Circular No. 23/2021/TT-NHNN amending and supplementing certain Articles of Circular No. 52/2018/TT-NHNN dated December 31, 2018 of the Governor of the State Bank of Vietnam on ranking credit institutions and foreign bank branches

CIRCULAR

Amending and supplementing some articles of Circular No. 52/2018/TT-NHNN dated December 31, 2018 of the Governor of the State Bank of Vietnam on credit institution rating and foreign bank branch rating.

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 and the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

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 issues this Circular to amend and supplement some articles of Circular No. 52/2018/TT-NHNN dated December 31, 2018 of the Governor of the State Bank of Vietnam on credit institution rating and foreign bank branch rating.

Article 1. Amending and supplementing some articles of Circular No. 52/2018/TT-NHNN

1. AMENDING AND SUPPLEMENTING ARTICLE 3 AS FOLLOWS:

a) Amending and supplementing Clause 1, 2, 3, 4, 5 of Article 3 as follows:

“1. Capital adequacy ratio is an indicator determined according to the regulations of the State Bank of Vietnam on limits and ratios ensuring safety in the operation of credit institutions and foreign bank branches.

 2. Tier 1 capital adequacy ratio is an indicator determined specifically as follows:

a) In the case where credit institutions and foreign bank branches implement the capital adequacy ratio according to the regulations of the State Bank of Vietnam on limits and ratios ensuring safety in the operation of credit institutions and foreign bank branches (excluding Circular No. 41/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank of Vietnam on the capital adequacy ratio for commercial banks and foreign bank branches and any subsequent amendments, supplements, or replacements), the Tier 1 capital adequacy ratio is determined by the formula:

Determination of individual Tier 1 capital, individual risk-weighted assets according to the regulations of the State Bank of Vietnam on limits and ratios ensuring safety in the operation of credit institutions and foreign bank branches;

b) In the case where credit institutions and foreign bank branches implement the capital adequacy ratio according to Circular No. 41/2016/TT-NHNN, the Tier 1 capital adequacy ratio is determined by the formula:

Where:

• RWA: Total risk-weighted assets
• : Required capital for operational risk

-  : Required capital for market risk

Determination of Tier 1 capital, RWA, according to the provisions of Circular No. 41/2016/TT-NHNN.

 3. Potential restructured debtrime Minister cthat may become non-performing is the outstanding debt not yet classified as non-performing due to restructuring of repayment terms, interest relief, and retention of the risk category by credit institutions and foreign bank branches.

 4. Non-performing debt sold to VAMC but not yet resolved are the non-performing debts sold to the Vietnam Asset Management Corporation (VAMC) for payment with special bonds and not yet resolved or recovered.

 5. Large credit customer is a customer (excluding credit institutions and foreign bank branches) whose credit balance accounts for 5% or more of the credit institution's or foreign bank branch's own capital. For cooperative banks, large credit customers include member savings and credit cooperatives as well.

b) Amending and supplementing the second bullet point of Clause 10 of Article 3 as follows:

“- Interest-bearing assets are the total of items such as deposits at the State Bank of Vietnam, deposits at other credit institutions, loans to other credit institutions (excluding provisions for bad debts), loans to customers (excluding provisions for bad debts), purchased debts (excluding provisions for bad debts), investment securities (excluding provisions for bad debts, impairment reserves, and VAMC bonds), reflected on the Balance Sheet in accordance with the financial reporting regulations for credit institutions and foreign bank branches, calculated as the average of quarters in a year.”

c) Amending and supplementing the second bullet point of Clause 15 of Article 3 as follows:

“- Interest-sensitive liabilities are the total of on-balance sheet interest-sensitive liabilities (excluding interest-free liabilities) reflected in the Financial Statement Notes in accordance with the financial reporting regulations for credit institutions and foreign bank branches.”

d) Amending and supplementing Clause 16 of Article 3 as follows:

“16Average fine amount for violations is the average value of the maximum and minimum fines within the fine range applicable to the violation of the organization as stipulated in the Decree on administrative penalties in the field of currency and banking currently in effect on December 31 of the ranking year (for periodic ranking cases) or the last day of the quarter immediately preceding the ranking date (for ranking cases as provided for in Clause 3 of Article 21 of this Circular).”

2. Amending and supplementing Clause 5 as follows:

a) Supplementing Point a1 to Clause 1 of Article 5 as follows:

“a1) Information and data from the audited financial statements of credit institutions and foreign bank branches in accordance with the law;”

b) Amending and supplementing point c Clause 2 Article 5 as follows:

“c) In the case of ranking as provided for in Clause 3 of Article 21 of this Circular, the Governor of the State Bank of Vietnam decides the scope of documents, information, and data to be used to calculate the ranking points for credit institutions and foreign bank branches.”

3. Amending and supplementing Article 8 as follows:

a) Amending and supplementing Point g of Clause 1:

“g) The ratio of credit for real estate investment and business to total credit (excluding credit for other credit institutions and foreign bank branches);”

b) Amending and supplementing Point a of Clause 2:

“a) Compliance with the laws on credit activities;”

4. Supplementing Point d to Clause 1 of Article 13 as follows:

“d) In the case where the total operating income has a negative value when determining the quantitative indicators specified in Clause 1 of Article 9, and pre-tax profit and average equity have a negative value when determining the quantitative indicators specified in Point a of Clause 1 of Article 10, then the score of each quantitative indicator is 1.”

5. Amending and supplementing Article 14 as follows:

a) Amending and supplementing Item 1.1, 1.2 and adding Item 1.1a, 1.2a to Article 14 as follows:

          b) Amend and supplement item number 2.1, 2.2 as follows:

c) Amend and supplement item number 2.7 as follows:

Article 15. Inspection labels for fire prevention and firefighting equipment

a) Amend and supplement item number 2.1 as follows:

b) Amend and supplement item number 2.3 as follows:

c) Amend and supplement item number 2.4 as follows:

d) Amend and supplement item number 2.7 as follows:

7. Amending and supplementing Article 16 as follows:

"Article 16. Method of calculating points for qualitative indicators

1. The points of the group of qualitative indicators at each ranking criterion are determined based on the assessment of the level of compliance with legal regulations of credit institutions and foreign bank branches according to the point values of 1, 2, 3, 4, or 5; wherein the lower the point value, the lower the level of compliance with legal regulations.

2. The violations of credit institutions and foreign bank branches used to calculate the points of the group of qualitative indicators for each ranking criterion specified in Articles 7, 8, 9, 10, 11, and 12 of this Circular are determined simultaneously according to two criteria as follows:

a) Time of identifying violations:

(i) Violations discovered within the four consecutive years immediately preceding the ranking year but not yet fully rectified;

(ii) Violations discovered in the ranking year;

b) Form of identifying violations:

(i) Results of supervision, inspection, audit, and administrative penalty decisions made by competent authorities (including the State Bank of Vietnam, other state management agencies, and independent auditing companies);

(ii) Violations identified, reported, and not yet fully rectified by credit institutions and foreign bank branches themselves.

3. The points of the group of qualitative indicators according to each ranking criterion are determined as follows:

a) For violations stipulated in administrative penalty decisions of competent authorities and/or violations stipulated in the Decree on Administrative Penalties in the Field of Currency and Banking, the points of the group of qualitative indicators are determined based on comparing the value of the group of qualitative indicators specified in Clause 4 of this Article with the scoring thresholds of the group of qualitative indicators specified in Article 16a of this Circular, specifically as follows:

(i) Five points if the value of the group of qualitative indicators is less than or equal to threshold 1;

(ii) Four points if the value of the group of qualitative indicators is less than or equal to threshold 2 and greater than threshold 1;

(iii) Three points if the value of the group of qualitative indicators is less than or equal to threshold 3 and greater than threshold 2;

(iv) Two points if the value of the group of qualitative indicators is less than or equal to threshold 4 and greater than threshold 3;

(v) One point if the value of the group of qualitative indicators is greater than threshold 4;

b) For violations not covered under point a of this Clause, credit institutions and foreign bank branches will be assigned a score of four points;

c) In cases where credit institutions and foreign bank branches have two scores determined according to point a of this Clause and point b of this Clause, the points of the group of qualitative indicators of credit institutions and foreign bank branches will be the lowest score between the two scores.

4. The value of the group of qualitative indicators reflects the degree of violation of legal regulations on currency and banking of credit institutions and foreign bank branches, taking into account the scale of credit institutions and foreign bank branches at each ranking criterion. The value of the group of qualitative indicators is determined as follows:

Where:

- Total fine amount is the total fine amount of violations of the group of qualitative indicators at one ranking criterion. The total fine amount is calculated as the sum of the fine amounts prescribed in administrative penalty decisions of competent authorities and the average fine amount of violations of credit institutions and foreign bank branches stipulated in the Decree on Administrative Penalties in the Field of Currency and Banking. For violations with a form of punishment of warning, the fine amount to determine the total fine amount is zero.

- Individual capital is determined in accordance with the State Bank's regulations on limits and ratios to ensure safety in the operations of credit institutions and foreign bank branches.

5. After determining the points for the group of qualitative indicators at each ranking criterion according to Clause 3 of this Article, credit institutions and foreign bank branches will continue to lose points subject to the condition that the maximum number of points deducted does not exceed 0.9 points according to the following principle:

a) At the same group of qualitative indicators at each ranking criterion, if credit institutions and foreign bank branches have more than two violations, the points of the group of qualitative indicators will be reduced by 0.1 points for each violation (applicable from the second violation onwards), except in the case stipulated in point b of this Clause;

b) For violations identified and reported by credit institutions and foreign bank branches themselves but not yet fully rectified, the points of the group of qualitative indicators will be reduced by 0.05 points for each violation (applicable from the second violation onwards).

6. In case credit institutions and foreign bank branches fail to fully implement plans to address recommendations and warnings from the State Bank of Vietnam regarding organization, management, and operation, except due to the impact of force majeure events, the points of the qualitative index group specified in Clause 2, Article 9 of this Circular will continue to be deducted according to the following principles after being determined in accordance with Clauses 3 and 5 of this Article:

a) If the points of the qualitative index group are greater than 1, the points of the qualitative index group of credit institutions and foreign bank branches will be deducted by 1 point;

b) If the points of the qualitative index group are less than or equal to 1, the points of the qualitative index group of credit institutions and foreign bank branches will be deducted and reduced to 0.1 point.

7. Credit institutions and foreign bank branches that have not been or are not subject to compliance with one or more indices within the qualitative index group as prescribed by laws on currency and banking shall not be scored for those indices.

8. Supplement Article 16a as follows:

"Article 16a. Thresholds for scoring each qualitative index group

The thresholds 1, 2, 3, and 4 of each qualitative index group have higher values indicating a lower degree of compliance with the law by credit institutions and foreign bank branches. These thresholds are specifically defined as follows:

9. Amend and supplement Clause 7 of Article 20 and add Clause 8 to Article 20 as follows:

"7. In addition to the provisions stipulated in Clause 5 of Article 20 of this Circular, credit institutions and foreign bank branches shall be ranked (E) if they fall into any of the following situations:

a) Loss of, or risk of losing, payment capacity or liquidity capacity as prescribed by the State Bank of Vietnam;

b) Accumulated losses exceed 50% of the charter capital and reserve funds;

c) Failure to maintain the capital adequacy ratio prescribed in Point b, Clause 1, Article 130 of the Law on Credit Institutions for a continuous period of 12 months or the capital adequacy ratio is below 4% for a continuous period of six months.

8. The total ranking score will be rounded to the second decimal place according to the following principles:

a) The second decimal place will increase by 0.01 if the third decimal place has a value from 6 to 9;

b) The second decimal place will remain unchanged if the third decimal place has a value from 0 to 5."

10. Amend and supplement Clause 3 of Article 21 as follows:

"3. In cases where credit institutions and foreign bank branches are submitting to competent authorities for approval of restructuring plans, mergers, or acquisitions under the Restructuring Plan for the Credit Institution System linked with Non-performing Loan Resolution approved by the Prime Minister, based on specific state management requirements, the Governor of the State Bank of Vietnam may decide on a different time frame from that prescribed in Clauses 1 and 2 of this Article."

11. Amend and supplement Clause 2 of Article 22 as follows:

"2. Content of the notification of ranking results:

a) For credit institutions and foreign bank branches: Notification of ranking results (including rank, total ranking score, and points of each criterion group specified in Articles 7, 8, 9, 10, 11, and 12 of this Circular) of credit institutions and foreign bank branches;

b) For provincial branches of the State Bank of Vietnam: Notification of ranking results (including rank, total ranking score, and points of each criterion group specified in Articles 7, 8, 9, 10, 11, and 12 of this Circular) of credit institutions and foreign bank branches headquartered in the province or city."

12. Amend and supplement Clause 1 of Article 23 as follows:

"1. Credit institutions and foreign bank branches shall not provide ranking results to third parties (except when a foreign bank branch provides ranking results to its parent bank after the parent bank has issued a commitment not to provide ranking results to third parties) in any form."

Article 2. Repeal certain points, clauses, and articles of Circular No. 52/2018/TT-NHNN

Repeal point d clause 1 Article 8, clause 3 Article 13, item number 2.5 Article 14, item number 2.5 Article 15.

This Circular takes effect from December 25, 2025/.

The Director of the Office, the Head of the Inspectorate and Supervision Department, the Governor of the State Bank of Vietnam branches in provinces and centrally-administered cities, the Heads of relevant units under the State Bank of Vietnam, credit institutions, and foreign bank branches shall be responsible for organizing the implementation of this Circular.

Article 4. Effective date

This Circular takes effect from February 15, 2022 and shall apply to the ranking of credit institutions and foreign bank branches starting from 2021./.