Circular No. 09/2015/TT-NHNN on the activities of purchasing and selling debts by credit institutions and foreign bank branches.

CIRCULAR

Regulations on the activities of purchasing and selling debts

of credit institutions, branches of foreign banksi

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On the basis of AND lCivil Code No. 33/2005/QH11 dated June 14, 2005;

On the basis of Law For power plants invested under the Build-Operate-Transfer (BOT) model, n is determined according to the operational period of the power plant stipulated in the BOT contract.Law on Credit Institutions No. 46/2010/QH12 dated June 16, 2010;

On the basis of Law specialized agency under the People's Committee of the province/city.Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

On the basis of Decree No. 156/2013/NĐ-CP dated November 11, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Department of Credit for Economic Sectors;

The Governor of the State Bank of Vietnam issues this Circular to regulate the activities of purchasing and selling debts of credit institutions and foreign bank branches.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular regulates the activities of purchasing and selling debts arising from lending transactions (including substitute payments in guarantee transactions) of credit institutions and foreign bank branches; the dossier, procedures, and formalities for approving the purchase of debts by credit institutions and foreign bank branches.

Article 2. Applicability

1. Credit institutions and foreign bank branches established and operating under the Law on Credit Institutions (hereinafter referred to as credit institutions and foreign bank branches).

2. Other individuals and organizations related to the purchase and sale of debt claims.

Article 3. Explanation of Terms

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1. Purchasing and selling debts means a written agreement regarding the transfer of the right to claim payment on a debt arising from lending transactions and substitute payments in guarantee transactions, whereby the seller transfers ownership of the debt to the buyer and receives payment from the buyer.

3. Seller of debt is a credit institution or foreign bank branch that sells a debt according to the provisions of Clause 2 of this Article.

a) Organizations and individuals who are residents as follows:

- Credit institutions and foreign bank branches approved by the State Bank to engage in debt purchasing activities;

- Business entities engaged in debt purchasing and selling services (not credit institutions or foreign bank branches) meeting the business conditions stipulated by law;

- Other organizations and individuals not engaged in debt purchasing and selling services.

b) Organizations and individuals who are non-residents.

5. Debtor is an organization or individual obligated to repay the purchased and sold debt as stipulated in the credit agreement.

6. Intermediary is an intermediary in the debt purchase and sale transaction between the buyer and seller and receives remuneration according to the brokerage contract.

8. Purchase price of debt is the amount of money the buyer must pay to the seller according to the debt purchase and sale contract.

Article 4. Conditions for debt purchase and sale

Debts to be purchased and sold must meet the following conditions:

1. The documents, vouchers, and related materials of the debt to be purchased and sold, and the guarantee contract (if any), provided by the seller must fully and accurately reflect the current status of the debt in accordance with the provisions of the law.

2. There is no written agreement prohibiting the purchase and sale of the debt.

3. The debt shall not be used to secure the performance of civil obligations at the time of purchasing and selling the debt, except where the guarantor agrees in writing to the sale of the debt.

Article 5. Principles for Implementing Debt Purchase and Sale

1. The activity of purchasing and selling debts shall not contravene the contents stipulated in the credit contract and the guarantee contract signed between the seller of the debt, the customer, and the guarantor.

2. The activity of purchasing and selling debts shall be conducted through mutual agreement among the parties, complying with the provisions of this Circular and relevant laws.

5. Credit institutions and foreign bank branches purchasing debts must comply with legal provisions concerning the safety of operations of credit institutions and foreign bank branches.

8. Asset management companies that are subsidiaries of credit institutions may only purchase debts from other credit institutions and foreign bank branches if the parent credit institution has a non-performing loan ratio below 3%, except in cases of purchasing debts under approved restructuring plans.

9. In cases where part of a debt is sold or a debt is sold to multiple buyers, the seller of the debt and the buyers must agree among themselves regarding the participation ratio, implementation methods, rights and obligations of each party, allocation of collateral value (if any) for the purchased and sold portion of the debt, and other specific contents in the debt purchase and sale contract in compliance with legal provisions.

10. Debts purchased and sold must be monitored, accounted for, and reported in statistics in accordance with legal provisions.

Article 6. Documents for Requesting Approval of Debt Purchase Activities of Credit Institutions and Branches of Foreign Banks

1. Principles for Preparing Documents:

a) The documents must be prepared in Vietnamese. Translations from foreign languages into Vietnamese must be confirmed by the legal representative of the credit institution or branch of a foreign bank.

b) The application for approval of debt purchase activities must be signed by the legal representative of the credit institution or branch of a foreign bank.

2. Documents for Requesting Approval of Debt Purchase Activities Include:

a) An application for approval of debt purchase activities according to Model 01 attached to this Circular. For wholly foreign-owned banks, the commitment to purchase debts is an activity that the owner or the foreign bank owning 50% of the charter capital of the wholly foreign-owned bank is permitted to carry out in the country where the owner or the foreign bank has its headquarters. For branches of foreign banks, the commitment to purchase debts is an activity that the parent bank is permitted to carry out in the home country.

b) A resolution of the Board of Directors (Board of Members) of the credit institution approving the request for approval of debt purchase activities; documents and translations of the parent bank signed by the legal representative agreeing to the request for approval of debt purchase activities for branches of foreign banks.

Article 7. Procedures for Approving Debt Purchase Activities

2. Within forty days from the date of receipt of complete and valid documents, the State Bank will consider and approve the debt purchase activities of credit institutions and branches of foreign banks by amending and supplementing the License. This document is an integral part of the License. In case of rejection, the State Bank will notify the credit institution or branch of a foreign bank in writing and specify the reasons.

Article 8. Transaction Currency

1. The currency used in debt purchases and sales is the Vietnamese Dong. The use of foreign currencies as payment currency in debt purchase and sale transactions can only be carried out when a credit institution or branch of a foreign bank sells a foreign currency debt to a non-resident buyer.

2. The currency for recovering debts is the currency of the debt or another currency agreed upon between the buyer and the debtor in compliance with the provisions of the law on restrictions on the use of foreign exchange within Vietnam.

Article 9. Provisions on Foreign Exchange Management in Debt Purchase and Sale Activities

1. The buyer, seller, debtor, and other related parties are responsible for complying with the provisions of the law on restrictions on the use of foreign exchange within Vietnam when carrying out debt purchase and sale activities and recovering purchased debts.

2. When purchasing and selling debts with credit institutions and branches of foreign banks:

a) The buyer uses a Vietnamese Dong settlement account to pay the credit institution or branch of a foreign bank the debt purchase price and related costs according to the debt purchase and sale contract when the debt purchase currency is the Vietnamese Dong;

b) The non-resident buyer uses a foreign currency settlement account opened at a credit institution or branch of a foreign bank authorized to operate foreign exchange business within Vietnam or a foreign currency account of the buyer abroad to pay the credit institution or branch of a foreign bank the debt purchase price and related costs according to the debt purchase and sale contract when the debt purchase currency is a foreign currency.

3. When recovering debts from purchased debts, the recovered debt amount must be transferred into one Vietnamese Dong settlement account and one foreign currency settlement account (in cases where the recovered debt is in foreign currency) opened at a commercial bank or branch of a foreign bank authorized to operate foreign exchange business within Vietnam.

a) The seller must register changes to overseas loans and recovered guarantee debts according to current regulations on foreign exchange management for overseas lending and recovery of guarantees for non-residents;

b) The resident buyer must register a debt recovery plan according to current regulations on foreign exchange management for the recovery of foreign debts arising from debt purchase and sale operations.

Credit institutions and foreign bank branches shall decide to choose one of the following methods for buying and selling debts:

1. Agreement: through direct negotiations between the debt seller and the debt buyer or indirectly through an intermediary.

Credit institutions and foreign bank branches must establish a Debt Buying and Selling Council in accordance with their charter and internal regulations on debt buying and selling activities. The composition, tasks, and powers (including determining the purchase price of the debt in the case of agreement-based buying and selling, and the starting price in the case of auction-based buying and selling) shall be stipulated by the credit institution or foreign bank branch.

Determining the purchase and sale prices for agreement-based debt buying and selling, and the starting price for auction-based debt buying and selling shall be carried out as follows:

1. The purchase and sale price, and the starting price shall be determined based on the book value of the debt, future interest payments that the debtor will make, the classification of the debt's recoverability group, and the value of the collateral (if any).

2. Credit institutions and foreign bank branches have the right to hire an appraisal organization to conduct the valuation of agreement-based debt purchases and sales, and the starting price for auction-based debt purchases and sales for the Debt Buying and Selling Council to decide.

Chapter II

SPECIFIC PROVISIONS

Article 13. Debt Purchase and Sale Contracts

1. The debt purchase and sale contract must be signed by the legal representative or authorized representative of the parties involved in the purchase and sale of debts.

2. The debt purchase and sale contract must include the following main contents:

a) The time of signing the debt purchase and sale contract;

b) The name and address of the parties participating in the signing of the debt purchase and sale contract;

c) The name and position of the representatives of the parties participating in the signing of the debt purchase and sale contract;

d) The name and address of the debtor and related parties (if any) concerning the purchased and sold debt;

đ) Details of the purchased and sold debt: loan amount, loan period, purpose, and the book value of the debt at the time of purchasing and selling;

e) Security measures for the debtor's payment obligations for the purchased and sold debt (if any);

g) The debt selling price, payment method, and payment deadline;

h) The time, method, and procedures for transferring the debt file and documents, including files and documents about the debt collateral (if any); The time when the debt buyer becomes the holder of the rights and obligations of the debt from the debt seller;

i) Rights and obligations of the debt seller and buyer;

k) Liability of the parties due to breach of contract;

l) Resolution of disputes arising.

3. In addition to the contents prescribed in Clause 2 of this Article, the parties may agree on other contents in the debt purchase and sale contract that do not conflict with the provisions of this Circular and relevant laws.

4. Amendments, supplements, or cancellation of the contents of the debt purchase and sale contract shall be agreed upon and decided by the relevant parties on the basis of ensuring compliance with the law.

1. The debt buyer becomes the holder of the rights and obligations related to the debt of the debt seller from the time agreed upon in the debt purchase and sale contract.

3. The debt buyer, debtor, and guarantor may agree to adjust the security measures for the purchased and sold debt in accordance with the law.

Article 15. Purchase and Sale of Joint Credit Debts

1. In cases where a member participating in joint credit purchases sells part or all of their debt, the selling member and the purchasing member shall agree on a plan for the purchase and sale of the debt; simultaneously, the selling member shall notify the remaining members in writing about the purchase and sale of the debt. In cases where a portion of the lead member's debt (the lead member coordinating joint credit, the lead member providing joint credit, the lead member handling payments, the lead member receiving collateral) is sold, the selling member, the purchasing member, and the remaining members shall agree on the contents of the changes to the joint credit contract.

The purchase and sale contract in this case is an inseparable part of the joint credit contract and the initial joint credit loan contract. The provisions of the purchase and sale contract must not conflict with the provisions concerning the debt in the joint credit contract and the joint credit loan contract.

2. In cases where the entire debt is sold, the joint credit lenders shall agree on a plan for selling the debt, ensuring compliance with the provisions of this Circular and relevant laws.

Article 16. Rights and Obligations of the Purchasing Debtor

1. The purchasing debtor has the following rights:

a) Requesting the selling debtor to provide information about the purchased debt (including information related to the formation and management of the debt);

b) Inheriting all the rights of the selling debtor towards the debt according to the agreement, in accordance with the law;

c) Requesting the selling debtor to transfer the file and complete the procedures to fully transfer the rights and obligations of the selling debtor, in accordance with the agreement of both parties in the purchase and sale contract and the law;

d) Requesting the selling debtor to fulfill all commitments according to the agreement;

e) Other rights as agreed and provided by law.

2. The purchasing debtor has the following obligations:

a) Paying the full amount due to the selling debtor according to the purchase and sale contract;

b) Paying all costs (including brokerage fees if applicable) arising during the purchase and sale process according to the agreement;

c) Inheriting all the obligations of the selling debtor towards the debt according to the agreement, in accordance with the law;

d) Fulfilling other obligations as agreed and provided by law.

Article 17. Rights and Obligations of the Selling Debtor

1. The selling debtor has the following rights:

a) Requesting the purchasing debtor to pay according to the agreement;

b) Requesting the purchasing debtor to fulfill all committed obligations;

c) Other rights as agreed and provided by law.

2. The selling debtor has the following obligations:

a) Notifying the debtor and related parties in writing about the debt sale contents at least five working days from the date the purchase and sale contract is signed or amended and supplemented. If the law provides otherwise or as agreed between the selling debtor and the debtor, or when necessary, the selling debtor shall notify the debtor in writing about the debt sale before signing the purchase and sale contract;

b) Providing information related to the sold debt according to the purchasing debtor's request, ensuring compliance with the law and not conflicting with the agreements in the credit contract and guarantee contract already signed;

c) Transferring the original state of the debt file fully and on time according to the agreement to the purchasing debtor;

d) Transferring the original state of the rights and obligations towards the sold debt including the rights and obligations towards the security measures and insurance of the debt (if any) to the purchasing debtor according to the purchase and sale contract and the law;

e) Paying all costs (including brokerage fees if applicable) arising during the purchase and sale process according to the agreement;

f) Fulfilling other obligations as agreed and provided by law.

Article 18. Rights and Obligations of the Broker

1. The broker has the following rights:

a) To arrange the purchase and sale of debts for debt buyers and sellers;

b) To receive brokerage fees and be compensated for reasonable expenses related to the brokerage contract as agreed upon by the parties;

c) Other rights as agreed and provided by law.

2. The broker has the following obligations:

a) To truthfully reflect information related to the debt purchase and sale transactions provided by the parties;

b) To bear legal responsibility for the information provided by themselves;

c) Not to disclose or provide information that harms the interests of debt buyers, debt sellers, and other parties involved in the debt;

d) To keep custody of documents handed over for the purpose of brokerage and return all such documents fully to the debt buyers and sellers after completing the brokerage work;

đ) To fulfill other obligations as agreed and stipulated by law in full and accurately;

Article 19. Dispute Resolution

1. Disputes arising from debt purchase and sale activities shall be resolved according to the agreement of the parties in the debt purchase and sale contract, but not contrary to the provisions of the law.

2. In cases involving foreign elements in debt purchases and sales, the parties may agree on the applicable law, foreign court, or commercial arbitration to resolve disputes arising from debt purchase and sale transactions if such agreements do not contravene the provisions of Vietnamese law.

Article 20. Management of Purchased and Sold Debts

1. Credit institutions, foreign bank branches:

a) Credit institutions, foreign bank branches purchasing debts must record and monitor separately at the actual purchase price of the purchased debt, ensuring the distinction between purchased debts and debts formed from the credit institution's lending activities, and include the amount of purchased debt in the total credit limit granted to the debtor;

Article 21. Financial Treatment and Accounting in Debt Purchase and Sale Transactions

a) For debts being recorded on-balance sheet:

- If the selling price of the debt is higher than the book value of the debt, the excess portion shall be recorded as income in the financial year of the credit institution, foreign bank branch;

- If the purchase or sale price of the debt is lower than the value of the debt, the shortfall portion shall be covered by compensation from individuals or groups (in cases where losses have been determined to be caused by individuals or groups and must be compensated according to regulations), insurance money from insurance organizations, and risk reserve funds already established in costs, any remaining shortfall shall be recorded as business expenses of the credit institution, foreign bank branch for the period.

b) For debts being monitored off-balance sheet, debts that have been removed from the balance sheet, the proceeds from selling the debt shall be recorded as other income of the credit institution, foreign bank branch;

Chapter III

REPORTING AND RESPONSIBILITIES OF RELATED UNITS

Article 22. Information Reporting System

Credit organizations and foreign bank branches must report their activities in purchasing and selling debts (including such activities conducted through subsidiaries and associated companies) in accordance with the State Bank of Vietnam's regulations on statistical reporting for units under the State Bank of Vietnam and credit organizations, foreign bank branches.

Article 23. Responsibilities of Credit Organizations and Foreign Bank Branches

Issue internal regulations in accordance with Clause 4, Article 5 of this Circular and submit them to the State Bank of Vietnam (Department of Credit for Economic Sectors, Banking Inspection and Supervision Authority) no later than five working days after signing or amending them.

Article 24. Responsibilities of Relevant Units Under the State Bank of Vietnam

1. Responsibilities of the Credit Department for Economic Sectors

a) Monitor and compile information on the implementation of debt purchase and sale activities by credit organizations and foreign bank branches;

b) Participate in opinions on approving debt purchase activities of credit organizations and foreign bank branches at the request of the Banking Inspection and Supervision Authority;

c) Serve as the focal point for handling issues arising during the implementation of this Circular.

2. Responsibilities of the Inspection and Supervision Agency

a) Serve as the focal point for receiving, reviewing, and submitting to the Governor of the State Bank of Vietnam applications for approval of debt purchase activities by credit organizations and foreign bank branches; Serve as the focal point for resolving issues related to debt purchase approvals as stipulated in this Circular;

b) Conduct regular or spot inspections and handle violations by credit organizations and foreign bank branches in complying with the provisions of this Circular; Provide information about violations by credit organizations and foreign bank branches in debt purchase and sale activities to the Department of Credit for Economic Sectors.

3. Responsibilities of the Financial Accounting Department

Guide accounting entries for debt purchase and sale activities of credit organizations and foreign bank branches.

4. Responsibilities of Relevant Units Under the State Bank of Vietnam

Based on their assigned functions and tasks, relevant units under the State Bank of Vietnam shall participate in opinions on approving debt purchase activities of credit organizations and foreign bank branches at the request of the Banking Inspection and Supervision Authority.

5. Responsibilities of the State Bank of Vietnam Branches in Provinces and Central Cities

Carry out inspections and supervision of credit organizations and foreign bank branches in compliance with the provisions of this Circular and handle violations within their authority.

Chapter IV

IMPLEMENTING PROVISIONS

Article 25. Transitional Provisions

1. Debt purchase and sale contracts signed before the effective date of this Circular shall continue to be implemented according to the agreements already concluded. Any amendments or supplements to debt purchase and sale contracts must comply with the provisions of this Circular.

2. Credit organizations and foreign bank branches that have been approved for debt purchase activities do not need to apply for approval of debt purchase activities as provided for in this Circular.

Article 26. Implementation

1. This Circular takes effect from September 1, 2015, replacing Decision No. 59/2006/QĐ-NHNN dated December 21, 2006 of the State Bank of Vietnam on the issuance of the Regulation on Debt Purchase and Sale Activities of Credit Organizations.

2. The Director of the Office, Heads of the Department of Credit for Economic Sectors, Heads of relevant units under the State Bank of Vietnam, Governors of State Bank of Vietnam branches in provinces and central cities, Chairmen of the Board of Directors, Chairmen of the Board of Members, and General Managers (Directors) of credit organizations and foreign bank branches are responsible for organizing the implementation of this Circular./.