Circular No. 17/2022/TT-NHNN guiding the implementation of environmental risk management in credit activities of credit institutions and foreign bank branches.

CIRCULAR

Guidelines for implementing environmental risk management in credit activities of credit institutions and foreign bank branches

use of credit organizations, foreign bank branches

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 Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010; the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Environmental Protection Law dated November 17, 2020;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 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 guide the implementation of environmental risk management in credit activities of credit institutions and foreign bank branches.

 Article 1. Scope of Regulation

This Circular guides the implementation of environmental risk management in credit activities of credit institutions and foreign bank branches in Vietnam for investment projects required to implement environmental risk management in credit activities as stipulated in Clause 1, Article 3 of this Circular.

Article 2. Applicability

1. Credit institutions and foreign bank branches established and operating in Vietnam (hereinafter referred to as credit institutions) shall be established and operate in accordance with the Law on Credit Institutions, excluding microfinance organizations, people's credit funds, and the Vietnam Microfinance Bank.

2. Organizations and individuals who are customers of credit institutions.

Article 3. Explanation of Terms

1. Investment projects required to implement environmental risk management in credit activities are investment projects specified in Appendices III, IV, and V issued together with Decree No. 08/2022/ND-CP dated January 10, 2022 of the Government detailing certain provisions of the Law on Environmental Protection (hereinafter referred to as investment projects).

2. Environmental risks of investment projects (hereinafter referred to as environmental risks) are the possibilities of adverse impacts on the environment during the implementation of investment projects leading to additional costs, reduced income, or capital and asset losses for customers who are project investors.

3. Environmental risks in credit activities are credit risks of credit institutions arising when customers receiving credit face environmental risks as provided for in Clause 2 of this Article.

4. Environmental risk assessment in credit activities is the determination of the level of environmental risks in credit activities of investment projects.

5. Environmental risk management in credit activities involves identifying, assessing environmental risks in credit activities; monitoring, controlling, and implementing measures to mitigate environmental risks in credit activities.

Article 4. Principles of environmental risk management in credit activities

1. Credit institutions implement environmental risk management in credit activities in compliance with legal regulations on credit provision and credit risk management in banking operations.

2. Credit institutions conduct environmental risk assessments in credit activities for investment projects to determine credit risks, establish conditions for credit provision, and manage credit risks for customer credits.

3. Credit institutions organize the implementation of environmental risk assessments of investment projects or utilize environmental risk assessment results of investment projects from service providers with environmental risk assessment functions or from other credit institutions according to service provision agreements.

4. When assessing investment projects with environmental risks in credit activities, credit institutions agree with customers to include additional measures that customers commit to undertake to limit environmental risks in credit activities in the credit agreement.

5. Customers are responsible for providing information for environmental risk management in credit activities as requested by credit institutions and bear responsibility for the accuracy of the information provided.

Article 5. Environmental risk management information in credit activities

Information serving environmental risk management in credit activities includes:

1. Information on the environment of the customer's investment project.

2. Decisions approving the results of the preliminary environmental impact assessment report, environmental impact assessment report, environmental permit, environmental registration (if applicable), as prescribed by law.

3. Inspection and audit results regarding environmental protection for the customer's investment project by competent environmental protection authorities (if applicable).

4. Actual survey information, information from functional agencies, social organizations, and local communities directly affected by the customer's investment project related to environmental protection regulations (if applicable).

5. Environmental protection work reports submitted by customers to state authorities with jurisdiction as prescribed by environmental protection laws.

6. Reports from customers to credit institutions on the implementation of commitments to mitigate environmental risks in credit activities according to the agreement in the credit agreement.

7. Reports from agencies and organizations required to submit environmental protection work reports as prescribed by environmental protection laws (if applicable).

8. Other information related to environmental protection activities.

Article 6. Internal Regulations for Managing Environmental Risks in Credit Activities

1. Credit institutions shall establish internal regulations independently or integrate them into internal regulations on credit provision and internal control regulations of credit institutions to manage environmental risks in credit activities in accordance with legal provisions on credit activities and credit risk management.

2. The internal regulations for managing environmental risks in credit activities of credit institutions shall include at least the following contents:

a) Identifying and classifying credit requests that require environmental risk assessment in credit activities.

b) Information to be collected to serve environmental risk management in credit activities.

c) Environmental risk assessment in credit activities in accordance with this Circular.

d) Environmental risk management in credit activities carried out during the review, evaluation, approval, and management of credit.

đ) Internal reporting on environmental risk management in credit activities.

Article 7. Effective Date

1. This Circular takes effect from June 1, 2023.

2. For credit agreements signed before this Circular takes effect, credit institutions may agree with customers to manage environmental risks in credit activities in accordance with the provisions of this Circular.

Article 8. Implementation organization

The Director of the State Bank of Vietnam’s Office, the Head of the Credit Department for Economic Sectors, Heads of units under the State Bank of Vietnam, credit institutions, foreign bank branches, organizations, and individuals related to this matter are responsible for implementing this Circular./.