Directive No. 08/CT-NH1 on certain measures to rectify the implementation of the regulation that one customer borrows from multiple credit institutions

DIRECTIVE

ON SOME MEASURES TO STRENGTHEN THE ENFORCEMENT OF REGULATIONS ON A SINGLE CUSTOMER BORROWING FROM MULTIPLE CREDIT INSTITUTIONS

The short-term credit regulations for economic organizations issued together with Decision No. 198/QĐ-NH1 dated September 16, 1994 allow a customer to borrow from multiple credit institutions, and the medium and long-term credit regulations for economic organizations issued together with Decision No. 367/QĐ-NH1 dated December 21, 1995 stipulate that multiple credit institutions can jointly lend to a customer's project under a joint business contract with conditions strictly defined to ensure the safety of the loan.

During the implementation of the above mechanism of credit regulations over the past period, certain results have been achieved; on one hand, it has created favorable conditions for customers to obtain sufficient loans, timely meeting capital requirements for production and business operations, reducing procedures and costs for borrowers, while on the other hand, it has promoted the expansion of credit, risk diversification among credit institutions, and capital security. Many credit institutions have strictly adhered to these regulations, issuing detailed guidelines on credit regulations, collecting multi-dimensional information about customers, conducting thorough pre-loan, during-loan, and post-loan inspections and controls; when lending, they have investigated and statistically analyzed the debt of customers to control lending to a single customer not exceeding 10% of the credit institution's own capital and reserve fund, and controlling the level of debt in line with the customer's own capital, thus maximizing the effectiveness of the loan and minimizing risks in lending.

However, during the process of implementing the mechanism of a single customer borrowing from multiple banks, some issues have emerged, leading to an increase in overdue debts and difficult-to-collect debts, specifically:

1. The credit regulations of the State Bank only provide general principles, but some credit institutions have not provided specific guidelines for the general credit regulations of the State Bank to suit specific conditions, nor have they detailed the procedures for credit operations. Some credit institutions have issued guiding documents, but they are incomplete and not specific enough, causing difficulties in implementation.

2. The phenomenon of non-compliance with credit regulations still exists in some places, violating loan procedures, ignoring certain loan conditions, inadequately reviewing loan files and investigating customers, due to a tendency towards simple business practices while neglecting capital security in lending.

3. Some unscrupulous individuals take advantage of loopholes to repeatedly obtain ownership documents for assets, create false loan applications to borrow from multiple places, aiming to defraud credit institutions; at the same time, some corrupt bank officials have colluded with them to exploit loans outside the prescribed regulations.

4. Cooperation between branches within the same banking system and between different systems, between branches in the same area, and between credit institutions and the central credit information center of the State Bank is still weak. Credit institutions do not provide each other with accurate information about customers in other areas, nor do they provide complete and timely information to the central credit information center, resulting in insufficient customer evaluation and inaccurate lending decisions.

5. The inspection work of credit institutions and the supervision of the State Bank are not regular, and the handling of violations is not strict enough.

These issues are also contributing factors to the increase in overdue debts and difficult-to-collect debts, leading to risks in credit activities. To address the negative aspects in the implementation of the mechanism of a single customer borrowing from multiple credit institutions and credit regulations in general, gradually improving the efficiency and security of loans, the Governor of the State Bank instructs:

1. General Directors (Directors) of credit institutions must urgently issue detailed and specific guidelines for credit regulations, defining the procedures for credit operations from the stage of reviewing loan applications, approving loans, inspecting, supervising, collecting debts, and calculating interest, ensuring safety factors. Credit institutions that have already issued guidelines need to review them again; if they are not comprehensive and detailed enough, they should supplement them. Guidelines for a single customer borrowing from multiple banks or multiple banks lending to a single project must comply with Article 5 of the short-term credit regulations for economic organizations issued together with Decision No. 198/QĐ-NH1 and Article 21 of the medium and long-term credit regulations for economic organizations issued together with Decision No. 367/QĐ-NH1. Credit institutions that do not meet the necessary conditions and lack guiding documents should temporarily refrain from lending until such documents are issued. Guiding documents for implementing credit regulations of credit institutions need to be sent to the State Bank (Department of Economic Research, Banking Inspectorate) for monitoring and inspection.

2. General Directors (Directors) of credit institutions must strictly implement the credit regulations of the State Bank Governor and bear responsibility for the procedures they guide, define, and implement within their credit institution systems.

Credit institutions must strengthen regular self-inspection and supervision of compliance with credit regulations and loan procedures, including pre-loan, during-loan, and post-loan inspections by credit officers and oversight by internal auditors.

3. The State Bank Inspectorate must apply on-site inspection and remote auditing methods to promptly identify errors and correct them; in cases where serious violations are found, they must be handled seriously and specific responsibilities assigned, avoiding superficial inspections and ineffective handling that allows issues to continue.

4. The State Bank Inspectorate must urgently complete the draft Decree of the Government on administrative penalties for violations in banking activities for the State Bank Governor to submit to the Government for promulgation.

5. State-owned commercial banks, investment and development commercial banks, joint-stock commercial banks, joint venture banks, foreign bank branches, finance companies, credit cooperatives, people's credit funds shall be responsible for implementing this Directive. The Banking Inspection Agency and functional units at the Central Bank, the State Bank of Vietnam provincial and municipal branches shall be responsible for inspecting and supervising the implementation process of the Directive.