Circular No. 20/2014/TT-NHNN on income and advance payments of asset management companies of Vietnamese credit institutions for non-performing loans purchased with special bonds

CIRCULAR

Regulations on income and advance payments of the asset management company of Vietnamese credit institutions for non-performing loans purchased with special bonds

of Vietnamese credit institutions for non-performing debts

purchased with special bonds

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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;

On the basis of Decree No. 18/2016/NĐ-CP dated March 18, 2016 of the Government amending and supplementing some articles of Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government stipulating the establishment, organization, and operation of the Asset Management Company of Vietnam's Credit Institutions;

Pursuant to the guidance of the Prime Minister in Circular No. 1760/TTg-KTTH dated October 31, 2013, and Circular No. 3831/VPCP-KTTH dated May 27, 2014;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam issues this Circular to regulate the income and advance payments of the Asset Management Company of Vietnamese Credit Institutions (hereinafter referred to as the Asset Management Company) for non-performing loans purchased with special bonds.

Article 1. Scope of Regulation and Applicability

Article 1. This Circular regulates the income and advance payments of the Asset Management Company for non-performing loans purchased with special bonds, including:

a) Income in cash corresponding to a certain percentage of the amount recovered from non-performing loans purchased with special bonds (hereinafter referred to as income based on the amount recovered from debt).

b) Annual advance payment in cash corresponding to a certain percentage of the average annual principal balance of non-performing loans purchased with special bonds (hereinafter referred to as advance payment based on the principal balance).

2. The subjects to which this Circular applies include:

a) The Asset Management Company;

b) Credit institutions selling non-performing loans to the Asset Management Company and receiving special bonds (hereinafter referred to as credit institutions selling loans).

c) Other relevant organizations and individuals.

Article 2. Principles for determining and repaying advance payment based on the principal balance

1. The average annual principal balance of non-performing loans purchased with special bonds as stipulated in point b, Clause 1, Article 1 of this Circular shall be determined by multiplying the principal balance currently recorded in the internal accounting ledger of the Asset Management Company.

2. Advance payment based on the principal balance is an advance payment made by credit institutions selling debts to the Asset Management Company to cover the costs related to handling non-performing loans.

3. The Asset Management Company shall repay the advance payments received from credit institutions selling debts using the income based on the amount recovered from debt and other lawful incomes.

Article 3. Amount of debt recovery

1. The Asset Management Company recovers non-performing loans purchased with special bonds through the following amounts and assets:

a) The amount obtained from selling debts, including cases where the debt is resold to the original credit institution before the maturity date of the special bond;

b) The amount obtained from exploiting, leasing, and selling collateral assets;

c) The amount paid by borrowers (including both principal and interest);

d) The amount paid by guarantors, obligors, or third parties on behalf of borrowers;

đ) The value of collateral assets that the Asset Management Company receives as its own assets instead of the borrower's, guarantor's, or obligor's debt repayment obligations, which have been agreed upon and re-evaluated according to the law;

e) The value of contributed capital or shares at the borrower converted from debt into capital or shares.

2. The amount of debt recovery serving as the basis for calculating income based on the amount recovered from debt as stipulated in point a, Clause 1, Article 1 of this Circular shall be determined by subtracting related costs for handling collateral assets, other costs under the borrower's, guarantor's, or obligor's obligations according to agreements and laws, and any excess amounts refunded to the borrower, guarantor, or obligor (if applicable) from the amounts and assets specified in Clause 1 of this Article.

Article 4. Proportion of revenues and advance payments of the Asset Management Corporation for non-performing debts purchased with special bonds

1. The Asset Management Corporation shall be entitled to an amount corresponding to a proportion of the debt recovery proceeds of the Asset Management Corporation as stipulated in Clause 2, Article 3 of this Circular.

2. Within fifteen working days at the beginning of each year, the credit institution selling debts shall transfer to the Asset Management Corporation advance payments of the preceding year corresponding to a proportion of the average actual principal balance of non-performing debts purchased with special bonds in the preceding year.

3. The Governor of the State Bank of Vietnam shall decide on the proportions prescribed in Clauses 1 and 2 of this Article for each period after consultation with the Minister of Finance based on the following principles:

a) Ensuring that the Asset Management Corporation has sufficient revenue to fully cover operating costs;

b) Promoting the resolution of non-performing debts;

c) Limiting risks and costs in resolving non-performing debts;

d) Minimizing costs for credit institutions selling debts.

Article 5. Repayment of advance payments based on the principal balance

1. The Asset Management Corporation shall use revenues from debt recovery proceeds to repay advance payments based on the principal balance in the following sequence:

a) Within five working days at the beginning of the next quarter, the Asset Management Corporation shall determine and notify the credit institution selling debts of the revenues from debt recovery proceeds that the Asset Management Corporation is entitled to in the previous quarter (if any);

b) Within five working days from the date of receiving the notification from the Asset Management Corporation as prescribed in this Article, the credit institution selling debts shall reconcile the figures and notify the Asset Management Corporation of any discrepancies regarding the debt recovery proceeds (if any);

c) Within fifteen working days at the beginning of the next quarter, the Asset Management Corporation shall use the revenues from debt recovery proceeds generated in the previous quarter for each non-performing debt to repay the advance payment based on the principal balance of that non-performing debt.

2. When special bonds mature for payment or the Asset Management Corporation unilaterally terminates the purchase and sale contract, the Asset Management Corporation shall use revenues from debt recovery proceeds and other lawful revenues to repay the advance payment based on the principal balance corresponding to those special bonds according to the financial mechanism for the Asset Management Corporation as prescribed by the Ministry of Finance.

3. In the event of a fiscal year-end where the Asset Management Corporation incurs losses and there are special bonds maturing during that fiscal year, if the total revenues from debt recovery proceeds that the Asset Management Corporation is entitled to in that year are less than the advance payments received from credit institutions that need to be repaid in that year, the Asset Management Corporation shall report to the State Bank of Vietnam and the Ministry of Finance for handling according to the financial mechanism for the Asset Management Corporation as prescribed by the Ministry of Finance.

Article 6. Accounting for revenues and advance payments of the Asset Management Corporation for non-performing debts purchased with special bonds

The Asset Management Corporation and the credit institution selling debts shall implement accounting for the payment of revenues and advance payments of the Asset Management Corporation for non-performing debts purchased with special bonds according to the guidance of the State Bank of Vietnam.

Article 7. Responsibilities of units under the State Bank of Vietnam

1. The Banking Inspection and Supervision Authority:

a) Supervising, inspecting, and handling violations by credit institutions selling debts and the Asset Management Corporation in implementing the provisions of this Circular.

b) Taking the lead and coordinating with relevant units to advise and assist the Governor of the State Bank of Vietnam in guiding and organizing the implementation of this Circular.

2. Department of Finance and Accounting:

a) Taking the lead and coordinating with the Banking Inspection and Supervision Agency and relevant units to submit to the Governor of the State Bank of Vietnam for comments on the annual financial plan of the Asset Management Corporation.

b) Taking the lead and coordinating with the Banking Inspection and Supervision Agency and relevant units to submit to the Governor of the State Bank of Vietnam for consultation with the Minister of Finance to decide on the proportions prescribed in Clauses 1 and 2 of Article 4 of this Circular for each period.

3. The State Bank of Vietnam branch in provinces and centrally-administered cities shall supervise, inspect, and handle violations by credit institutions selling debts within their jurisdiction in implementing the provisions of this Circular.

Article 8. Responsibilities of the Asset Management Corporation

1. Supervise and inspect credit institutions selling debts in the process of determining and paying revenues and advances for non-performing debts purchased with special bonds in accordance with this Circular.

2. Fulfill responsibilities as prescribed in this Circular and other responsibilities as stipulated by law.

Article 9. Responsibilities of credit institutions selling debts

1. Coordinate with the Asset Management Corporation to determine, calculate, and timely and fully pay revenues and advances for non-performing debts purchased with special bonds as prescribed in this Circular.

2. Fulfill responsibilities as prescribed in this Circular and other responsibilities as stipulated by law.

Article 10. Effective Date

1. This Circular takes effect from September 26, 2014.

2. For non-performing debts purchased with special bonds in 2013 and 2014, the Asset Management Corporation and credit institutions selling debts shall implement the determination of revenues, advances, and repayment of advances according to the provisions of this Circular; regarding the payment time for revenues, advances, and repayment of advances, the Asset Management Corporation and credit institutions selling debts shall follow the decision of the Governor of the State Bank of Vietnam.

Article 11. Implementation Organization

The Director of the Office, the Chief Inspector, the Head of Banking Inspection and Supervision, the Heads of units under the State Bank of Vietnam, the Governors of State Bank of Vietnam branches in provinces and cities, the Chairmen of the Boards of Directors, the Chairmen of the Boards of Members, and General Directors (Directors) of Vietnamese credit institutions, the Chairmen of the Boards of Members, and General Directors of the Asset Management Corporation are responsible for organizing the implementation of this Circular./.