Circular No. 07/2019/TT-NHNN stipulates the limits and ratios for ensuring safety in the operations of the Vietnam Development Bank

CIRCULAR

Regulations on limits and ratios for ensuring safety in operations

of the Vietnam Development Bank 

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

Pursuant to the Law on Credit Organizations dated June 16, 2010;

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

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;

limits and ratios to ensure safety in the operations of the Vietnam Development Bank

Article 1. Amending and supplementing certain Articles of Circular No. 07/2019/TT-NHNN

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

The Governor of the State Bank of Vietnam issues this Circular to regulate the limits and ratios for ensuring safety that the Vietnam Development Bank must maintain regularly, including:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular stipulates the limits and ratios for ensuring safety in operations that the Vietnam Development Bank must maintain regularly, including:

a) Credit limit;

b) Liquidity reserve ratio;

2. Based on the results of supervision, inspection, and audit conducted by the State Bank of Vietnam (hereinafter referred to as the State Bank) regarding compliance with laws and regulations on currency and banking activities within its jurisdiction, in cases where it is necessary to ensure safety in the operations of the Vietnam Development Bank, depending on the nature and level of risk, the State Bank may require the Vietnam Development Bank to implement stricter limits and ratios for ensuring safety compared to those specified in this Circular.

Article 2. Interpretation of Terms

In this Circular, the following terms are understood as follows:

1. Customers are enterprises, self-financing public service units, and other economic organizations borrowing from the Vietnam Development Bank.

2. Securities are evidences confirming the obligation to repay between the Vietnam Development Bank and the holder of securities within a certain period, repayment conditions, and other conditions. Securities include bonds, promissory notes, deposit certificates, and other securities denominated in Vietnamese dong issued by the Vietnam Development Bank in accordance with the law.

3. Credit granting is the agreement by the Vietnam Development Bank for enterprises, self-financing public service units, and other economic organizations to use a sum of money or to be allowed to use a sum of money under the principle of repayment through lending, guaranteeing, and other credit-granting transactions as prescribed by law, including credit granted from entrusted funds of the Government, organizations, and individuals where the Vietnam Development Bank bears the risk as prescribed by law.

4. Related parties are organizations and individuals as defined in Clause 28, Article 4 of the Law on Credit Institutions (amended and supplemented in 2017).

Article 3. Internal Regulations

1. The Vietnam Development Bank must issue internal regulations on credit granting and loan management to ensure the proper use of borrowed funds in accordance with this Circular and related documents, which must at least include the following contents:

a) Criteria for identifying a customer, a customer and a related party as stipulated in Clause 4, Article 2 of this Circular, credit policies for a customer, a customer and a related party, including provisions on credit granting conditions, credit granting limits, interest rates, documentation, procedures, processes for assessing and approving credit granting, and loan management;

b) Provisions on the principles of delegation and authorization for decision-making and approval of credit granting, risk handling according to authority for a customer, a customer and a related party, including provisions on responsibilities and authorities of units and individuals in assessing, granting credit, managing credit quality to ensure transparency, non-conflict of interest, and non-concealment of credit quality.

2. The Vietnam Development Bank must issue internal regulations on liquidity management in accordance with this Circular and related documents, which must at least include the following contents:

a) Provisions on delegation, authorization, functions, and tasks of relevant departments in maintaining the liquidity reserve ratio;

b) Plans and measures to ensure the liquidity reserve ratio;

c) Guidance, inspection, control, and internal auditing for maintaining the liquidity reserve ratio.

3. The internal regulations stipulated in Clauses 1 and 2 of this Article must be reviewed and revised at least once every year.

4. Within ten days from the date of issuance, amendment, supplementation, or replacement of the internal regulations stipulated in Clauses 1 and 2 of this Article, the Vietnam Development Bank must submit these documents directly or by mail to the State Bank (Bank Inspection and Supervision Authority) and the Ministry of Finance.

Article 4. Information Technology System

The Vietnam Development Bank must establish an information technology system to meet the requirements for storing, accessing, and supplementing databases to serve calculations, management, supervision of limits, safety ratios in operations, and the implementation of statistical reports as prescribed by the State Bank of Vietnam.

Chapter II

SPECIFIC PROVISIONS

Article 5. Capital

The own capital of the Vietnam Development Bank shall be determined in accordance with the provisions of the laws on financial management systems and performance evaluation for the Vietnam Development Bank.

Article 6. Credit Limit

1. The total outstanding credit balance of the Vietnam Development Bank (including state investment credit) relative to its own capital shall not exceed 15% for a single customer, and shall not exceed 25% for a single customer and related parties, except for special projects as provided for.

2. The total outstanding credit balance specified in Clause 1 of this Article includes the total amount of outstanding loans from investment credit, export credit; outstanding loans from loan rescheduling; outstanding balances from other credit business activities of the Vietnam Development Bank; guarantee balances and balances of entrusted amounts to other credit organizations, foreign bank branches for credit provision (including outstanding balances already transferred to off-balance sheet accounts).

3. The total outstanding credit balance specified in Clause 1 of this Article does not include the outstanding credit balance from the following sources as specified in Clause 2 of this Article:

a) Entrusted funds from the Government, organizations, and individuals where the risks associated with these loans are borne by the entrusting Government, organization, or individual;

b) Funds received under mandate for re-lending where the Vietnam Development Bank does not bear the risk.

Article 7. Liquidity Reserve Ratio

1. At the end of each month's working day, the Vietnam Development Bank shall calculate and manage the liquidity reserve ratio according to the provisions set out in the Appendix to this Circular as stipulated in Clause 2 of this Article.

2. The liquidity reserve ratio:

a) The Vietnam Development Bank must hold high-liquidity assets to reserve to meet payment needs that are due and unforeseen;

b) The liquidity reserve ratio is determined according to the following formula:

         

Where:

(i) High-liquidity assets as defined in the Appendix to this Circular;

(ii) Total Sources of Funds consist of items under the Sources of Funds section on the Balance Sheet, including: deposits from the State Treasury, financial organizations, credit organizations, economic organizations, customers; government budget borrowing, financial organizations, credit organizations; issuance of securities; other debts excluding the Risk Reserve Fund;

c) High-liquidity assets and total Sources of Funds as specified in point b of this clause are calculated in Vietnamese Dong, including Vietnamese Dong and other freely convertible foreign currencies converted into Vietnamese Dong at the central exchange rate announced by the State Bank of Vietnam for US Dollar (USD) and the cross-rate of Vietnamese Dong against certain foreign currencies as stipulated by the State Bank of Vietnam regarding the announcement of the central exchange rate of Vietnamese Dong against US Dollar and the cross-rate of Vietnamese Dong against certain foreign currencies.

a) From the date this Circular takes effect until December 31, 2020: 0.6%;

b) From January 1, 2021 to December 31, 2022: 1%;

c) From January 1, 2023 to December 31, 2024: 1.5%;

d) From January 1, 2025: 2%.

1. The Vietnam Development Bank shall calculate the maximum loan-to-deposit ratio based on Vietnamese dong, including Vietnamese dong and other freely convertible foreign currencies converted to Vietnamese dong according to the central exchange rate announced by the State Bank of Vietnam for US dollars (USD) and the cross-exchange rate of Vietnamese dong against certain other foreign currencies as prescribed by the State Bank of Vietnam regarding the announcement of the central exchange rate of Vietnamese dong against US dollars (USD) and the cross-exchange rate of Vietnamese dong against certain other foreign currencies, determined on the last working day of each month using the following formula:

                                   

Where:

- LDR: is the loan-to-deposit ratio;

- L: is the total loans as stipulated in Clause 2 of this Article;

- D: is the total deposits as stipulated in Clause 3 of this Article.

b) Short-term loans under special government programs;

c) Medium-term investment credit loans;

d) Medium-term loans under special government programs;

c) Medium-term investment credit loans;

d) Medium-term special government program loans;

e) Long-term loans under special government programs;

g) Compulsory guarantee loans;

g) Other loans;

h) Debts awaiting resolution.

3. Total deposits include:

a) Domestic and foreign organization deposits;

b) Loans from the Vietnam Social Security, state budget loans, loans from domestic and foreign financial organizations and credit institutions;

c) Funds raised from bond issuance, promissory notes, deposit certificates, and other securities.

4. The Vietnam Development Bank must maintain the maximum loan-to-deposit ratio according to the following schedule:

a) From the date this Circular takes effect until December 31, 2020: 100%;

b) From January 1, 2021: 95%.

Chapter III

RESPONSIBILITIES OF THE VIETNAM DEVELOPMENT BANK AND

UNITS UNDER THE STATE BANK OF VIETNAM

Article 9. Vietnam Development Bank

1. Continuously comply with the limits and safety ratios in banking operations as prescribed in this Circular.

2. In case the Vietnam Development Bank fails to meet or is at risk of not meeting the limits and safety ratios in banking operations as prescribed in this Circular, within a maximum period of 30 days from the date of failure or risk of non-compliance, the Vietnam Development Bank must submit a remediation plan to ensure compliance with the limits and safety ratios in banking operations prescribed in this Circular directly or by mail to the State Bank of Vietnam (Bank Inspection and Supervision Department) and the Ministry of Finance.

3. Report fully, promptly, and accurately on the limits and safety ratios in banking operations as prescribed by the State Bank of Vietnam.

Article 10. Bank Inspection and Supervision Department

1. Inspect and supervise the implementation of regulations on limits and safety ratios in the operations of the Vietnam Development Bank.

2. Inspect and supervise the Vietnam Development Bank's establishment and implementation of internal regulations as stipulated in Article 3 of this Circular.

Article 11. Forecasting and Statistics Division

The Forecasting and Statistics Division bases on the provisions of this Circular to establish and submit to the Governor of the State Bank of Vietnam for issuance of regulations on statistical reporting for the Vietnam Development Bank in implementing the limits and safety ratios prescribed in this Circular.

Chapter IV

TRANSITIONAL PROVISIONS

Article 12. Transitional provisions on credit granting

For credit granting contracts signed before this Circular takes effect, the Vietnam Development Bank, customers, and related parties shall continue to implement according to the commitments, rights, and responsibilities stipulated in the signed contract. Any amendment or supplementation to such contracts shall only be carried out if the amended or supplemented content complies with the provisions of this Circular.

Article 13. Transitional provisions regarding liquidity reserve ratio and loan-to-deposit ratio

1. At the time this Circular takes effect, if the Vietnam Development Bank has a liquidity reserve ratio and loan-to-deposit ratio that do not meet the requirements set forth in Articles 7 and 8 of this Circular, the Vietnam Development Bank must develop and implement a resolution plan and submit it to the State Bank of Vietnam (Bank Inspection and Supervision Agency) and the Ministry of Finance for reporting. The minimum contents of the plan must include the following:

a) Specific limits and ratios that do not comply with the regulations;

b) Measures and plans to address and ensure compliance with the regulations within a maximum period of six months from the date this Circular takes effect.

2. In case the State Bank of Vietnam and the Ministry of Finance request amendments, supplements, or adjustments to the resolution plan, the Vietnam Development Bank shall be responsible for making the necessary adjustments and organizing its implementation in accordance with the requirements of the State Bank of Vietnam and the Ministry of Finance.

Chapter V

IMPLEMENTING PROVISIONS

Article 14. Effective Date

Domestic stainless steel produced and imported before June 1, 2020 shall continue to circulate in the market until June 1, 2021.

Article 15. Implementation Organization

The Director of the Office, the Head of Bank Inspection and Supervision, the Heads of units under the State Bank of Vietnam, the Chairman of the Board of Directors, and the General Director of the Vietnam Development Bank are responsible for implementing this Circular./.