Circular No. 23/2020/TT-NHNN stipulates the limits and ratios to ensure safety in the operations of non-bank credit institutions.

CIRCULAR

Regulations on limits and ratios to ensure safety in the operations of

for non-bank credit institutions

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

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010 non-bank credit institutions under the Law on Credit Institutions 2010 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions dated November 20, 2017;

Pursuant to Decree No. 39/2014/NĐ-CP dated May 7, 2014 of the Government on the activities of finance companies and financial leasing companies;

Pursuant to Decree No. 16/2019/NĐ-CP dated February 1, 2019 of the Government amending and supplementing certain provisions of decrees regulating business conditions within the State management of the State Bank of Vietnam;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

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

The Governor of the State Bank of Vietnam promulgates this Circular prescribing limits and ratios to ensure safety in the operations of non-bank credit institutions.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular stipulates limits and ratios to ensure safety that non-bank credit institutions must maintain continuously, including:

b) Liquidity ratio;

b) Limitations and credit granting ratios;

c) Liquidity coverage ratio;

d) Maximum ratio of short-term capital used for medium- and long-term loans;

e) Limits on capital contribution and share purchase.

2. Based on the results of supervision, inspection, and audit by the State Bank of Vietnam (hereinafter referred to as the State Bank) of non-bank credit institutions, if necessary to ensure safety in their operations, depending on the nature and degree of risk, the State Bank may require non-bank credit institutions to implement stricter limits and ratios to ensure safety than those prescribed in this Circular.

5. Non-bank credit institutions participating in financing programs and projects decided by the Government and Prime Minister shall consider sources of funds and debts of each program and project when determining limits and ratios to ensure safety according to decisions of the Government and Prime Minister.

Article 2. Applicability

2. Related organizations and individuals concerning limits and ratios to ensure safety in the operations of non-bank credit institutions.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Accounts Receivable including deposits at credit institutions, foreign bank branches, deposits at foreign credit institutions; investment in securities; loans, financial leasing, factoring, discounting, rediscounting transferable instruments, securities, credit issuance through credit cards, other forms of credit as prescribed by the State Bank; entrusted loans and entrusted financial leasing; off-balance sheet commitments.

2. Customer in credit relationships with non-bank credit institutions (hereinafter referred to as customers) which are organizations (including credit institutions and foreign bank branches), individuals, and other subjects as prescribed by civil law.

A customer is an organization or an individual or another subject as prescribed by civil law.

3. Real estate business is the act of investing capital to establish, construct, repair, purchase, acquire through transfer, lease, lease-purchase real estate for sale, transfer, lease, sublease, lease-purchase for profit-making purposes.

4. Subordinated debt is a debt under an agreement where the creditor is only paid after all other obligations, secured or unsecured debts, when the borrowing entity is declared bankrupt or dissolved.

5. Trading advantage is the positive difference between the purchase price of a financial asset and its book value that a non-bank credit institution must pay arising from a transaction with the nature of acquiring a business or another financial institution as prescribed by law. This financial asset is fully reflected in the balance sheet of the non-bank credit institution.

6. OECD is the Organization for Economic Co-operation and Development.

7. International financial organization b) Explanation and calculation of cost components and profit of Electricity Corporation i, including:

a) The World Bank Group comprising: The International Bank for Reconstruction and Development (IBRD), The International Finance Corporation (IFC), The International Development Association (IDA), The Multilateral Investment Guarantee Agency (MIGA);

b) The Asian Development Bank (ADB);

c) The African Development Bank (AfDB);

d) The European Bank for Reconstruction and Development (EBRD);

đ) The Inter-American Development Bank (IADB);

e) The European Investment Bank (EIB);

g) The European Investment Fund (EIF);

h) The Nordic Investment Bank (NIB);

i) The Caribbean Development Bank (CDB);

k) The Islamic Development Bank (IDB);

l) The Council of Europe Development Bank (CEDB);

m) Other international financial organizations with capital contributed by governments of countries.

a) A company directly or indirectly owning more than 20% of the charter capital or voting shares or having control over a non-bank credit institution;

b) A financial company with subsidiaries or associated companies.

9. Securities are evidences confirming the obligation to repay between the issuer of securities and the holder of securities within a certain period, interest payment conditions, and other conditions. Securities include bonds, bills, treasury bills, deposit certificates, promissory notes, and other types of securities.

10. Credit issuance is the arrangement whereby a non-bank financial institution agrees to allow organizations or individuals to use a sum of money or commits to allowing the use of a sum of money according to the principle of repayment through lending operations, discounting, financial leasing, factoring, corporate bond investment, credit card issuance, bank guarantee, and other credit operations as prescribed by the State Bank, including credit provision from the capital of another legal entity for which the non-bank financial institution bears risk as prescribed by law.

11. Total outstanding credit balance includes the total outstanding loan balance, discount, rediscount, financial leasing, factoring, total amount of corporate bond investment (excluding special bonds, bonds issued directly to non-bank financial institutions for purchasing bad debts at market value of the Asset Management Corporation of Vietnam), other credit operations as prescribed by the State Bank (including the outstanding credit balance provided from the capital of another legal entity for which the non-bank financial institution bears risk as prescribed by law); un-disbursed loan limit, credit card limit, guarantee balance, and balance of entrusted loans to other financial institutions for lending, financial leasing.

a) Related parties of an organization (including financial institutions) include the following cases:

(i) The parent company or financial institution acting as the parent company (hereinafter referred to as the parent financial institution) of that organization;

(ii) Subsidiary companies of that organization;

(iii) Companies with the same parent company or the same parent financial institution of that organization;

(iv) Managers or members of the Supervisory Board of the parent company or the parent financial institution of that organization;

(v) Individuals or organizations authorized to appoint managers or members of the Supervisory Board of the parent company or the parent financial institution of that organization;

(vi) Managers or members of the Supervisory Board of that organization;

(vii) Companies or organizations authorized to appoint managers or members of the Supervisory Board of that organization;

(viii) Spouse, father, mother, child (including adopted father, adopted mother, adopted child, father-in-law (father of wife), mother-in-law (mother of wife), daughter-in-law (son-in-law), step-father, step-mother, step-child of wife or husband), brother, sister, younger brother or sister (including half-brother, half-sister, half-brother, half-sister), brother-in-law, sister-in-law, sister-in-law, brother-in-law of the manager, member of the Supervisory Board, shareholder holding 5% or more of the charter capital or voting shares of that organization;

(ix) Organizations or individuals holding 5% or more of the charter capital or voting shares of that organization;

(x) Individuals authorized to represent the contributed capital or shares on behalf of that organization;

(xi) Companies or financial institutions in which that organization holds 5% or more of the charter capital or voting shares;

(xii) Companies or financial institutions in which that organization has the authority to appoint managers or members of the Supervisory Board of the company or financial institution;

(xiii) Companies or financial institutions in which that organization has the authority to appoint managers or members of the Supervisory Board of the parent company of the company or financial institution.

b) Related parties of an individual include the following cases:

(i) Spouse, father, mother, child (including adopted father, adopted mother, adopted child, father-in-law (father of wife), mother-in-law (mother of wife), daughter-in-law (son-in-law), step-father, step-mother, step-child of wife or husband), brother, sister, younger brother or sister (including half-brother, half-sister, half-brother, half-sister), brother-in-law, sister-in-law, sister-in-law, brother-in-law of that individual;

(ii) Companies or financial institutions in which that individual holds 5% or more of the charter capital or voting shares;

(iii) Subsidiary companies where that individual is a manager or member of the Supervisory Board of the parent company or parent financial institution;

(iv) Subsidiary companies where that individual has the authority to appoint managers or members of the Supervisory Board of the parent company or parent financial institution;

(v) Companies or financial institutions where that individual is a manager or member of the Supervisory Board;

(vi) Companies or financial institutions where that individual is spouse, father, mother, child (including adopted father, adopted mother, adopted child, father-in-law (father of wife), mother-in-law (mother of wife), daughter-in-law (son-in-law), step-father, step-mother, step-child of wife or husband), brother, sister, younger brother or sister (including half-brother, half-sister, half-brother, half-sister), brother-in-law, sister-in-law, sister-in-law, brother-in-law of the manager, member of the Supervisory Board, shareholder holding 5% or more of the charter capital or voting shares of the company or financial institution;

(vii) Organizations or individuals authorized to represent the contributed capital or shares on behalf of that individual;

(viii) Individuals jointly authorized by an organization to represent the contributed capital or shares at another organization along with that individual;

(ix) Individuals authorized by that individual to represent the contributed capital or shares.

c) Other legal entities or individuals with potential risks to the activities of non-bank financial institutions are determined according to internal regulations of the non-bank financial institution or upon written request of the State Bank through inspection and supervision activities for each specific case.

15. Non-revocable is the act of not being able to revoke or change in any form the established commitments, except when required to revoke or change according to the provisions of the law.

19. Financial Organization is an organization defined under the law on preventing and combating money laundering.

20. State Financial Organization is a financial organization specified in Clause 19 of this Article that is held by the State with more than 50% of the charter capital or the total number of voting shares.

21. Foreign Financial Organization is a financial organization established abroad in accordance with foreign laws.

22. Average Monthly Total Debt is calculated by dividing the total balance of the Total Debt account at the end of each day in the month by the total number of days in the month.

23. Forward Purchase and Sale Transaction is a transaction where a non-bank financial institution purchases and takes ownership of securities not yet due for payment from another financial institution or foreign bank branch (seller), while the seller commits to repurchase those securities after a certain period of time.

24. Exchange Rate for calculating limits and safety ratios stipulated in this Circular (hereinafter referred to as exchange rate) shall be defined as follows:

a) Exchange rate for converting various foreign currencies into Vietnamese Dong:

(i) On working days that are not the last working day of the month, quarter, or year: apply the regulations of the State Bank of Vietnam regarding the accounting exchange rate in the Accounting System of financial institutions;

(ii) On working days which are the last working day of the month, quarter, or year: apply the regulations of the State Bank of Vietnam regarding the exchange rate for converting the Balance Sheet in foreign currency to Vietnamese Dong for financial institutions using Vietnamese Dong as their accounting currency, or the exchange rate for converting financial statements in foreign currency to Vietnamese Dong for financial institutions using foreign currency as their accounting currency in the Accounting System of financial institutions and the Reporting System for financial institutions;

b) The exchange rate for converting various foreign currencies into US dollars shall be determined by non-bank financial institutions.

Article 4. Internal Regulations

a) Criteria for identifying a customer, a customer and associated parties as stipulated in Clause 2 and Clause 13 of Article 3 of this Circular, credit policies for a customer, a customer and associated parties, provisions on principles of classification, delegation, and authorization for decision-making and approval of credit provision, restructuring of debt repayment terms for a customer, a customer and associated parties;

b) Provisions on risk diversification in credit activities; methods for monitoring, managing, and approving decisions on credit provision for a customer, a customer and associated parties at a level of 1% or more of the non-bank financial institution's own capital. These provisions must ensure transparency and fairness between the credit assessment and provision stages and the restructuring of debt repayment terms, preventing conflicts of interest between the assessor, the credit decision-maker, and the customer who is an associated party;

c) Principles and criteria for evaluating and determining the credit risk level for customer groups and sectors prioritized or restricted for credit provision by the non-bank financial institution, serving as the basis for developing annual business plans and strategies;

d) Credit provision and debt repayment term restructuring (including extension and adjustment of repayment periods) must be carried out transparently, without conflicts of interest, and without concealing credit quality, where the person deciding on debt repayment term restructuring is not the person deciding on the credit provision, except when the credit provision is approved by the Board of Directors or the Board of Members. In cases where credit provision and debt repayment term restructuring are conducted through a committee mechanism, at least two-thirds (2/3) of the members of the restructuring committee must not be members of the credit provision committee;

e) Provisions on risk management in credit activities for investing in stocks and corporate bonds; credit provision for real estate business; credit provision for public-private partnership investment projects;

f) Provisions on credit provision to the Director (Deputy Director) of branches, public service units, and equivalent positions in non-bank financial institutions ensuring the principles stipulated in Points a, b, c, d, and Point e of this Clause. The determination of equivalent positions shall be carried out in accordance with the internal regulations of the non-bank financial institution.

2. Non-bank financial institutions must issue internal regulations on asset quality assessment and compliance with minimum capital adequacy ratios, based on risk management principles for assets, taking into account needs, characteristics, risk levels in operations, considering business cycles, adaptability to risks, and the business strategy of the non-bank financial institution. The content of these regulations must comply with the provisions of this Circular and related documents, including at least the following contents:

a) Provisions on organizational structure, delegation mechanisms, and functions and responsibilities of each department managing the minimum capital adequacy ratio;

b) Principles, policies, procedures for identifying, measuring, monitoring, controlling, reporting, and exchanging information on risks to comply with the minimum capital adequacy ratio;

c) Provisions on the management of own capital structure and assets that can be assessed include: the degree and trend of risks, the impact of risks on the required own capital to offset risks; the scale and quality of own capital, the ability to withstand macroeconomic risk factors, the ability to access additional own capital sources, including financial support from shareholders when necessary to ensure compliance with the minimum capital adequacy ratio; obligations to provide capital to subsidiaries and associated companies; short-term and long-term own capital targets, anticipated costs for additional own capital and solutions to achieve the own capital target. Provisions on the management of own capital structure and assets include:

(i) Procedures and methods for monitoring and evaluating the scale, composition, quality of own capital and asset portfolio;

(ii) A system for managing the minimum capital adequacy ratio;

(iii) Early warning provisions, clearly defining signs to identify risks early, risks leading to a decline in the minimum capital adequacy ratio, and supervision and reporting according to regulations;

(iv) Measures to ensure individual and consolidated minimum capital adequacy ratios, which must include provisions on:

- Management and development measures for own capital and assets to respond to cases of decline or violation of the minimum capital adequacy ratio requirements;

- Responsibilities, authorities, obligations, and coordination among relevant departments and individuals in developing response plans and measures to address cases of decline or violation of the minimum capital adequacy ratio.

3. Non-bank credit organizations must issue internal regulations on liquidity management in accordance with this Circular and related documents, which must at least include the following contents:

a) Regulations on the classification, delegation, functions, and responsibilities of relevant departments in managing assets Receivable, assets Payable, and maintaining the liquidity coverage ratio and liquidity;

b) Procedures, formalities, and limits for liquidity management, maturity mismatch limits between assets Receivable and assets Payable based on inflows and outflows of cash as stipulated in Appendix 3 of this Circular;

c) Principles, policies, procedures for identifying, measuring, monitoring, controlling, reporting, and exchanging information on payment and liquidity risks; early warning criteria for payment and liquidity risks and response measures;

d) Plans and measures for holding high-liquidity securities;

đ) Guidance, inspection, control, and internal audit for maintaining the liquidity coverage ratio and liquidity;

e) Models for assessing and testing payment and liquidity capacity, including possible payment and liquidity scenarios. Scenario analysis must ensure:

(i) Minimum scenario analysis includes two cases:

- Cash flow from business operations under normal conditions;

- Cash flow from business operations under conditions of payment and liquidity difficulties;

(ii) Scenario analysis must ensure the following contents are reflected:

- The ability to fulfill daily obligations and commitments;

- Response measures to have sufficient capacity to meet payment requirements;

4. Internal regulations prescribed in Clause 1, Clause 2, and Clause 3 of this Article must be reviewed and revised or supplemented at least once a year;

5. Within ten days from the date of issuance, amendment, supplementation, or replacement of internal regulations prescribed in Clause 1, Clause 2, and Clause 3 of this Article, non-bank credit organizations must directly submit or send through postal services the issued, amended, supplemented, or replaced internal regulations to the State Bank (Bank Inspection and Supervision Department).

Article 5. Information Technology System

Non-bank credit organizations must have an information technology system connected throughout the organization to implement the provisions of this Circular, ensuring the following minimum requirements:

1. Storing, accessing, and supplementing databases on customers, markets, ensuring risk management as prescribed by the State Bank of Vietnam and internal regulations of non-bank credit organizations.

2. Statistics, monitoring, managing cash flows, capital items, assets, liabilities; calculating, managing, supervising safety limits and ratios in operations.

3. Implementing statistical reporting systems as prescribed and required by the State Bank of Vietnam.

Chapter II
SPECIFIC PROVISIONS

Section 1
THE ACTUAL VALUE OF CAPITAL AND HANDLING WHEN THE ACTUAL VALUE OF CAPITAL IS LOWER THAN THE LEGAL CAPITAL REQUIREMENT

Article 6. The Actual Value of Capital

1. The actual value of capital of non-bank credit organizations is the remaining value of capital determined according to the principles stipulated in Clause 2 and the calculation method stipulated in Clause 3 of this Article.

2. Principles for determining the actual value of capital:

Non-bank credit organizations calculate the remaining value of capital when:

a) Fully establishing risk reserves as prescribed by law;

b) Fully calculating income and expenses as prescribed by law to determine business results.

3. Method for calculating the actual value of capital:

The actual value of capital is determined by adding (or subtracting) accumulated undistributed profits (accumulated losses not yet resolved) reflected in accounting books to the subscribed capital and share premium.

4. Non-bank credit organizations must regularly monitor and evaluate the actual value of capital and periodically report to the State Bank of Vietnam (Bank Inspection and Supervision Authority) the actual value of capital as follows:

a) For non-bank credit organizations with annual financial statements ending on December 31:

By the latest on July 15 and January 15 each year, non-bank credit organizations report the actual value of capital at the end of June 30 and December 31;

b) For non-bank credit organizations whose annual financial statements are approved by competent authorities to end on a date other than December 31:

By the latest on the first day of the first quarter accounting period and the third quarter accounting period, non-bank credit organizations report the actual value of capital at the end of the immediately preceding quarter accounting period;

c) In cases where the actual value of capital reported under points a and b of this Clause does not include independent auditor adjustments (if any), non-bank credit organizations shall supplement it in the subsequent financial statement period.

Article 7. Handling When the Actual Value of Capital Is Lower Than the Legal Capital Requirement

1. When the actual value of capital of non-bank credit organizations falls below the legal capital requirement, non-bank credit organizations must:

a) Develop and implement a handling plan to ensure that the actual value of capital is at least equal to the legal capital requirement;

b) Within a maximum of 30 days from the time the actual value of capital falls below the legal capital requirement, submit a written report on the handling plan and commitment to implement the plan directly or through postal services to the State Bank of Vietnam (Bank Inspection and Supervision Authority), including at least the following contents:

(i) The actual value of capital as prescribed in Article 6 of this Circular;

(ii) Reasons for the actual value of capital falling below the legal capital requirement;

(iii) Measures to ensure that the actual value of capital does not fall below the legal capital requirement and maintain safety ratios in operations;

c) Organize and implement handling measures as required by the State Bank of Vietnam (if any).

2. Measures applied by the State Bank of Vietnam to handle when the actual value of capital of non-bank credit organizations falls below the legal capital requirement:

a) Evaluate, inspect, audit, or require non-bank credit organizations to conduct independent audits to determine the actual value of capital in the handling plan reported as prescribed in Clause 1 of this Article;

b) Require non-bank credit organizations to modify, supplement, and improve handling measures when the actual value of capital falls below the legal capital requirement as prescribed in the handling plan in Clause 1 of this Article if necessary;

c) Monitor and inspect the implementation of handling measures in the handling plan, including handling measures as required by the State Bank of Vietnam;

d) Depending on the degree to which the actual value of capital falls below the legal capital requirement, the State Bank of Vietnam will decide specific handling measures for each non-bank credit organization as follows:

(i) Measures prescribed in Clause 2 of Article 59 of the Law on the State Bank of Vietnam when the actual value of capital falls below 80% of the legal capital requirement;

(ii) Applying restructuring measures as prescribed by law, revoking the license of non-bank credit organizations if the actual value of capital is less than 50% of the legal capital requirement or the actual value of capital has been continuously lower than the legal capital requirement for six months despite having a handling plan as prescribed in Clause 1 of this Article.

Section 2
OWN CAPITAL AND MINIMUM SAFE CAPITAL RATIO

Article 8. Own Capital

Own capital includes the total Tier 1 Capital and Tier 2 Capital minus the deductions specified in Appendix 1 attached to this Circular.

Article 9. Minimum Capital Adequacy Ratio

1. The minimum capital adequacy ratio reflects the level of sufficient capital of non-bank credit institutions based on the value of own capital and the degree of risk in the operations of non-bank credit institutions. Non-bank credit institutions must maintain the minimum capital adequacy ratio as prescribed in Clause 2 of this Article on a continuous basis.

2. The minimum capital adequacy ratio of non-bank credit institutions:

a) The minimum capital adequacy ratio of non-bank credit institutions consists of the individual minimum capital adequacy ratio and the consolidated minimum capital adequacy ratio.

b) Individual minimum capital adequacy ratio: Each non-bank credit institution must maintain an individual minimum capital adequacy ratio of 9%.

The individual minimum capital adequacy ratio is determined by the following formula:

Where:

- Individual own capital is determined according to the provisions in Appendix 1 attached to this Circular.

- Total risk-weighted assets individually is the total value of on-balance sheet assets determined according to their risk weight and the corresponding on-balance sheet asset value of off-balance sheet commitments determined according to their risk weight as stipulated in Appendix 2 attached to this Circular.

The consolidated minimum capital adequacy ratio is determined by the following formula:

Where:

- Consolidated own capital is determined according to the provisions in Appendix 1 attached to this Circular.

- Total risk-weighted assets consolidated is determined according to the provisions in Appendix 2 attached to this Circular.

Section 3
LIMITS AND CREDIT RATIONING

1. Non-bank credit institutions comply with the provisions regarding cases where credit shall not be granted, credit rationing limits, and credit limits as stipulated in Articles 126, 127, and 128 of the Law on Credit Institutions (amended and supplemented).

2. Non-bank credit institutions base their individual own capital as prescribed in Article 9 of this Circular at the end of the most recent working day to determine the limits and credit rationing as prescribed in Clause 1 of this Article.

1. A financial company may only grant credit with a term up to 01 (one) year to customers for investment and trading in corporate bonds, and when granting credit, it must meet the following conditions:

a) The credit grant must ensure the limits and safety ratios as prescribed by law;

b) Have a bad debt ratio below 3%;

c) Fully comply with all regulations on risk management as prescribed by the State Bank concerning the internal control system of non-bank credit institutions and regulations on classifying assets, provisioning levels, provisioning methods for risks, and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches.

2. A financial company shall not grant credit to customers for investment and trading in corporate bonds in the following cases:

a) Collateral is corporate bonds issued by credit institutions, subsidiaries of credit institutions, or foreign bank branches;

b) Collateral is corporate bonds of enterprises that the borrowing customer purchases from such enterprises;

g) To invest in and trade in corporate bonds of enterprises that are subsidiaries of the financial company itself;

h) Customers are subsidiaries or associated companies of credit institutions.

3. The total amount of outstanding credit granted for investment and trading in corporate bonds (including corporate bonds of credit institutions and foreign bank branches) shall not exceed 5% of the charter capital of the financial company.

1. A finance company may only grant credit with a term not exceeding 01 (one) year to customers for investing in and trading shares, and when granting such credit, it must meet the following conditions:

a) The credit grant must ensure the limits and safety ratios as prescribed by law;

b) Have a bad debt ratio below 3%;

c) Fully comply with all regulations on risk management as prescribed by the State Bank concerning the internal control system of non-bank credit institutions and regulations on classifying assets, provisioning levels, provisioning methods for risks, and the use of provisions to handle risks in the operations of credit institutions and foreign bank branches.

2. A finance company shall not grant credit to customers for investing in and trading shares in the following cases:

a) The collateral is shares of a credit institution or a subsidiary of a credit institution;

b) The collateral is shares of an issuing enterprise where the borrowing customer purchases shares of that enterprise;

c) To invest in and trade shares of a credit institution;

g) The customer is a subsidiary or associated company of a credit institution.

3. The total outstanding balance of credit granted for investing in and trading shares by a finance company shall not exceed 5% of the charter capital of the finance company.

1. Non-bank credit institutions manage credit-granting activities in accordance with the provisions of the law and internal regulations on credit granting and management of borrowed funds to ensure the proper use of borrowed funds as stipulated in Clause 1, Article 4 of this Circular.

2. Non-bank credit institutions must establish, update immediately upon any change, and publicly disclose within their entire system the list of founding shareholders, major shareholders, capital contributors, members of the Board of Directors, members of the Board of Members, members of the Supervisory Board, managers, and other managerial positions as prescribed by law, the charter on organization and operation of non-bank credit institutions, and those related parties of these individuals. This list must be directly sent or delivered through postal services to the State Bank (the Banking Inspection and Supervision Authority), except for positions that have been reported according to changes prescribed by law.

3. Non-bank credit institutions must report to:

a) The Shareholders' Meeting, Board of Members on credit grants to the entities prescribed in Clause 1, Article 127 of the Law on Credit Institutions (as amended and supplemented) occurring up to the data collection date for the Shareholders' Meeting, Board of Members;

b) The owner, capital contributors, managers, and executives when credit grants to the entities prescribed in Clause 1, Article 127 of the Law on Credit Institutions (as amended and supplemented) occur;

c) The State Bank in accordance with the State Bank's regulations on reporting and statistical systems for credit grants to the entities prescribed in Clause 1, Article 127 of the Law on Credit Institutions (as amended and supplemented).

4. Credit grants to subsidiaries, associated companies, and entities listed in Clause 2 of this Article (except in cases where credit cannot be granted as prescribed in Article 126 of the Law on Credit Institutions (as amended and supplemented)) must be approved by the Board of Directors, Board of Members, except for credit grants within the authority of the Shareholders' Meeting. The Supervisory Board must oversee the approval of credit grants to these entities.

Section 4
LIQUIDITY RATIO

Article 14. Liquidity Coverage Ratio

1. Each day, non-bank financial institutions shall base on the provisions set out in Appendix 3 attached to this Circular to prepare a cash inflow and outflow table at the end of the working day for monitoring and managing the liquidity coverage ratios prescribed in Clauses 2 and 3 of this Article.

2. Liquidity reserve ratio:

a) Non-bank financial institutions must hold high-liquidity assets to reserve for meeting payment demands that are due and unexpected.

b) Non-bank financial institutions must maintain a minimum liquidity reserve ratio of 1%.

c) The liquidity reserve ratio is determined according to the following formula:

Where:

- High-liquidity assets as defined in Appendix 3 attached to this Circular;

- Total Liabilities is the Total Liabilities item on the accounting balance sheet, excluding:

+ The rediscounting of securities from the State Bank in the form of discounting bills of exchange, loans collateralized with securities (excluding the rediscounting of special bonds and directly issued bonds for purchasing bad debts from credit institutions at market value by the Asset Management Corporation of Credit Institutions); overnight loans in interbank electronic payments; sale of securities with maturity (excluding the sale of directly issued bonds for purchasing bad debts from credit institutions at market value by the Asset Management Corporation of Credit Institutions) through open market operations of the State Bank.

+ Loans extended by other credit institutions, foreign bank branches in the forms of term sales, discounting, re-discounting and loans collateralized: (i) types of securities used in transactions with the State Bank; (ii) types of bonds, bills issued or guaranteed for payment by governments and central banks of countries, rated from AA level or equivalent and above or corresponding rating scale of independent credit rating agencies (Standard & Poor’s, Fitch Rating).

d) High-liquidity assets and total liabilities are calculated in Vietnamese Dong, including Vietnamese Dong and other freely convertible currencies converted into Vietnamese Dong (according to the exchange rate specified in point a, Clause 24, Article 3 of this Circular).

3. Thirty-day Liquidity Coverage Ratio:

a) Non-bank financial institutions must calculate and maintain the thirty-day liquidity coverage ratio for Vietnamese Dong and the thirty-day liquidity coverage ratio for foreign currency (including US Dollar and other foreign currencies converted into US Dollar according to the exchange rate specified in point b, Clause 24, Article 3 of this Circular);

b) The thirty-day liquidity coverage ratio is determined according to the following formula:

Where:

(i) High-liquidity assets as defined in Appendix 3 attached to this Circular;

(ii) Net Cash Outflows in the Next 30 Days is the difference between cash outflows over the next 30 consecutive days starting from the next day and cash inflows over the next 30 consecutive days starting from the next day as defined in Appendix 3 attached to this Circular.

c) In case a non-bank financial institution determines that net cash outflows in the next 30 days for Vietnamese Dong is positive, the non-bank financial institution must maintain the thirty-day liquidity coverage ratio for Vietnamese Dong as stipulated in point b of this Clause at a minimum of 20%.

d) In case a non-bank financial institution determines that net cash outflows in the next 30 days for foreign currency is positive, the non-bank financial institution must maintain the thirty-day liquidity coverage ratio for foreign currency as stipulated in point b of this Clause at a minimum of 5%.

1. Non-bank credit organizations must establish a department for managing assets on the liability side and assets on the asset side (at the division level or equivalent) at their headquarters to monitor and manage daily liquidity, which shall be overseen by the General Director (Director) or Deputy General Director (Deputy Director) authorized to do so.

2. In cases where the calculated liquidity ratio of non-bank credit organizations over a thirty-day period following the next day does not meet the requirements set out in points c and d, Clause 3, Article 14 of this Circular, the State Bank shall examine and handle according to the regulations on administrative penalties in the field of currency and banking, while also implementing supervision of liquidity. Non-bank credit organizations must immediately apply self-management measures, including borrowing from other credit organizations, foreign bank branches, borrowing from foreign financial institutions, or entering into irrevocable deposit commitments, irrevocable loan commitments, and other irrevocable measures with other credit organizations, foreign bank branches, and foreign financial institutions to ensure the liquidity ratio. If non-bank credit organizations have to use these self-management measures at a level of twenty percent or more of high liquidity assets, the State Bank will apply additional supervisory and handling measures as prescribed by law.

3. Non-bank credit organizations must report daily to the State Bank the liquidity ratio as stipulated in the statistical reporting regulations applicable to credit organizations and foreign bank branches. Before 10:00 AM the next day, non-bank credit organizations must submit a written report on any temporary shortfall in the liquidity ratio (if any) and the measures taken to offset the shortfall directly or through postal services to the State Bank (Supervisory Authority).

4. Non-bank credit organizations may only lend or enter into irrevocable deposit commitments and irrevocable loan commitments with other credit organizations and foreign bank branches to offset liquidity shortfalls if such activities still ensure compliance with the liquidity ratio over a thirty-day period as specified in Article 14 of this Circular.

5. After using the self-management measures prescribed in Clause 2 of this Article, if non-bank credit organizations continue to face difficulties with liquidity, they must immediately report to the State Bank (Supervisory Authority).

Section 5
MAXIMUM RATIO OF SHORT-TERM FUNDS USED FOR MEDIUM-TERM AND LONG-TERM LOANS

Article 16. Maximum Ratio of Short-Term Funds Used for Medium-Term and Long-Term Loans

1. Non-bank credit organizations shall determine the maximum ratio of short-term funds used for medium-term and long-term loans in Vietnamese dong, including Vietnamese dong and foreign currencies convertible into Vietnamese dong (as stipulated in point a, Clause 24, Article 3 of this Circular) using the following formula:

Where:

- A: The ratio of short-term funds used for medium-term and long-term loans.

- B: Total outstanding medium-term and long-term loans as specified in Clause 2 of this Article minus total medium-term and long-term funds as specified in Clause 3 of this Article.

- C: Short-term funds as specified in Clause 4 of this Article.

b) Principal overdue balances of loans, entrusted loans, financial leasing, and balances of purchases and investments in securities.

a) Outstanding amounts of the following items with remaining terms exceeding one year:

(i) Loans and financial leasing (including loans and financial leasing to other credit organizations and foreign bank branches in Vietnam), except:

- Loans and financial leasing funded by entrusted funds from the Government, individuals, and other organizations (including other credit organizations and foreign bank branches in Vietnam) where the risks associated with such loans and financial leasing are borne by the Government, individuals, and those organizations;

- Loans and financial leasing for programs and projects refinanced by the State Bank pursuant to decisions of the Government and Prime Minister.

(ii) Entrusted loans to other credit organizations for lending and financial leasing where the non-bank credit organization bears the risk;

(iii) Purchases and investments in securities, except securities used in transactions with the State Bank (excluding bonds issued by the Asset Management Corporation of Credit Organizations in Vietnam);

(iv) For entrusted loans and financial leasing, specified in sub-items (i) and (ii) above with different repayment periods, the remaining term for calculating medium-term and long-term loans shall be determined separately for each repayment period of the debt.

b) Principal overdue of loans and financial leasing, entrusted loans and financial leasing, and balances of purchases and investments in securities.

3. Medium-term and long-term funds include balances with remaining terms exceeding one year of the following items:

a) Deposits from domestic and foreign organizations (including deposits from other credit organizations and foreign bank branches in Vietnam), excluding Treasury deposits;

b) Borrowings from domestic and foreign financial institutions (including borrowings from other credit organizations and foreign bank branches in Vietnam);

c) Entrusted investment capital received from the Government that the non-bank credit organization bears the risk;

d) Borrowings from lead credit organizations when the non-bank credit organization participates in lending to projects and bears the related risks;

đ) Funds raised from issuing promissory notes, bills, deposit certificates, and bonds;

e) Paid-in capital, supplementary capital reserve fund, development investment fund, and remaining financial reserve fund after deducting accumulated losses (determined on the accounting balance sheet at the time of calculating the maximum ratio of short-term funds used for medium-term and long-term loans), original value of purchases and investments in fixed assets, contributions, and share purchases in accordance with the law.

h) Exchange rate differences arising from revaluation of foreign currency equity items recorded on the balance sheet at the nearest point in time when converting financial statements prepared in foreign currency to Vietnamese Dong;

4. Short-term capital includes the remaining balances with terms up to 01 (one) year (including demand deposits) of the following items:

a) Deposits from domestic and foreign organizations (including deposits from credit institutions, branches of foreign banks in Vietnam), except for the following items:

(i) Various types of State Treasury deposits;

(ii) Customer margin deposits and dedicated capital deposits;

b) Loans from domestic and foreign financial organizations (including loans from credit institutions, branches of foreign banks in Vietnam);

c) Entrusted investment capital received from the Government that the non-bank credit organization bears the risk;

d) Borrowings from lead credit organizations when the non-bank credit organization participates in lending to projects and bears the related risks;

d) Funds raised from issuing promissory notes, bills of exchange, deposit certificates, and bonds;

5. Non-bank credit institutions must comply with the maximum ratio of short-term capital used for medium- and long-term loans of 90%;

2. Government Bonds include:

a) Treasury bills;

b) Treasury bonds;

c) National construction bonds;

3. Government-Guaranteed Bonds include:

a) Corporate bonds issued and guaranteed by the Government;

b) Policy bank bonds issued and guaranteed by the Government;

c) Financial organization and credit institution bonds issued and guaranteed by the Government;

Section 7
LIMITS ON CAPITAL CONTRIBUTIONS AND SHARE PURCHASES

Finance companies, finance companies and their subsidiaries, and associated companies of finance companies must comply with the limits on capital contributions and share purchases as stipulated in Articles 110, 129, and 135 of the Law on Credit Institutions (amended and supplemented);

Chapter III
IMPLEMENTATION

Article 19. Transitional Provisions

1. Contracts signed between non-bank credit institutions and customers before the effective date of this Circular and in compliance with the law at the time of signing shall continue to be implemented according to the agreed terms until the end of the contract period. Any amendments, supplements, or extensions of such contracts can only be made if the amended, supplemented, or extended content complies with the provisions of this Circular and relevant laws;

2. At the effective date of this Circular, non-bank credit institutions that do not meet the minimum capital adequacy ratio specified in Article 9 of this Circular must develop a resolution plan, which must include at least the following contents:

a) Specific ratios not met as required;

b) Measures and plans to address the situation to ensure compliance with the regulations within a maximum period of six months from the effective date of this Circular.

Article 20. Post-transition Processing

After the maximum transition period specified in Clause 2 of Article 19 of this Circular or after the maximum deadline required by the State Bank of Vietnam pursuant to Clause 2 of Article 21 of this Circular, if a non-bank financial institution fails to meet the minimum capital adequacy ratio prescribed in this Circular, the State Bank of Vietnam shall apply appropriate measures according to the provisions of the law depending on the degree and nature of the risk.

Article 21. Responsibilities of Non-Bank Financial Institutions

1. Non-bank financial institutions that have not ensured compliance with the limits and safety ratios prescribed in this Circular must develop remediation plans and proactively implement remedial measures to comply with the regulations.

2. Within a maximum period of thirty days from the date this Circular takes effect, non-bank financial institutions must submit directly or through postal services the remediation plan specified in Clause 2 of Article 19 of this Circular to the State Bank of Vietnam (Supervisory Authority).

In case the State Bank of Vietnam requests modifications, supplements, or adjustments to the contents of the remediation plan, the non-bank financial institution shall be responsible for implementing such requirements.

Article 22. Effectiveness

1. This Circular takes effect from February 14, 2021.

2. The following documents and regulations cease to be effective:

- Circular No. 36/2014/TT-NHNN dated November 20, 2014, issued by the Governor of the State Bank of Vietnam, stipulating the limits and safety ratios in the operations of credit institutions and foreign bank branches;

- Circular No. 06/2016/TT-NHNN dated May 27, 2016, issued by the Governor of the State Bank of Vietnam, amending and supplementing certain articles of Circular No. 36/2014/TT-NHNN dated November 20, 2014, issued by the Governor of the State Bank of Vietnam, concerning the limits and safety ratios in the operations of credit institutions and foreign bank branches;

- Circular No. 19/2017/TT-NHNN dated December 28, 2017, issued by the Governor of the State Bank of Vietnam, amending and supplementing certain articles of Circular No. 36/2014/TT-NHNN dated November 20, 2014, issued by the Governor of the State Bank of Vietnam, concerning the limits and safety ratios in the operations of credit institutions and foreign bank branches;

- Circular No. 16/2018/TT-NHNN dated July 31, 2018, issued by the Governor of the State Bank of Vietnam, amending and supplementing certain articles of Circular No. 36/2014/TT-NHNN dated November 20, 2014, issued by the Governor of the State Bank of Vietnam, concerning the limits and safety ratios in the operations of credit institutions and foreign bank branches;

- Article 4 of Circular No. 13/2019/TT-NHNN dated August 21, 2019, issued by the Governor of the State Bank of Vietnam, amending and supplementing certain articles of related circulars concerning the issuance of licenses, organization, and operation of credit institutions and foreign bank branches.

Article 23. Implementation Organization

The Director of the Office, the Head of Banking Inspection and Supervision, the Heads of units under the State Bank of Vietnam, and non-bank financial institutions are responsible for implementing this Circular./.