Circular No. 06/2021/TT-NHNN Amending and supplementing certain articles of Circular No. 39/2013/TT-NHNN dated December 31, 2013 of the Governor of the State Bank of Vietnam on the determination, provision, management, and utilization of risk reserve funds of the State Bank of Vietnam

CIRCULAR

Amending and supplementing some articles of Circular No.39/2013/TT-NHNN 

December 31, 2013, Circular of the Governor of the State Bank of Vietnam

on determining, provisioning, managing, and using the risk reserve fund of the State Bank of Vietnam

December 31, 2013, Circular of the Governor of the State Bank of Vietnam on determining, provisioning, managing, and using the risk reserve fund of the State Bank of Vietnam

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

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to the Prime Minister's Decision No. 07/2013/QĐ-TTg dated January 24, 2013 on the financial system of the State Bank of Vietnam;

At the proposal of the Director of the Department of Finance and Accounting;

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain articles of Circular No. 39/2013/TT-NHNN December 31, 2013, Circular of the Governor of the State Bank of Vietnam on determining, provisioning, managing, and using the risk reserve fund of the State Bank of Vietnam (hereinafter referred to as Circular No. 39/2013/TT-NHNN)

Article 1. Amending and supplementing certain Articles of Circular No.39/2013/TT-NHNNDecember 31, 2013, Circular of the Governor of the State Bank of Vietnam on determining, provisioning, managing, and using the risk reserve fund of the State Bank of Vietnam (hereinafter referred to as Circular No. 39/2013/TT-NHNN)

1. Amend and supplement Article 6 as follows:

“Article 6. Classification of Assets with Risks

1. Money and gold deposited with foreign banks, loans and payments to foreign banks:

a) Group 1: Money and gold deposited at foreign banks, loans and payments with partners meeting the investment criteria approved by the Governor of the State Bank of Vietnam for each period (except in cases provided for in point c of this clause);

b) Group 2: Money and gold deposited at foreign banks, loans and payments with partners not meeting the investment criteria of the Governor of the State Bank of Vietnam at the time of determining the risk reserve (except in cases provided for in point c of this clause);

c) Group 3: Money and gold deposited with foreign banks, loans and payments to counterparties in countries experiencing war, terrorism, bankruptcy, natural disasters, and those counterparties that are no longer able to pay.

2. Investment securities on international financial markets:

The State Bank of Vietnam does not classify securities investments on international markets for the purpose of provisioning for risk reserves. The specific determination of the reserve for this item only applies to securities currently invested in international financial markets that have decreased in value compared to their book value.

3. Loans are classified according to increasing levels of risk as follows:

a) Group 1:

(i) Loans not yet due for repayment (including loans automatically extended according to the regulations of the State Bank);

(ii) Loans without specified repayment terms arising within six months;

b) Group 2:

(i) Overdue loans under six months;

(ii) Loans without specified repayment terms arising from six months to under one year;

(iii) Loans extended for the first time and not yet due for repayment;

c) Group 3:

(i) Overdue loans from six months to under one year;

(ii) Loans without specified repayment terms arising from one year to under three years;

(iii) Loans extended for the first time and overdue under six months;

(iv) Loans extended for the second time and not yet due for repayment;

d) Group 4:

(i) Overdue loans from one year to under two years;

(ii) Loans without specified repayment terms arising from three years to under five years;

(iii) Loans extended for the first time and overdue from six months to under one year;

(iv) Loans extended for the second time and overdue under six months;

(v) Loans extended for the third time and not yet due for repayment;

đ) Group 5:

(i) Overdue loans for two years or more;

(ii) Loans without specified repayment terms arising from five years or more;

(iii) Loans extended for the first time and overdue for one year or more;

(iv) Loans extended for the second time and overdue for six months or more;

(v) Loans extended for the third time and overdue;

(vi) Loans extended for the fourth time or more;

(vii) Written-off debts.

4. Payments to the Government and State Budget:

a) Group 1:

(i) Advance payments to the State Budget as stipulated in the Law on the State Bank of Vietnam not yet due for repayment;

(ii) Payments to the Government with specified repayment terms but not yet due;

(iii) Payments to the Government without specified repayment terms, not yet refunded, and arising within one year;

b) Group 2:

(i) Overdue advances to the State Budget according to the Law on the State Bank of Vietnam exceeding five years but less than five years;

(ii) Payments to the Government with specified repayment terms overdue for less than five years;

(iii) Payments to the Government without specified repayment terms, not yet refunded, and arising from one year to less than five years;

c) Group 3:

(i) Advance payments to the State Budget as stipulated in the Law on the State Bank of Vietnam overdue for five years or more;

(ii) Payments to the Government with specified repayment terms overdue for five years or more;

(iii) Payments to the Government without specified repayment terms, not yet refunded, and arising for five years or more.

5. Receivables from organizations and individuals with original documents proving the amount owed but unpaid:

a) Original documents proving the amount of debt owed by the debtor including:

- One of the following original documents: Economic contract, debt commitment, court decision regarding the obligation of organizations or individuals to pay the State Bank of Vietnam;

- Contract termination document (if available);

- Account reconciliation; if there is no account reconciliation, then a request for reconciliation confirming the accounts receivable or a demand letter sent by the State Bank of Vietnam (with postmark or confirmation from the delivery unit) must be provided;

- Account balance statement;

- Relevant documents, records, and vouchers related to the occurrence and recording of debt obligations of organizations or individuals to the State Bank (if available).

b) Classification:

(i) Group 1: Receivables of organizations or individuals that have not yet reached the payment deadline or are overdue for less than six months;

(ii) Group 2:

- Receivables of organizations or individuals that are overdue from six months up to less than one year;

- Receivables of organizations or individuals based on judgments or decisions of the Court that have become legally effective within the voluntary execution period;

(iii) Group 3:

- Receivables of organizations or individuals that are overdue from one year up to less than two years;

- Receivables of organizations or individuals based on judgments or decisions of the Court that have become legally effective and are overdue for less than six months beyond the voluntary execution period;

(iv) Group 4:

- Receivables of organizations or individuals that are overdue from two years up to less than three years;

- Accounts receivable from organizations or individuals based on court decisions that have taken legal effect and overdue for voluntary execution for more than six months but less than one year;

(v) Group 5:

- Receivables of organizations or individuals that are overdue for three years or more;

- Receivables of organizations or individuals based on judgments or decisions of the Court that have become legally effective and are overdue for one year or more beyond the voluntary execution period;

- Accounts receivable where the State Bank of Vietnam has evidence showing that the debtor organization has been dissolved (for old debts arising before the effective date of the Law on the State Bank of Vietnam in 1997), bankrupted; the debtor individual has died; debts that have been requested for enforcement but cannot be executed due to the debtor being missing or absent from their place of residence. Determination of individuals being absent from their place of residence, declared missing, or deceased shall be carried out in accordance with Articles 64, 68, and 71 of the Civil Code 2015.

6. In cases where the loan criteria satisfy multiple groups as defined in Clause 3 of this Article simultaneously, it shall be classified into the group with the highest risk level.

7. In case the asset recorded on two different accounting accounts, the exclusion shall be made on the accounting account in accordance with the separate guidance of the State Bank of Vietnam before classifying risky assets in accordance with the provisions of this Article.

8. The determination, conversion of term, and calculation of term in clauses 3, 4, and 5 of this Article shall be implemented in accordance with Articles 146, 147, and 148 of the Civil Code 2015."

2. Amend and supplement point d of Clause 2 of Article 7 as follows:

"d) Accounts receivable from organizations or individuals with original documents proving the amount of debt owed:

- Debtor: Accounts receivable from organizations or individuals that are overdue for payment or not yet due for payment but the State Bank of Vietnam has evidence showing that the debtor organization has been dissolved (for old debts arising before the effective date of the Law on the State Bank of Vietnam in 1997), bankrupted; the debtor individual has died; debts that have been requested for enforcement but cannot be executed due to the debtor being missing or absent from their place of residence. Determination of individuals being absent from their place of residence, declared missing, or deceased shall be carried out in accordance with Articles 64, 68, and 71 of the Civil Code 2015.

- Method for calculating provisions:

Where:

+ The value of the debts at the time of determining the risk provision;

+ Corresponding provision rates are as follows:

• Group 1: 0%;

• Group 2: 30%;

• Group 3: 50%;

• Group 4: 70%;

• Group 5: 100%.”

3. Amend and supplement Article 9 as follows:

“Article 9. Losses to be handled using risk provisions

After exhausting all recovery measures without success, the State Bank of Vietnam will use the risk reserve fund to handle the remaining losses after compensating from the compensation of the organizations or individuals causing the loss, insurance organizations, and disposing of collateral (if any) arising from the following items:

1. Money and gold deposited with foreign banks, loans and settlements with foreign banks

Losses from money and gold deposited at foreign banks, loans and payments with foreign banks due to unforeseen reasons such as war, terrorism, bankruptcy, natural disasters in the country where the State Bank of Vietnam invests or holds assets, and the foreign bank is unable to make payments.

2. International financial market securities investment activities

Securities investments on international financial markets suffer losses due to objective reasons such as war, terrorism, natural disasters leading to the State Bank of Vietnam being unable to recover the full book value of the securities, the State Bank of Vietnam will use the risk reserve fund to handle the losses.

3. Loan activities

a) Debts (principal and interest) written off pursuant to a decision of the Prime Minister, but not funded by the Government to compensate the State Bank;

b) Debts owed by credit institutions that have clear evidence of being irrecoverable when the credit institution is dissolved (for old debts arising before the effective date of the Law on the State Bank of Vietnam in 1997), bankrupted in accordance with the law.

4. Settlements with the State and the State Budget

The State Bank of Vietnam shall take the lead and coordinate with the Ministry of Finance to report and submit to the Prime Minister for approval to use the risk reserve fund to handle payments to the State and the State Budget, including: payments to the State and the State Budget that are overdue or have no specified payment deadline and have not been recovered or have not had any measures taken for at least five years.

5. Debts due from organizations and individuals supported by original documents proving the amount owed by the debtor has not been paid

Receivables with potential losses that cannot be recovered during the operation of the State Bank of Vietnam, where there is evidence to confirm that the debtor is an organization that has been dissolved (for debts arising before the effective date of the Law on the State Bank of Vietnam 1997), bankrupted; the debtor is an individual who has died; debts for which enforcement proceedings have been requested but cannot be carried out due to the debtor being missing or absent from their place of residence. The determination of individuals absent from their place of residence, declared missing, or dead shall be carried out in accordance with Articles 64, 68, and 71 of the Civil Code 2015.

6. Losses in settlement, cash reserve management, foreign exchange reserve management, and domestic gold market intervention activities:

a) Losses incurred during settlement activities such as technical network settlement failures, technological issues...;

b) Losses concerning money, gold, precious assets, and negotiable instruments arising during cash reserve operations such as:

- Losses during transportation due to force majeure incidents including accidents, robbery, destruction, natural disasters, fire, war, terrorism;

- Losses of cash, precious assets, and negotiable instruments at transaction locations and vaults due to destruction, robbery, fire, natural disasters, war, terrorism;

c) Losses arising from the management of state foreign exchange reserves and interventions to stabilize the domestic gold market, such as losses in quality testing of gold and gold devaluation.

4. Amend and supplement Article 10 as follows:

a) Amend and supplement Clause 2 as follows:

“2. Reports and recommendations of units under the State Bank of Vietnam responsible for managing, monitoring, or experiencing losses.”

b) Supplement Clause 6 as follows:

“6. Documents proving that the State Bank has taken recovery measures but has not succeeded in recovering the debt.”

 5. Amend and supplement Clause 4 of Article 11 as follows:

“4. Based on the relevant files and documents stipulated in Article 10 of this Circular, the assessment opinion of the Department of Finance and Accounting, and the opinions of related units, the Loss Handling Council will analyze, evaluate, propose solutions, and submit to the Governor of the State Bank of Vietnam for comments from the Ministry of Finance. After reaching agreement with the Ministry of Finance, the Governor of the State Bank of Vietnam will consider and decide to use the risk reserve fund to handle each loss.

For losses at Point a, Clause 3 of Article 9 and payments to the State and the State Budget at Clause 4 of Article 9 of this Circular, if there is no Prime Minister's approval document allowing the State Bank to use the risk reserve fund to handle them, the Loss Handling Council must report and submit to the Governor of the State Bank of Vietnam for comments from the Ministry of Finance and submit to the Prime Minister for examination and approval before handling. After the Prime Minister's approval, the Governor of the State Bank of Vietnam will issue a decision to use the risk reserve fund to handle each loss.”

6. Amend and supplement Clause 2 of Article 12 as follows:

“2. Members of the Council include the Director of Banking Inspection and Supervision or Deputy Director of Banking Inspection and Supervision, Department Heads or Deputy Department Heads, Bureau Chiefs or Deputy Bureau Chiefs of the following units under the State Bank of Vietnam:

a) Department of Finance - Accounting: Vice-Chairman in charge.

b) Internal Audit Department;

c) Monetary Policy Department;

d) Credit to Economic Sectors Department;

đ) Legal Affairs Department;

e) Organization and Cadre Department;

g) Issuance and Treasury Bureau;

h) Units related to the loss according to the proposal of the Department of Finance - Accounting.”

7. Amend and supplement Clause 1, 2 of Article 14 as follows:

“1. Units causing losses shall not notify the debtor and continue to monitor and recover (if possible).

2. Files for losses that have been handled using the risk reserve fund must be stored in accordance with the law, including both the loss handling file and all documents proving that the head of the unit has taken all recovery measures but has not succeeded.”

Article 2.

Replace the phrase "refinancing" with the phrase "lending" at Point a, Clause 2 of Article 1, and Point c, Clause 2 of Article 7 of Circular 39/2013/TT-NHNN.

Article 3. Transitional Provisions

For losses that have been settled using risk reserves prior to the date this Circular takes effect, the State Bank of Vietnam will continue to manage them according to the provisions of Circular No. 39/2013/TT-NHNN.

The Head of the Ministry’s Office, Heads of Departments, Director of the Vietnam Registration Agency, Heads of agencies, units, and individuals related to this Circular shall be responsible for its enforcement.

The Director of the Office, the Head of the Financial and Accounting Department, and the Heads of units under the State Bank of Vietnam are responsible for organizing the implementation of this Circular.

Article 5. Implementation Provisions

1. This Circular takes effect from August 16, 2021.

2. This Circular abolishes Clause 3, Clause 5, and Clause 6 of Article 1 of Circular No. 37/2018/TT-NHNN dated December 25, 2018 amending and supplementing some articles of Circular No. 39/2013/TT-NHNN dated December 31, 2013 issued by the Governor of the State Bank of Vietnam on the determination, provision, management, and use of the risk reserve fund of the State Bank of Vietnam./.