Circular No. 14/2014/TT-NHNN amending and supplementing certain provisions on loan classification, provision for credit risk reserve establishment and utilization in banking operations of credit institutions issued pursuant to Decision No. 493/2005/QĐ-NHNN dated April 22, 2005 of the Governor of the State Bank of Vietnam.

CIRCULAR

Amending and supplementing certain provisions on classification of debts, provision for and utilization of reserves to address credit risks in banking operations of credit institutions

issued pursuant to Decision No. 493/2005/QĐ-NHNN dated April 22, 2005

 of the Governor of the State Bank of Vietnam

of the Governor of the State Bank of Vietnam

___________________

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Organizations No. 47/2010/QH12 dated June 16, 2010;

Pursuant to 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 Inspectorate and Supervision Department,

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain provisions of the Regulations on Classification of Debts, Provision for and Utilization of Reserves to Address Credit Risks in Banking Operations of Credit Institutions issued pursuant to Decision No. 493/2005/QĐ-NHNN dated April 22, 2005 of the Governor of the State Bank of Vietnam (hereinafter referred to as Decision 493).

Article 1. Supplement Clause 3a into Article 6 of Decision 493 (as amended and supplemented by Decision No. 18/2007/QĐ-NHNN dated April 25, 2007 of the Governor of the State Bank of Vietnam) as follows:

"3a. Restructuring repayment terms and maintaining the same debt classification:
a) Credit cooperatives and people's credit funds may consider restructuring repayment terms and maintaining the same debt classification as previously classified before restructuring repayment terms when meeting all of the following conditions:

(i) The debt was not granted in violation of legal regulations;

 (ii) The restructuring of repayment terms is consistent with the purpose of the loan project under the credit agreement;

(iii) The borrower uses the borrowed capital for the agreed purpose in the credit agreement;

(iv) The restructuring of repayment terms and maintaining the same debt classification can only be implemented when the borrower does not have the ability to repay the principal and/or interest within the agreed repayment period or does not have the ability to repay the full principal and/or interest within the agreed repayment period in the credit agreement, has a new feasible repayment plan that is suitable to the production, business, and service conditions, and complies with the State Bank's regulations on limits and ratios ensuring safety in the operation of credit cooperatives and people's credit funds, including the maximum ratio of short-term capital used for medium- and long-term loans in cases where short-term loans are restructured into medium- and long-term loans.

(v) When restructuring repayment terms and maintaining the same debt classification, credit cooperatives and people's credit funds must comply with the State Bank's regulations on limits and ratios ensuring safety in the operation of credit cooperatives and people's credit funds, including the maximum ratio of short-term capital used for medium- and long-term loans in cases where short-term loans are restructured into medium- and long-term loans.
b) Credit cooperatives and people's credit funds implementing restructuring of repayment terms and maintaining the same debt classification as provided in point a of this clause must ensure compliance with the following requirements:

(i) Have established internal regulations on control and supervision over the restructuring of repayment terms and maintaining the same debt classification to implement uniformly throughout the system, have an internal control mechanism for the restructuring of repayment terms and maintaining the same debt classification, ensuring strict monitoring, safety, prevention, and prohibition of misrepresentation of credit quality through the restructuring of repayment terms and maintaining the same debt classification;

(ii) Must control the content and reasons for restructuring repayment terms and maintaining the same debt classification for each debt. The State Bank requires credit cooperatives and people's credit funds to report specifically on the content and reasons for restructuring repayment terms and maintaining the same debt classification for each debt when necessary;

(iii) Actively decide and take responsibility for the restructuring of repayment terms and maintaining the same debt classification in accordance with the provisions of this Circular;

(iv) For a single debt, the implementation of restructuring repayment terms and maintaining the same debt classification as provided in point a of this clause can only be done once;

(v) Must regularly review and assess the borrower's repayment capacity after the debt has been restructured. If the borrower still cannot repay the debt according to the restructured repayment term, credit cooperatives and people's credit funds shall classify the debt into the corresponding debt category in accordance with the provisions of Articles 6 and 7 of these Regulations;

(vi) Within the first five days of each month or upon request of the State Bank, credit cooperatives and people's credit funds must submit reports to the State Bank (Supervisory Authority) on the implementation of restructuring repayment terms and maintaining the same debt classification according to Model Form No. 3 attached to this Circular."

Article 2. Effective Date

This Circular takes effect from May 22, 2014 and ceases to be effective from April 1, 2015.

This Circular takes effect from December 25, 2025/.

The Head of the Office, the Head of the Supervisory Authority, the Heads of units under the State Bank, the Governors of the State Bank branches in provinces and centrally-administered cities, the Chairmen of the Boards of Directors, General Managers (Directors) of credit cooperatives and people's credit funds are responsible for organizing the implementation of this Circular.