

1. Application for a special loan.

2. Balance sheet of the credit institution's accounting accounts up to the date of application for the loan.

3. Document from the Special Control Board recommending the credit institution to receive a special loan.

4. Report on payment capacity; measures already applied by the credit institution to ensure payment capacity and the current status of the credit institution up to the date of application for the loan, confirmed by the Special Control Board.

5. List of deposits due within the next ten days from the date of application for the loan.

6. Plan for deposit payments.

7. Plan and method for loan repayment.

8. Commitment letter from the credit institution regarding the proper use of borrowed funds and repayment of the loan on schedule.

Article 13. Interest Rate on Loans

1. The interest rate for special loans is determined by the State Bank in each specific case.

2. The interest rate for overdue debt is 150% of the loan interest rate specified in the Decision on Special Loan for cases where the State Bank provides the loan, and in the Special Loan Agreement for cases where another credit institution provides the loan.

Article 14. Loan Period

1. Based on the request of the credit institution and its actual payment capacity, the State Bank shall decide the loan period and repayment term for each specific case, but the maximum loan period shall be two years. In cases where the repayment due date falls on a holiday, the loan period will be extended to the next working day.

2. The State Bank may consider extending the special loan based on the actual payment capacity of the credit institution, but each extension period shall not exceed the initial loan period.

3. Procedures and formalities for extending the special loan

When requesting an extension of the loan, the credit institution must submit directly or via postal service one set of extension application documents to the State Bank (Department of Monetary Policy) at least five working days before the repayment due date, including:

a) An extension request document (specifying the reasons for the extension request).

b) Documents specified in Clauses 2, 3, 4, 7, and 8 of Article 12 of this Circular, updated to the date of the extension request.

Within a maximum of two working days from the date of receiving all extension documents, the State Bank shall issue a decision on extending the loan to the credit institution or require the credit institution to extend the loan.

If the loan is not extended, the State Bank shall issue a document specifying the reasons.

Section 2

SPECIAL LOAN FOR CREDIT INSTITUTIONS AT RISK OF LOSING PAYMENT CAPACITY DUE TO SEVERE INCIDENTS

Article 15. Conditions for Special Loan

Credit institutions eligible for special loans from the State Bank or other credit institutions must meet the following conditions:

1. The credit institution is at risk of losing payment capacity due to severe incidents.

2. The credit institution is not placed under special supervision.

Article 16. Application Documents for Special Loan

1. Application for a special loan.

2. Balance sheet of the credit institution's accounting accounts up to the date of application for the loan.

3. A request document from the Governor of the provincial or municipal branch of the State Bank.

4. A report on the payment capacity, measures already applied by the credit institution to ensure payment capacity, and the current status of the credit institution up to the loan request date, confirmed by the provincial or municipal branch of the State Bank.

5. List of deposits due within the next ten days from the date of application for the loan.

6. Plan for deposit payments.

7. Plan and method for loan repayment.

8. Commitment letter from the credit institution regarding the proper use of borrowed funds and repayment of the loan on schedule.

Article 17. Loan Interest Rate

1. The loan interest rate is the rediscount rate published by the State Bank during each period.

2. The overdue interest rate is 150% of the loan interest rate stipulated in the Decision on Special Loan when the State Bank lends to the credit institution or in the Special Loan Contract when another credit institution lends to the credit institution.

Article 18. Loan Term

1. Based on the request of the credit institution and its actual payment capacity, the State Bank shall decide the loan period and repayment term for each specific case, but the maximum loan period shall be less than one year. In cases where the repayment due date falls on a holiday, the loan period will be extended to the next working day.

2. The State Bank may consider extending the special loan based on the actual payment capacity of the credit institution, but each extension period shall not exceed the initial loan period and the total loan period and extension period shall not exceed two years.

3. Procedures and formalities for extending the special loan

When requesting an extension of the loan, the credit institution must submit directly or via postal service one set of extension application documents to the State Bank (Department of Monetary Policy) at least five working days before the repayment due date, including:

a) An extension request document (specifying the reasons for the extension request).

b) Documents specified in Clauses 2, 3, 4, 7, and 8 of Article 16 of this Circular, updated to the date of the extension request.

Within a maximum of two working days from the date of receiving all extension documents, the State Bank shall issue a decision on extending the loan to the credit institution or require the credit institution to extend the loan.

If the loan is not extended, the State Bank shall issue a document specifying the reasons.

Chapter III

RESPONSIBILITIES OF THE RELATED UNITS

Article 19. Responsibilities of credit institutions requesting loans

1. Fulfill commitments in the loan application, use borrowed funds for their intended purpose, and repay loans on time.

2. Report to the State Bank of Vietnam on a weekly basis or when necessary regarding payment capacity, usage of special loans, and repayment of special loans.

3. Develop specific plans and measures to repay loans on schedule.

4. Implement requirements of the State Bank of Vietnam as stipulated in Article 9 of this Circular.

Article 20. Responsibilities of credit institutions providing loans

1. Report to the State Bank of Vietnam on a weekly basis or when necessary regarding lending activities and repayment status of credit institutions.

2. Classify debts and set aside provisions for risks according to the law for special loans.

3. Monitor the use of borrowed funds by credit institutions requesting loans.

Article 21. Responsibilities of Units under the State Bank

1. Monetary Policy Department

a) Serve as the main point of contact, coordinate with relevant units to handle requests for special loans and extensions of special loans, and submit them to the Governor of the State Bank of Vietnam for review and decision.

b) Serve as the main point of contact, coordinate with relevant units to submit to the Governor for decision other credit institutions to provide special loans to requesting credit institutions.

c) Transfer loan application files approved by the Governor of the State Bank of Vietnam to the Trading Department, the State Bank of Vietnam branch in provinces and cities, or other credit institutions designated by the State Bank of Vietnam to implement lending.

d) Summarize the implementation of special loans from the Trading Department, the State Bank of Vietnam branch in provinces and cities, and other credit institutions to report to the Governor.

đ) Lead and coordinate with relevant units to resolve difficulties and issues arising during the implementation of lending and debt recovery.

2. Banking Inspection and Supervision Authority

a) Coordinate with the Monetary Policy Department to handle requests for special loans and extensions of special loans, and address issues arising during the implementation of lending.

b) Inspect, audit, and monitor the use of borrowed funds.

c) Handle or recommend the Governor to handle cases of violation as stipulated in this Circular.

d) Coordinate with relevant units to submit to the Governor measures to deal with cases where credit institutions cannot repay special loans.

đ) Monitor and report to the Governor of the State Bank of Vietnam the operations and activities of credit institutions requesting loans.

3. The Credit Department

Coordinate with the Monetary Policy Department to handle requests for special loans and extensions of special loans, and address issues arising during the implementation of lending.

4. Department of Finance and Accounting

Guide accounting procedures related to special lending transactions.

5. Trading Department

a) Disburse loan amounts; monitor, urge, and recover debts based on the Decision on Special Loans.

b) Weekly compile information and data on special loans occurring at the Trading Department and send them to the Monetary Policy Department for consolidation and reporting to the Governor.

c) Timely report difficulties and issues arising during lending and debt recovery and propose solutions.

6. State Bank of Vietnam Branches in Provinces and Cities

a) Coordinate with relevant units to examine and handle requests for special loans and extensions of special loans.

b) Disburse loan amounts; monitor, urge, and recover debts based on the Decision on Special Loans.

c) Inspect and monitor the use of borrowed funds and revenues at credit institutions to recover loans.

d) Recommend the Governor to handle cases of violation within authority and promptly report difficulties and issues arising during lending and debt recovery and propose solutions.

đ) Weekly compile information and data on special loans occurring at State Bank of Vietnam branches in provinces and cities and send them to the Monetary Policy Department for consolidation and reporting to the Governor.

7. Special Supervisory Board

a) Propose and recommend to the Governor of the State Bank of Vietnam on special loans, extensions of special loans, and termination of special loans for credit institutions facing payment insolvency, threatening the stability of the credit institution system.

b) Inspect and monitor the use of borrowed funds and revenues of credit institutions to ensure revenue sources for the State Bank of Vietnam in cases where credit institutions face payment insolvency, threatening the stability of the credit institution system.

Chapter IV

IMPLEMENTING PROVISIONS

Article 22. Transitional provisions

1. Special loans provided by the State Bank of Vietnam and other credit institutions to credit institutions before the effective date of this Circular shall continue to be implemented according to the Decision on Special Loans or special loan contracts already signed until the State Bank of Vietnam and other credit institutions have recovered all principal and interest. The Decisions on Special Loans and special loan contracts mentioned above may be amended and supplemented if the amendments and supplements comply with this Circular.

2. The State Bank of Vietnam will consider and decide to convert existing credit facilities of the State Bank of Vietnam for credit institutions to support liquidity into special loans as stipulated in this Circular.

Article 23. Effectiveness of Implementation

1. This Circular takes effect from April 1, 2012. Decisions No. 18/1998/QĐ-NHNN1 dated September 1, 1998, and No. 18/1999/QĐ-NHNN1-Tym dated November 11, 1999, issued by the Governor of the State Bank of Vietnam on the Regulation on Loaning and Debt Recovery from the Support Loan Fund for Joint Stock Credit Institutions and the Decision to Amend and Supplement Decision No. 18/1998/QĐ-NHNN1 dated September 1, 1998, are hereby abolished.

2. The Director of the Office, Heads of the Monetary Policy Department and other units under the State Bank of Vietnam, Directors of State Bank of Vietnam branches in provinces and cities; Chairmen of the Board of Directors, Chairmen of the Board of Members, General Directors

(Directors) of credit institutions and other organizations and individuals concerned are responsible for implementing this Circular./.