Circular No. 15/2009/TT-NHNN on the maximum ratio of short-term capital used for medium- and long-term loans for credit institutions

CIRCULAR

Regulations on the maximum ratio of short-term capital used for medium- and long-term loans for Credit Institutions

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

Pursuant to the Law on Credit Institutions 1997; the Law Amending and Supplementing Certain Provisions 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 stipulates the maximum ratio of short-term capital used for medium- and long-term loans for credit institutions as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

This Circular stipulates the maximum ratio of short-term capital used for medium- and long-term loans for credit institutions operating in Vietnam, except for grassroots credit funds.

Article 2. Interpretation of Terms

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

1. Short-term capital of credit institutions is capital with remaining maturity up to 12 months.

2. Medium- and long-term capital is capital with remaining maturity over 12 months.

3. Medium- and long-term loan is a loan or financial lease with a term exceeding 12 months.

Chapter II

SPECIFIC PROVISIONS

Article 3. Short-term capital used for medium- and long-term loans

Short-term capital used for medium- and long-term loans of credit institutions includes:

1. Demand deposits and time deposits with remaining deposit period up to 12 months of organizations (including other credit institutions) and individuals.

2. Demand savings deposits and time savings deposits with remaining deposit period up to 12 months of individuals.

3. Capital raised through issuance of securities with remaining payment period up to 12 months.

4. Loans from other credit institutions with remaining loan period up to 12 months, excluding interbank market loans.

Article 4. Medium- and long-term capital used for medium- and long-term loans

1. Medium- and long-term capital used for medium- and long-term loans includes:

a) Time deposits with remaining deposit period over 12 months of organizations (including other credit institutions) and individuals.

b) Time savings deposits with remaining deposit period over 12 months of individuals.

c) Capital raised through issuance of securities with remaining payment period over 12 months.

d) Loans from other credit institutions with remaining repayment period over 12 months.

đ) Charter capital and Reserve fund remaining after deducting investments in fixed assets; contributions and purchases of shares in accordance with Clause 20, Article 2 of the Regulations on Safety Ratios in the Operation of Credit Institutions issued together with Decision No. 457/2005/QĐ-NHNN dated April 19, 2005 of the Governor of the State Bank of Vietnam amended and supplemented by Decision No. 34/2008/QĐ-NHNN dated December 5, 2008 of the Governor of the State Bank of Vietnam.

e) Capital surplus.

2. Items to be deducted from medium- and long-term capital used for medium- and long-term loans:

a) Investments in investment securities held until maturity and other securities with medium- and long-term terms issued by other credit institutions.

b) Investments in treasury shares.

c) Deposits at other credit institutions with deposit period over 12 months.

Article 5. The maximum ratio of short-term capital used for medium- and long-term loans

1. Credit organizations shall use capital for medium- and long-term loans in the following order:

a) Utilize medium- and long-term capital.

b) Utilize short-term capital.

2. The maximum ratio of short-term capital used for medium- and long-term loans by credit organizations is as follows:

- Commercial banks: 30%

- Finance companies and financial leasing companies: 30%

- Central People's Credit Funds: 20%

3. The ratio of short-term capital used for medium- and long-term loans is calculated using the following formula:

[(A-B) /C] x 100%

Where:

- A is the total outstanding medium- and long-term loan balance

- B is the total medium- and long-term capital used for medium- and long-term loans after deducting amounts to be deducted according to Clause 4 of this Circular.

- C is the total short-term capital used for medium- and long-term loans as stipulated in Article 3 of this Circular.

Chapter III

IMPLEMENTING PROVISIONS

Article 6. Effectiveness

This Circular takes effect 45 days from the date of signature and replaces the provisions on the maximum ratio of short-term capital used for medium- and long-term loans by credit organizations in the Regulation on Safety Ratios in the Operation of Credit Organizations issued pursuant to Decision No. 457/2005/QĐ-NHNN dated April 19, 2005 of the Governor of the State Bank of Vietnam.

Article 7. Implementation Organization

1. From the date this Circular takes effect, credit organizations with a higher ratio of short-term capital used for medium- and long-term loans than that prescribed in this Circular shall not continue to use short-term capital for medium- and long-term loans and must develop measures and plans to adjust so as to comply with the prescribed ratio by January 1, 2010.

2. The Department of Forecasting and Monetary Statistics shall base its regulations in this Circular to establish and submit to the Governor for issuance a reporting system for credit organizations.

3. The Heads of the Office, the Inspector General of the Banking Supervision and Inspection Authority, the Heads of units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam branches in provinces and centrally governed cities, the Chairmen of the Boards of Management, and the General Directors (Directors) of credit organizations are responsible for implementing this Circular.