Circular No. 13/2010/TT-NHNN on the ratios ensuring safety in the operations of credit institutions

✦ Smart summary

Circular No. 13/2010/TT-NHNN stipulates the ratios ensuring safety in the operations of credit institutions, applicable to credit institutions in Vietnam except for the Social Policy Bank and the Vietnam Development Bank. This circular stipulates ratios such as the minimum capital adequacy ratio, credit limits, liquidity ratio, investment limit, share purchase limit, and loan-to-deposit ratio.

Scope of application

Credit institutions operating in Vietnam (excluding the Social Policy Bank, the Vietnam Development Bank, and grassroots credit funds).

Key points

Credit institutions must maintain a minimum capital adequacy ratio of 9% between own capital and total risk-weighted assets (individual capital adequacy ratio) and 9% on a consolidated basis (consolidated capital adequacy ratio).
Credit institutions shall not extend credit to subsidiaries engaged in securities trading activities.
The lending and guarantee limit for a single customer shall not exceed 15% of the credit institution's own capital; the total outstanding loans and guarantee balances for a related group of customers shall not exceed 60% of the credit institution's own capital.
Credit institutions must maintain a minimum ratio of 15% between total liquid assets and total liabilities, and a minimum ratio of 1 between total assets due for repayment within the next seven days and total liabilities due for repayment within the next seven days.
Credit institutions may only use charter capital and reserve funds to invest in shares and purchase equity. The level of investment and share purchase shall not exceed 11% of another enterprise's charter capital.

🌐 Social impact of this document

This creates a stricter risk management system for credit institutions, helping to ensure financial safety and stability in the banking system.
However, compliance with these regulations may impose cost burdens on credit institutions, particularly when it is necessary to maintain a high minimum capital ratio.

❓ Frequently asked questions

What is the minimum capital adequacy ratio of credit institutions?

Credit institutions must maintain a minimum capital adequacy ratio of 9% between own capital and total risk-weighted assets (individual capital adequacy ratio) and 9% on a consolidated basis (consolidated capital adequacy ratio).

What type of business activity cannot credit institutions extend credit to their subsidiaries?

Credit institutions shall not extend credit to subsidiaries engaged in securities trading activities.

What is the lending and guarantee limit for a single customer of credit institutions?

Credit institutions shall not extend credit to a single customer exceeding 15% of the credit institution's own capital. The total outstanding loans and guarantee balances for a related group of customers shall not exceed 60% of the credit institution's own capital.

What can credit institutions use their charter capital and reserve funds for?

Credit institutions may only use their charter capital and reserve funds to invest in shares and purchase equity according to this Circular.

What is the maximum level of investment and share purchase by credit institutions in another enterprise?

The level of investment and share purchase by credit institutions in another enterprise shall not exceed 11% of that enterprise's charter capital.

Full text

CIRCULAR

Provisions on safety ratios in the operation of credit institutions

Pursuant to the Law on the State Bank of Vietnam 1997 and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam 2003;

Based on the Law on Credit Institutions 1997 and the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions 2004;

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;

The State Bank of Vietnam (hereinafter referred to as the State Bank) shall stipulate safety ratios in the operation of credit institutions as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope and Applicability

1. Credit institutions operating in Vietnam (hereinafter referred to as credit institutions), except for the Social Policy Bank, the Vietnam Development Bank, and grassroots credit funds, must maintain safety ratios during their operations as prescribed in this Circular.

2. Safety ratios prescribed in this Circular include:

b) Liquidity ratio;

b) Credit limits;

c) Liquidity coverage ratio;

d) Limits on capital contribution and share purchase;

đ) Loan-to-deposit ratio;

3. Based on the results of supervision, inspection, and audit of credit institution activities by the Banking Inspection and Supervision Authority, the State Bank may require credit institutions to maintain higher safety ratios than those prescribed in this Circular.

Article 2. Interpretation of Terms

In this Circular, the following terms shall be understood as follows:

1. Debtor includes assets "Have" formed from deposits, loans, advances, overdrafts, financial leasing, factoring, discounting, rediscounting transferable instruments, other securities, and stock investments.

2. Customer is an organization or individual having a credit relationship with a credit institution. One customer is an organization or an individual having a credit relationship with a credit institution.

3. Related customer group includes two or more customers having a credit relationship with a credit institution, falling under one of the following cases:

a) Parent company with subsidiary and vice versa; credit institution with subsidiary of the credit institution and vice versa; subsidiaries of the same parent company or of the same credit institution with each other; person managing, member of the Board of Supervisors of the parent company or of the credit institution, individual or organization authorized to appoint these persons with subsidiary and vice versa;

b) Company or credit institution with person managing, member of the Board of Supervisors of that company or credit institution or with company, organization authorized to appoint these persons and vice versa;

c) Company or credit institution with individual, organization holding 5% or more of the charter capital or voting shares at that company or credit institution and vice versa;

d) Individuals related to each other, including spouse, father, adopted father, mother, adopted mother, child, adopted child, brother, sister, full sibling, and spouse of these individuals;

đ) Company or credit institution with individuals related to each other as prescribed in Point d Clause of this Article of the person managing, member of the Board of Supervisors, shareholder contributing capital or holding 5% or more of the charter capital or voting shares of that company or credit institution and vice versa;

e) Individual appointed as representative for organizations or individuals prescribed in Points a, b, c, d, and đ Clause of this Article with the appointing organization or individual, and representatives appointed for the same organization's capital contributions with each other;

g) Group of individuals or organizations capable of influencing decision-making and operations of the company or credit institution through the Shareholders' Meeting or Board of Directors of the company or credit institution.

4. Subsidiary of a credit institution is another enterprise or credit institution with legal personality, independent accounting, established or purchased shares according to the regulations of the State Bank and:

4.1. Holding over 50% of the charter capital or voting shares of another enterprise or credit institution, except when ownership is not tied to control of the enterprise or credit institution; or

4.2. Holding less than 50% of the charter capital or voting shares of another enterprise or credit institution, but:

a) Other shareholders agree to grant the credit institution over 50% of the voting rights; or

b) The credit institution has the right to influence financial policies and operations of the enterprise or credit institution according to an agreement between the credit institution and the enterprise or credit institution; or

c) The credit institution has the right to appoint or dismiss the majority of members of the Board of Management, Board of Directors, or equivalent management level of the enterprise or credit institution; or

d) The credit institution has the right to cast the majority of votes at meetings of the Board of Management, Board of Directors, or equivalent management level.

5. Directly affiliated company of a credit institution is a subsidiary of a credit institution, operating in finance, insurance, banking, and management; exploiting and selling assets during the process of handling collateral for loans and assets entrusted by the state to the credit institution for debt recovery.

6. Joint venture company of a credit institution is another enterprise or credit institution with legal personality, independent accounting, established based on a joint venture contract between the credit institution and parties, and jointly owned and controlled by the credit institution and the contributing parties.

7. Associated company of a credit institution is another enterprise or credit institution with legal personality, independent accounting, established or purchased shares according to the regulations of the State Bank and meeting all the following conditions:

a) The credit institution has the right to participate in making decisions on financial policies and operations of the enterprise or credit institution but does not control such policies;

b) The credit institution holds from 20% to 50% of the charter capital or voting shares of the enterprise or credit institution;

c) Is not a subsidiary or joint venture company of the credit institution.

8. Capital contribution, share purchase is the act of credit institutions using registered capital and reserve funds to contribute to forming the registered capital, purchasing shares of enterprises, subsidiaries, joint ventures, associated companies, other credit institutions, providing registered capital for directly affiliated companies of credit institutions; contributing to investment funds, contributing to implementing investment projects; including entrusting funds to other legal entities, organizations, enterprises to carry out investments in the aforementioned forms.

9. Real estate business is the act of investing capital, establishing, purchasing, receiving transfers, leasing, lease-purchasing real estate for sale, transfer, leasing, subleasing, lease-purchasing with the purpose of generating profit.

10. Investments in the form of contributions and share purchases aimed at controlling enterprises include:

a) Investments that account for more than 50% of the registered capital or voting shares of another enterprise or another credit institution;

b) Investments with ownership ratios lower than those specified in Point a Clause of this Article but sufficient to control decisions of the Shareholders' Meeting or Board of Members.

11. Interest rate swap contracts include interest rate swap agreements, forward rate agreements, interest rate option contracts, and other interest rate transaction contracts as prescribed by the State Bank.

12. Foreign exchange transaction contracts include foreign exchange swap agreements, forward foreign exchange agreements, futures contracts, foreign exchange option contracts, and other foreign exchange transaction contracts as prescribed by the State Bank.

13. Undistributed profits are the portion of profits determined through independent audit after tax payment and establishment of reserves according to legal provisions, retained to supplement the capital of credit institutions as stipulated by law. The undistributed profits of joint-stock credit institutions must be approved by the Shareholders' Meeting.

14. Commercial advantage is the larger difference between the purchase price of a financial asset and its book value on the balance sheet that a credit institution must pay arising from a business combination that has the nature of an acquisition carried out by the credit institution. This financial asset is fully reflected on the balance sheet of the credit institution.

15. OECD is the Organization for Economic Cooperation and Development (OECD).

16. International financial organizations include: The International Bank for Reconstruction and Development (IBRD), Inter-American Development Bank (IADB), Asian Development Bank (ADB), African Development Bank (AfDB), European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD).

Article 3. Information Technology

Credit institutions must ensure they have an information technology system connected throughout the system to:

1. Store, access, and update databases on customers, markets, ensuring risk management according to internal regulations of the credit institution.

2. Manage cash flows, statistics, monitor capital items, assets, ensuring compliance with safety ratio requirements in operations as prescribed in this Circular.

3. Implement statistical reporting systems as prescribed by the State Bank.

Chapter II

SPECIFIC PROVISIONS

PART 1. MINIMUM CAPITAL ADEQUACY RATIO

Article 4. Minimum Capital Adequacy Ratio

1. Credit organizations, except for foreign bank branches, must maintain a minimum capital adequacy ratio of 9% between own capital and total risk-weighted assets of the credit organization (individual capital adequacy ratio).

2. Credit organizations must prepare consolidated financial statements in accordance with the provisions of the law, in addition to maintaining the individual capital adequacy ratio stipulated in Clause 1 of this Article, they must also maintain a minimum consolidated capital adequacy ratio of 9% based on the consolidation of the capital and assets of the credit organization and its subsidiaries (consolidated capital adequacy ratio).

Article 5. Individual Capital Adequacy Ratio of Credit Organizations

1. The individual capital adequacy ratio is determined as follows:

Individual capital adequacy ratio =	Tier 1 own capital
	Total risk-weighted assets

Where:

- Own capital is the total Tier 1 capital specified in Clause 2 and Tier 2 capital specified in Clause 3, minus the items to be deducted specified in Clause 4 of this Article.

- Total risk-weighted assets specified in Clause 5 of this Article.

2. Tier 1 capital consists of the total amounts specified in Clause 2.1 of this Article, minus the items to be deducted specified in Clause 2.2 of this Article.

2.1. Items included in calculating Tier 1 capital include:

a) Registered capital (capital that has been issued, capital that has been contributed);

b) Supplementary reserve fund for registered capital;

c) Business development investment fund;

d) Undistributed profits;

đ) Share premium included in capital according to the provisions of the law, minus the portion used to purchase treasury shares (if any).

2.2. Items to be deducted from Tier 1 capital include:

a) Goodwill;

b) Business losses, including accumulated losses;

c) Contributions and purchases of shares in other credit organizations;

d) Contributions and purchases of shares in subsidiaries;

đ) Portion of contributions and purchases of shares in a business, a fund, or an investment project exceeding 10% of the total amounts specified in Clause 2.1 of this Article after deducting the items to be deducted specified in Points a, b, c, and d of Clause 2.2 of this Article.

e) The total contributions and purchases of shares after deducting the excess over 10% specified in Point đ of Clause 2.2 of this Article exceeding 40% of the total amounts specified in Clause 2.1 of this Article after deducting the items to be deducted specified in Points a, b, c, and d of Clause 2.2 of this Article, the excess will be deducted.

3. Tier 2 capital consists of the total amounts specified in Clause 3.1 of this Article within the limits specified in Clause 3.2 of this Article.

3.1. Items included in calculating Tier 2 capital include:

a) 50% of the balance of accounts for revaluation of fixed assets according to the provisions of the law;

b) 40% of the balance of accounts for revaluation of financial assets according to the provisions of the law;

c) Financial reserve fund;

d) Convertible bonds issued by credit organizations satisfying the following conditions:

(i) Initial term of at least five years;

(ii) Not guaranteed by the assets of the credit organization itself;

(iii) The credit organization may not repurchase at the request of the holder or on the secondary market, or the credit organization may only repurchase after obtaining written approval from the State Bank with the condition that the repurchase does not affect the safety ratios as prescribed;

(iv) The credit organization may suspend interest payments and carry forward accrued interest to the next year if making interest payments results in a loss for the year;

(v) In the event of liquidation of the credit organization, the holder of convertible bonds shall only be paid after the credit organization has paid all secured and unsecured creditors;

(vi) Any increase in interest rate, including any increase in the additional interest rate above the reference rate, can only be implemented after five years from the date of issuance and adjusted once during the entire term before conversion into ordinary shares.

đ) Other debt instruments satisfying all of the following conditions:

(i) Are debts where, in all circumstances, the creditor is only paid after the credit organization has paid all secured and unsecured creditors;

(ii) Initial term of at least ten years;

(iii) Not guaranteed by the assets of the credit organization itself;

(iv) The credit organization may suspend interest payments and carry forward accrued interest to the next year if making interest payments results in a loss for the year;

(v) The creditor may only be repaid early by the credit organization after obtaining written approval from the State Bank;

(vi) Any increase in interest rate, including any increase in the additional interest rate above the reference rate, can only be implemented after five years from the date of signing the contract and adjusted once during the entire term of the loan.

3.2. Limits when determining Tier 2 capital:

a) The total value of the items specified in Points d and đ of Clause 3.1 of this Article shall not exceed 50% of the value of Tier 1 capital.

b) The financial reserve fund shall not exceed 1.25% of the total risk-weighted assets specified in Clause 5 of this Article.

c) During the last five years before the conversion or payment deadline, each year closer to the conversion or payment deadline, the value of the items specified in Points d and đ of Clause 3.1 of this Article must be reduced by 20% of the initial value.

d) The total value of Tier 2 capital shall not exceed 100% of the value of Tier 1 capital.

4. Items to be deducted when calculating own capital:

4.1. 100% of the balance of accounts for revaluation of fixed assets according to the provisions of the law;

4.2. 100% of the balance of accounts for revaluation of financial assets according to the provisions of the law.

5. Total risk-weighted assets is the total value of assets "Have" determined according to the level of risk and the value of corresponding off-balance sheet commitments determined according to the level of risk.

Assets "Have" determined according to the level of risk are calculated as the product of the value of assets "Have" and the corresponding risk weight of assets "Have" specified in Clauses 5.1, 5.2, 5.3, 5.4, 5.5, and 5.6 of this Article.

Corresponding off-balance sheet commitments determined according to the level of risk are calculated as the product of the value of off-balance sheet commitments and the conversion factor specified in Clause 6.3 and the risk weight specified in Clause 6.4 of this Article.

5.1. Assets "Have" with a risk weight of 0% include:

a) Cash;

b) Gold;

c) Deposits at the Social Policy Bank according to the provisions regarding credit for the poor and other policy targets;

d) Claims denominated in Vietnamese Dong against the Government of Vietnam, the State Bank, or guaranteed by the Government of Vietnam, the State Bank.

d) Discounts and re-discounts of securities issued by the credit institution itself;

e) Claims denominated in Vietnamese Dong guaranteed by securities issued by the credit institution itself; claims fully guaranteed by cash, savings deposits, pledged funds, securities issued by the Government, State Bank;

g) Claims against the Central Government, Central Banks of countries belonging to the OECD;

h) Claims guaranteed by government bonds of central governments of countries belonging to the OECD or guaranteed for payment by the central governments of countries belonging to the OECD.

5.2. Assets "Have" with a risk weight of 20% include:

a) Claims against other domestic and foreign credit institutions, including foreign currency claims;

b) Claims against Provincial People's Committees, Central City People's Committees; foreign currency claims against the Government of Vietnam, State Bank;

c) Foreign currency claims guaranteed by securities issued by the credit institution itself. Claims guaranteed by securities issued by other credit institutions established in Vietnam;

d) Claims against state financial organizations; claims guaranteed by securities issued by state financial organizations;

đ) Precious metals (excluding gold), precious stones;

e) Claims against international financial organizations and claims guaranteed for payment or secured by securities issued by these organizations;

g) Claims against banks established in OECD countries and claims guaranteed for payment by these banks;

h) Claims against securities companies established in OECD countries that comply with risk-based management and supervision agreements on capital, and claims guaranteed for payment by these companies;

i) Claims against banks established outside OECD countries with remaining terms under one year, and claims with remaining terms under one year guaranteed for payment by these banks;

5.3. Assets "Have" with a risk weight of 50% include:

a) Project investment contracts according to the regulations on the organization and operation of finance companies;

b) Claims fully guaranteed by residential property, land use rights, residential property attached to land use rights of the borrower, or these assets leased by the borrower but the lessee agrees to allow the lessor to use them as collateral during the lease period;

5.4. Assets "Have" with a risk weight of 100% include:

a) Capital contributions, share purchases, except capital contributions, share purchases in subsidiaries, joint ventures, associated companies, and claims to be deducted from Tier 1 capital as stipulated in Points c, d, đ, and e Clause 2.2 Article of this provision;

b) Claims against banks established in non-OECD countries with remaining terms of one year or more, and claims with remaining terms of one year or more guaranteed for payment by these banks;

c) Claims against central governments of non-OECD countries, except loans in local currency and funding sources also in local currency of those countries;

d) Investments in machinery, equipment, fixed assets, and other real estate according to the provisions of the law;

đ) Other claims not included in the claims specified in Clause 5.1, Clause 5.2, Clause 5.3, Clause 5.4, Clause 5.5, and Clause 5.6 of this Article;

5.5. Assets "Have" with a risk weight of 150% include loans to subsidiaries, joint ventures, associated companies of credit institutions, except claims specified in Clause 5.6 of this Article;

5.6. Assets "Have" with a risk weight of 250% include:

a) Loans for stock investments;

b) Loans to securities companies;

c) Loans for real estate business purposes;

6. Off-balance sheet items corresponding assets "Have" are determined based on risk levels according to the following principles and order:

6.1. Convert the value of off-balance sheet items into the corresponding asset "Have" value according to the conversion factor decided in Clause 6.3 of this Article;

6.2. Multiply the value of the corresponding asset "Have" of each off-balance sheet item by the corresponding risk weight specified in Clause 6.4 of this Article;

6.3. Conversion factors for off-balance sheet items:

a) Off-balance sheet items with a conversion factor of 100% include irrevocable commitments that replace direct lending forms but have the same risk level as direct lending, including:

(i) Loan guarantees;

(ii) Payment guarantees;

(iii) Confirmations of letters of credit; standby letters of credit for financial guarantees for loans, issuance of securities; Acceptances of payments including acceptances under drafts, except for acceptances of drafts under Point c.(ii) Clause 6.3 of this Article;

b) Off-balance sheet items with a conversion factor of 50% include irrevocable commitments for the responsibility to pay on behalf of credit institutions, including:

(i) Performance guarantees;

(ii) Bid guarantees;

(iii) Other guarantees;

(iv) Standby letters of credit outside the letters of credit specified in Point a.(iii) Clause 6.3 of this Article;

(v) Other commitments with initial terms of one year or more;

c) Off-balance sheet items with a conversion factor of 20% include trade-related commitments, including:

(i) Irrevocable letters of credit;

(ii) Acceptances of short-term commercial drafts guaranteed by goods;

(iii) Delivery guarantees;

(iv) Other trade-related commitments;

d) Off-balance sheet items with a conversion factor of 0%, including:

(i) Revocable letters of credit;

(ii) Other unconditional revocable commitments;

đ) Conversion factors for interest rate swap contracts:

(i) With initial terms under one year: 0.5%;

(ii) With initial terms from one year to under two years: 1.0%;

(iii) With initial terms of two years or more: 1.0% for the portion under two years plus (+) 1.0% for each subsequent year;

e) Conversion factors for foreign exchange swap contracts:

(i) With initial terms under one year: 2.0%;

(ii) For initial terms from 1 year to less than 2 years: 5.0%

(iii) For initial terms of 2 years or more: 5.0% for the portion of the term under 2 years plus (+) 3.0% for each additional year thereafter.

6.4. The risk weight of the "Asset" value corresponding to each off-balance sheet commitment is as follows:

a) Off-balance sheet commitments guaranteed for payment by the Government of Vietnam or the State Bank, or fully collateralized with cash, savings deposits, margin money, or securities issued by the Government or the State Bank: The risk weight is 0%.

b) Off-balance sheet commitments collateralized with real estate: The risk weight is 50%.

c) Interest rate swap contracts, foreign exchange contracts, and other off-balance sheet commitments: The risk weight is 100%.

Article 6. Consolidated Capital Adequacy Ratio

1. Credit institutions must prepare consolidated financial statements in accordance with the provisions of the law based on data from the Balance Sheet, Financial Statements, Consolidated Financial Statements, and other information to maintain the minimum consolidated capital adequacy ratio, as follows:

1.1. Consolidation Object: Includes companies specified in the Accounting Standards for Credit Institutions issued together with Decision No. 16/2007/QD-NHNN dated April 18, 2007, of the Governor of the State Bank, except insurance companies.

1.2. The consolidated capital adequacy ratio is determined as follows:

Consolidated Capital Adequacy Ratio =	Consolidated own funds
	Total Risk-weighted Assets "Assets" consolidated

Where:

- Tier 1 capital as defined in Clause 2 and Tier 2 capital as defined in Clause 3 of this Article, minus the items to be deducted as defined in Clause 4 of this Article.

- Total Risk-weighted Assets "Assets" as defined in Clause 5 of this Article.

2. Tier 1 capital consists of the total amounts specified in Clause 2.1 of this Article, minus the items to be deducted specified in Clause 2.2 of this Article.

2.1. Items included in calculating Tier 1 capital include:

a) Items as defined in Clause 2.1 of Article 5 of this Circular;

b) Exchange rate differences arising during the consolidation of Financial Statements.

2.2. Items to be deducted from Tier 1 capital include:

a) Items as defined in Point a and Point b of Clause 2.2 of Article 5 of this Circular;

b) Investments in shares and equity in other credit institutions;

c) Investments in shares and equity in subsidiaries not included in the consolidation scope according to the law;

d) The portion of investments in shares and equity in a business, fund, or investment project exceeding 10% of the total amount of items as defined in Clause 2.1 of this Article after deducting the items to be deducted as defined in Point a and Point b of Clause 2.2 of Article 5 of this Circular.

đ) The total amount of investments in shares and equity after deducting the excess over 10% as defined in Point d of Clause 2.2 of Article 5 of this Circular, if it exceeds 40% of the total amount of items as defined in Clause 2.1 of this Article after deducting the items to be deducted as defined in Point a and Point b of Clause 2.2 of Article 5 of this Circular, the excess will be deducted.

3. Tier 2 capital includes the total amount of items as defined in Clause 3.1 of this Article calculated within the limit defined in Clause 3.2 of this Article.

3.1. Items included in calculating Tier 2 capital include:

a) Items as defined in Points a, b, c, d, and đ of Clause 3.1 of Article 5 of this Circular;

b) Minority interest benefits.

3.2. Limits when determining Tier 2 capital:

a) The total value of items as defined in Points d and đ of Clause 3.1 of Article 5 of this Circular shall not exceed 50% of Tier 1 capital.

b) The total reserve fund shall not exceed 1.25% of the total Risk-weighted Assets "Assets" as defined in Clause 5 of this Article.

c) During the last five years before the conversion or repayment deadline, after each year closer to the conversion or repayment deadline, the value of items as defined in Points d and đ of Clause 3.1 of Article 5 of this Circular must be reduced by 20% of their original value.

d) The total value of Tier 2 capital shall not exceed 100% of the value of Tier 1 capital.

4. Deductible items when calculating own capital: Items as defined in Clause 4.1 and Clause 4.2 of Article 5 of this Circular.

5. Total Risk-weighted Assets "Assets" is the total value of Assets, minus the items as defined in Points b, c, d, and đ of Clause 2.2 of Article 5 of this Circular, determined according to the risk level and the corresponding value of Assets of off-balance sheet commitments determined according to the risk level.

Risk-weighted Assets "Assets" is calculated as the product of the value of Assets and the corresponding risk weight of Assets as defined in Clause 5.1, Clause 5.2, Clause 5.3, Clause 5.4, and Clause 5.5 of this Article.

The corresponding Assets "Assets" of off-balance sheet commitments determined according to the risk level is calculated as the product between the value of off-balance sheet commitments and the conversion factor as defined in Clause 6.3 and the risk weight as defined in Clause 6.4 of Article 5 of this Circular.

5.1. Assets "Assets" with a risk weight of 0% include items as defined in Clause 5.1 of Article 5 of this Circular.

5.2 Assets "Assets" with a risk weight of 20% include items as defined in Clause 5.2 of Article 5 of this Circular.

5.3. Assets "Assets" with a risk weight of 50% include items as defined in Clause 5.3 of Article 5 of this Circular.

5.4. Assets "Have" with a risk weight of 100% include:

a) Items as defined in Points a and d of Clause 5.4 of Article 5 of this Circular;

b) Receivables as defined in Points b and c of Clause 5.4 of Article 5 of this Circular;

c) Other receivables outside those defined in Clauses 5.1, 5.2, 5.3, 5.4, and 5.5 of this Article.

5.5. Assets "Assets" with a risk weight of 250% include the item as defined in Clause 5.6 of Article 5 of this Circular.

6. Off-balance sheet items corresponding assets "Have" are determined based on risk levels according to the following principles and order:

6.1. Convert the value of off-balance sheet commitments into the corresponding Asset value according to the conversion factor as defined in Clause 6.3 of Article 5 of this Circular.

6.2. Multiply the corresponding Asset value of each off-balance sheet commitment by the corresponding risk weight as defined in Clause 6.4 of Article 5 of this Circular.

PART 2. CREDIT LIMITS

Article 7. Determining a Customer and a Related Customer Group

1. Credit institutions shall base on the provisions of this Circular and internal regulations on credit quality management to establish and issue regulations on criteria for determining a customer and a related customer group, credit policies for customers, and credit limits applicable to a customer and a related customer group, including at least the following contents:

a) Specific criteria for determining a customer and a related customer group.

b) Credit limits for a customer and a related customer group.

c) A diversification plan for credit activities, methods for monitoring and managing credit grants exceeding 5% of the credit institution's own capital. Each loan or guarantee, financial lease transaction, and the total of loans or guarantees, and financial lease transactions exceeding 10% of the credit institution's own capital must be approved by the Board of Directors or the Chairman of the Board of Directors or a person authorized by the Board of Directors or the Chairman of the Board of Directors according to the internal credit policy of the credit institution for the customer.

2. Internal regulations on criteria for determining a customer and a related customer group, and credit limits applicable to a customer and a related customer group must be revised and supplemented in accordance with the content of revisions and supplements to internal regulations on credit quality management and credit policies for customers when the internal credit rating system is revised and supplemented annually.

3. Within fifteen days from the date of issuance or revision and supplementation of internal regulations on criteria for determining a customer and a related customer group and credit limits applicable to a customer and a related customer group, credit institutions must submit to the State Bank (Bank Inspection and Supervision Authority) for reporting.

Article 8. Loan, Guarantee, and Discount Limits

1. The outstanding balance of loans of credit institutions includes the outstanding balance of loans under credit contracts; the outstanding balance of loans entrusted by credit institutions to other credit institutions; the outstanding balance of amounts paid by credit institutions on behalf of customers in performing guarantee obligations.

The total outstanding balance of loans of credit institutions to a single customer shall not exceed 15% of the credit institution's own capital.

2. The total outstanding balance of loans and the outstanding balance of guarantees of credit institutions to a single customer shall not exceed 25% of the credit institution's own capital, where the total outstanding balance of loans to a single customer shall not exceed the ratio specified in Clause 1 of this Article.

3. The total outstanding balance of loans of credit institutions to a related customer group shall not exceed 50% of the credit institution's own capital, where the total outstanding balance of loans to a single customer shall not exceed the ratio specified in Clause 1 of this Article.

4. The total outstanding balance of loans and the outstanding balance of guarantees of credit institutions to a related customer group shall not exceed 60% of the credit institution's own capital, where the total outstanding balance of loans and guarantees to a single customer shall not exceed the ratio specified in Clause 2 of this Article.

5. The total outstanding balance of loans of foreign bank branches to a single customer shall not exceed 15% of the foreign bank's own capital.

The total outstanding balance of loans and the outstanding balance of guarantees of foreign bank branches to a single customer shall not exceed 25% of the foreign bank's own capital.

The total outstanding balance of loans of foreign bank branches to a related customer group shall not exceed 50% of the foreign bank's own capital, where the total outstanding balance of loans to a single customer shall not exceed 15% of the foreign bank's own capital.

The total outstanding balance of loans and the outstanding balance of guarantees of foreign bank branches to a related customer group shall not exceed 60% of the foreign bank's own capital.

6. Credit institutions shall not provide unsecured credit or credit with preferential conditions to enterprises that they control and must comply with the following restrictions:

a) The total outstanding balance of loans and the outstanding balance of guarantees of credit institutions to an enterprise that they control shall not exceed 10% of the credit institution's own capital.

b) The total outstanding balance of loans and the outstanding balance of guarantees of credit institutions to enterprises that they control shall not exceed 20% of the credit institution's own capital.

c) Credit institutions may provide unsecured credit to wholly-owned leasing companies up to a maximum of 5% of the credit institution's own capital but must ensure the restrictions stipulated in Points a and b of this Clause.

7. Credit institutions shall not provide credit to wholly-owned securities trading companies.

8. Credit institutions shall not provide unsecured loans for investment and securities trading.

9. The total outstanding balance of loans and discounting of securities for all customers for the purpose of investment and securities trading shall not exceed 20% of the credit institution's charter capital.

10. In cases where the capital requirement of a customer exceeds the loan limit prescribed in Clauses 1, 2, 3, 4, and 5 of this Article, credit institutions and foreign bank branches may provide syndicated credit in accordance with the regulations of the State Bank.

11. In special cases, to fulfill economic and social tasks where the syndication capacity of credit institutions and foreign bank branches has not met the borrowing and leasing requirements of a customer, the Prime Minister may decide specifically on the amount of loans and leases for each specific case.

Article 9. Limitations on Financial Leasing

1. The total outstanding balance of financial leasing to one customer shall not exceed thirty percent (30%) of the company's own capital.

2. The total outstanding balance of financial leasing to a related group of customers shall not exceed fifty percent (50%) of the company's own capital, with the amount of financial leasing to each customer not exceeding the ratio specified in Clause 1 of this Article.

Article 10. Cases Not Subject to Application

The limitations prescribed in Articles 8 and 9 of this Circular shall not apply to the portion of loans and guarantees in the following cases:

1. Loans from entrusted funds of the Government, organizations, individuals, or when the borrower is another credit institution; loans to the Government of Vietnam.

2. Loans and guarantees for a term of less than one year to other credit institutions operating in Vietnam.

3. Loans and guarantees fully secured by government bonds of Vietnam or government bonds issued by countries belonging to the OECD.

4. Loans and guarantees fully secured by deposits, including savings deposits and pledged deposits at credit institutions.

5. Loans and guarantees fully secured by securities issued by the credit institution itself.

6. Financial leasing that has been specifically decided by the Prime Minister regarding the level of lending and financial leasing to a customer.

7. Loans and guarantees that have been approved in writing by the State Bank.

8. Financial leasing using entrusted funds of the Government, organizations, or when the lessee is another credit institution but not a credit institution under the direct control of the leasing company.

SECTION 3. RATIOS FOR LIQUIDITY CAPACITY

Article 11. Management of Liquidity Capacity

1. Credit institutions must establish a department managing "Debt" and "Asset" properties (at least at the department level or equivalent) to monitor and manage daily liquidity capacity. The "Debt" and "Asset" property management department shall be supervised by the General Director (Director) or Deputy General Director (Deputy Director) authorized by the Board of Directors.

2. Credit institutions must develop and promulgate internal regulations on managing liquidity capacity for Vietnamese Dong, Euro, British Pound, and US Dollar (including US Dollar and other foreign currencies converted into US Dollar according to the inter-bank exchange rate at the end of each day), which must include at least the following contents:

2.1. The classification, delegation of authority, functions, tasks, and responsibilities of relevant departments and individuals in managing "Debt" and "Asset" properties and ensuring the maintenance of liquidity ratios.

2.2. Procedures for statistics, construction, and monitoring of maturities for "Debt" and "Asset" properties. A system for measuring, evaluating, and reporting on liquidity capacity, liquidity, and early warning systems for temporary liquidity shortages and solutions.

2.3. Measures to ensure liquidity capacity and liquidity in case of temporary liquidity shortages, as well as in cases of liquidity crises.

2.4. Plans and measures to strengthen holdings of high-liquidity securities.

2.5. Construction and testing models for assessing and stress-testing liquidity capacity and liquidity. Stress-testing models must include scenarios for analyzing liquidity capacity and liquidity, ensuring:

a) At least two scenarios for analysis:

- Cash flow from the credit institution's business operations occurring normally;

- Cash flow from the credit institution's business operations when facing difficulties in liquidity capacity and liquidity.

b) Analysis scenarios must reflect the following contents:

- Ability to fulfill daily obligations and commitments;

- Measures to ensure that the credit institution has sufficient liquidity capacity for at least seven (07) days in case of liquidity and liquidity difficulties.

3. Internal regulations on managing liquidity capacity must be approved by the Board of Directors and must be reviewed and revised at least once every six months or upon request by the State Bank (Bank Inspection and Supervision Authority).

For branches of foreign banks, internal regulations on managing liquidity capacity and liquidity must be approved by the foreign bank.

4. Credit institutions must report to the State Bank (Bank Inspection and Supervision Authority):

4.1. Internal regulations on managing liquidity capacity and any amendments or supplements to these regulations within five (05) days of issuance or amendment;

4.2. Immediately upon the occurrence of risks related to liquidity capacity and liquidity and measures taken to address them.

Article 12. Liquidity Ratios

At the end of each day, credit institutions must determine and take measures to ensure liquidity ratios for the following day as follows:

1. The minimum ratio of 15% between total "Assets" available for immediate payment and total liabilities payable.

1.1. Total "Assets" available for immediate payment include:

a) Cash balance, book value of gold in the vault;

b) Deposit balance, book value of gold deposited with the State Bank (excluding required reserves);

c) The positive difference between deposit balances without term, book value of gold deposited without term at other credit institutions, excluding the Social Policy Bank, and deposit balances without term, book value of gold deposited without term from other credit institutions at the credit institution;

d) The positive difference between deposit balances with term, book value of gold deposited with term due for payment at other credit institutions, excluding the Social Policy Bank, and deposit balances with term, book value of gold with term due for payment from other credit institutions at the credit institution;

đ) Book value of various types of government bonds, treasury bills issued by the Government of Vietnam, governments, or central banks of OECD member countries, or guaranteed for payment by the Government of Vietnam, governments, or central banks of OECD member countries;

e) Book value of Treasury bills, bills issued by the State Bank;

g) Book value of bonds issued by local authorities, local financial investment companies, and the Vietnam Development Bank;

h) Book value of securities listed on stock exchanges in Vietnam, but not exceeding 5% of total liabilities payable;

i) Book value of various types of securities, other negotiable instruments accepted by the State Bank for rediscounting or custody, transactions conducted in money market operations;

1.2. Total liabilities payable are determined by the balance in the Total Liabilities Payable account.

2. The minimum ratio of 1 between total "Assets" due for payment within seven days following the next day and total "Liabilities" due for payment within seven days following the next day for Vietnamese dong, euro, British pound, and US dollar (including US dollars and other foreign currencies converted into US dollars according to the interbank exchange rate at the end of each day).

2.1. "Assets" due for payment within seven days following the next day include:

a) Cash balance in the vault at the end of the previous day;

b) Book value of gold at the end of the previous day, including gold deposited with the State Bank and other credit institutions;

c) Deposit balance with the State Bank (excluding required reserves), deposit balance without term at other credit institutions at the end of the previous day;

d) Deposit balance with term at other credit institutions due for payment within seven days following the next day;

đ) 95% of the value of various types of securities issued or guaranteed for payment by the Government of Vietnam, governments of OECD member countries held until the end of the previous day;

e) 90% of the value of various types of securities issued or guaranteed for payment by credit institutions operating in Vietnam, banks of OECD member countries held until the end of the previous day;

g) 85% of the value of other listed securities held until the end of the previous day;

h) 80% of the balance of secured loans, finance leases, excluding non-performing loans, due for payment within seven days following the next day;

i) 75% of the balance of unsecured loans, excluding non-performing loans, due for payment within seven days following the next day.

2.2. "Liabilities" due for payment within seven days following the next day include:

a) Deposit balance without term of other credit institutions at the end of the previous day;

b) Deposit balance with term of other credit institutions, organizations, individuals due for payment within seven days following the next day;

c) 15% of the average deposit balance without term of organizations (excluding deposits from other credit institutions), individuals over the preceding thirty days up to the previous day. Credit institutions must determine this average balance as the basis for calculation;

d) Loan balance from the Government, State Bank due for payment within seven days following the next day;

đ) Loan balance from other credit institutions due for payment within seven days following the next day;

e) Negotiable instrument balance issued by the credit institution due for payment within seven days following the next day;

g) Value of irrevocable loan commitments to customers due for fulfillment within seven days following the next day;

h) Value of loan guarantee commitments to customers due for fulfillment within seven days following the next day;

i) Value of payment guarantee commitments, excluding the portion secured by cash, due for payment within seven days following the next day;

k) Interest and fee amounts due for payment daily within seven days following the next day.

Article 13. Monitoring Table for Liquidity Ratios

1. Credit organizations shall base on the provisions of Article 12 and Appendix No. 02 attached to this Circular to establish a monitoring table for the payment terms of "Assets" and repayment terms of "Liabilities" for each day within the following thirty days from the next day to support liquidity management.

2. The monitoring table for payment terms prescribed in Clause 1 of this Article must ensure the following requirements:

2.1. It must ensure that all "Assets" due for payment and "Liabilities" due for payment for each specific day within the following thirty days from the next day are monitored daily.

2.2. "Assets" and "Liabilities" due for payment and execution on each specific day are determined based on the time limit stipulated in credit contracts, loan contracts, deposit contracts, commitments, and guarantees.

Article 14. Handling Measures for Liquidity Ratios

1. Based on the results of the monitoring table for payment terms and the calculation of liquidity ratios, if at the end of each day the credit organization does not meet the liquidity ratios prescribed in Article 12 of this Circular, the credit organization must take measures, including borrowing from other credit organizations to support liquidity, ensuring compliance with the liquidity ratios for the next day as prescribed; and report immediately to the State Bank (Bank Inspection and Supervision Department) on the handling measures.

2. After applying the handling measures prescribed in Clause 1 of this Article, if the credit organization continues to face difficulties or has risks regarding liquidity affecting its solvency, the credit organization must report immediately to the State Bank (Bank Inspection and Supervision Department) as prescribed in Clause 4.2 of Article 11 of this Circular. The State Bank may apply necessary measures to handle credit organizations facing difficulties and having risks regarding liquidity and solvency.

3. A credit organization can only commit to lending to support the liquidity and solvency of another credit organization when it has ensured the liquidity ratios prescribed in Article 12 of this Circular.

4. A credit organization temporarily lacking liquidity ratios prescribed in Article 12 of this Circular shall not commit to lending to another credit organization in the interbank market.

5. A credit organization encountering difficulties in implementing the liquidity ratios and being subject to necessary measures applied by the State Bank as prescribed in Clause 2 of this Article, including rediscounting loans, shall not participate in the interbank market.

SECTION 4. LIMITS ON CAPITAL CONTRIBUTIONS AND SHARE PURCHASES

Article 15. Sources of Capital for Contributions and Share Purchases

Credit organizations can only use registered capital and reserve funds to contribute capital and purchase shares as prescribed in this Circular.

Article 16. Limits on Capital Contributions and Share Purchases

1. The level of capital contribution and share purchase by a credit organization in a business, investment fund, investment project, or another credit organization shall not exceed eleven percent (11%) of the registered capital of such business, investment fund, investment project, or another credit organization, except in cases where capital contributions and share purchases are made to establish a subsidiary company as prescribed by law.

The total level of capital contributions and share purchases by a credit organization and its subsidiaries, joint ventures, and associated companies in the same business, investment fund, investment project, or another credit organization shall not exceed eleven percent (11%) of the registered capital of such business, investment fund, investment project, or another credit organization.

2. The total level of capital contributions and share purchases by a credit organization:

a) In all subsidiary companies shall not exceed twenty-five percent (25%) of the registered capital and reserve funds of the credit organization.

b) In all businesses, investment funds, investment projects, and other credit organizations and capital contributions and share purchases of subsidiary companies of the credit organization shall not exceed forty percent (40%) of the registered capital and reserve funds of the credit organization, provided that the total level of capital contributions and share purchases by the credit organization in subsidiary companies does not exceed the ratio prescribed in Point a of Clause 2 of this Article.

3. If a credit organization exceeds the ratios prescribed in Clause 1 and Clause 2 of this Article, it must obtain prior written approval from the State Bank and fully comply with the following conditions:

a) The credit organization strictly complies with other regulations on ensuring safety in banking operations, has a non-performing loan (NPL) ratio of three percent (3%) or less, and has been continuously profitable in the three (03) consecutive years prior to that.

b) It is a capital contribution or share purchase in other credit organizations aimed at providing financial support to credit organizations facing financial difficulties, at risk of losing their ability to pay, and affecting the safety of the credit organization system.

Article 17. Transitional Provisions

A credit organization that has exceeded the levels prescribed in Clause 1 and Clause 2 of Article 16 of this Circular must have measures to address the situation and shall not continue to make capital contributions or share purchases in businesses, investment funds, investment projects, or other credit organizations, nor establish subsidiary companies until it complies with the ratios prescribed in Clause 1 and Clause 2 of Article 16 of this Circular.

The measures taken by a credit organization to address the excess ratios prescribed in Article 16 of this Circular must be approved by the Board of Directors and reported to the State Bank (Bank Inspection and Supervision Department).

PART 5. LOAN TO DEPOSIT RATIO

Article 18. Loan to Deposit Ratio

1. Credit institutions may only use mobilized funds to provide loans under the condition that before and after providing loans, they must ensure the liquidity ratio and other safety ratios prescribed in this Circular and not exceed the following ratio:

1.1. For banks: 80%

1.2. For non-bank credit institutions: 85%

2. The provision of loans as stipulated in Clause 1 of this Article includes forms such as lending, financial leasing, factoring, guarantee, discounting negotiable instruments, and transferable securities.

3. Mobilized funds as stipulated in Clause 1 of this Article include:

3.1. Unsecured deposits and term deposits of individuals;

3.2. Term deposits of organizations (excluding State Treasury), including term deposits of other credit institutions and branches of foreign banks;

3.3. Domestic borrowing from organizations (excluding the State Treasury and domestic credit institution borrowing) and borrowing from foreign credit institutions;

3.4. Capital raised from organizations and individuals through the issuance of negotiable instruments.

Chapter III

REPORTING, INSPECTION, AND VIOLATION HANDLING

Article 19. Reporting System

Credit institutions shall report on the implementation of the safety ratio regulations as prescribed by the State Bank of Vietnam regarding the reporting and statistical system applicable to credit institutions.

Article 20. Inspection and Violation Handling

Credit institutions and related individuals who violate the provisions of this Circular will be subject to handling according to one of the following forms depending on the nature and behavior of the violation:

1. Administrative penalty in accordance with the law;

2. Limitation on lending, limitation on expanding the network, and scope of activities;

3. Suspension for a period of time or indefinitely of the performance of one or more relevant business operations related to the violation;

4. Recommendation for criminal responsibility in accordance with the law outside the forms of punishment prescribed in Clauses 1, 2, and 3 of this Article.

Article 21. Organization of Implementation

1. The Banking Inspection and Supervision Authority is responsible for:

1.1. Supervise, inspect, and audit the results of implementing the safety ratios prescribed in this Circular;

1.2. Administer administrative penalties in accordance with Clause 1 of Article 20 of this Circular and submit to the Governor of the State Bank of Vietnam the forms of handling prescribed in Clauses 2, 3, and 4 of Article 20 of this Circular;

1.3. Coordinate with the Credit Department, Forecasting and Monetary Statistics Department in implementing the provisions of Clauses 2 and 3 of this Article.

2. The Credit Department is responsible for:

2.1. Coordinating with the Banking Inspection and Supervision Agency in handling the liquidity ratios of credit institutions;

2.2. Handling credit institutions facing difficulties in liquidity as prescribed in Clauses 2 and 5 of Article 14 of this Circular.

3. The Forecasting and Monetary Statistics Department shall base on the provisions of this Circular to develop and submit to the Governor of the State Bank of Vietnam for promulgation regulations on reporting and statistics on the implementation of safety ratios in banking operations of credit institutions.

4. The Finance and Accounting Department shall base on the provisions of this Circular to develop and submit to the Governor of the State Bank of Vietnam for promulgation guidelines on determining the capital adequacy ratio for credit institutions and accounting systems related to the provisions of the law.

Chapter IV

IMPLEMENTING PROVISIONS

Article 22. Effectiveness

1. This Circular takes effect from October 1, 2010, and replaces Decision No. 457/2005/QD-NHNN dated April 19, 2005, of the Governor of the State Bank of Vietnam promulgating Regulations on Safety Ratios in the Operation of Credit Institutions, Decision No. 03/2007/QD-NHNN dated January 19, 2007, of the Governor of the State Bank of Vietnam amending and supplementing some articles of the Regulations on Safety Ratios in the Operation of Credit Institutions issued together with Decision No. 457/2005/QD-NHNN dated April 19, 2005, of the Governor of the State Bank of Vietnam, Decision No. 34/2008/QD-NHNN dated December 5, 2008, amending and supplementing some articles of the Regulations on Safety Ratios in the Operation of Credit Institutions issued together with Decision No. 457/2005/QD-NHNN dated April 19, 2005, of the Governor of the State Bank of Vietnam, Clause 1 and Clause 2 of Article 4 of Decision No. 03/2008/QD-NHNN dated February 1, 2008, of the Governor of the State Bank of Vietnam on lending and discounting negotiable instruments for investment and stock trading.

2. Any amendment, supplementation, and replacement of this Circular shall be decided by the Governor of the State Bank of Vietnam.

3. The Director of the Office, the Director of the Banking Inspection and Supervision Agency, the Heads of units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam branches in provinces and centrally administered cities, the Chairmen of the Board of Directors, and General Managers (Directors) of credit institutions are responsible for implementing this Circular./.

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