Decision No. 297/1999/QD-NHNN On the issuance of "Regulations on safety ratios in the operations of credit institutions"

DECISION OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Regarding the issuance of "Regulations on Safety Ratios in the Operation of Credit Institutions"

||

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10, and the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997;

- Based on Decision No. 1073/QĐ-TTg dated November 17, 1999 of the Prime Minister concerning measures to address the aftermath of floods in the provinces and cities of Quảng Bình, Quảng Trị, Thừa Thiên Huế, Đà Nẵng, Quảng Nam, Quảng Ngãi, and Bình Định;

||

Pursuant to …;

Article 1: The attached Decision issues the "Regulations on Safety Ratios in the Operation of Credit Institutions".

Article 2: This Decision shall take effect fifteen days from the date of signature. The provisions in the following documents related to "Regulations on Safety Ratios in the Operation of Credit Institutions" issued together with this Decision shall cease to be effective:

1. "Regulations on Ensuring Safety in Currency and Credit Business for Credit Institutions" issued pursuant to Decision No. 107/QĐ-NH5 dated June 9, 1992 of the Governor of the State Bank of Vietnam;

2. Circular No. 10/TT-NH5 dated July 6, 1992 of the Governor of the State Bank of Vietnam guiding the implementation of "Regulations on Ensuring Safety in Currency and Credit Business for Credit Institutions".

Article 3: The Heads of the Office, the Heads of the Department of Banks and Non-Bank Financial Institutions under the State Bank of Vietnam, the Heads of Units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam Branches in provinces and cities, the Chairmen of the Boards of Management, and the General Directors (Directors) of credit institutions are responsible for implementing this Decision.

REGULATIONS

ON SAFETY RATIOS
(Issued together with Decision No. 457/2005/QĐ-NHNN

(Issued together with Decision No. 297/1999/QĐ-NHNN5
dated August 25, 1999 of the Governor of the State Bank of Vietnam)

I - GENERAL PROVISIONS

Article 1. Credit institutions operating in Vietnam must continuously maintain safety ratios as prescribed herein, including:

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

2. The liquidity ratio.

3. The minimum capital adequacy ratio.

II - SPECIFIC PROVISIONS

PART I
MAXIMUM RATIO OF SHORT-TERM CAPITAL USED
FOR MEDIUM-TERM AND LONG-TERM LOANS.

Article 2.

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

a. State-owned credit institutions: 25%

b. Joint venture credit institutions: 25%

c. Foreign bank branches: 25%

d. Non-bank financial institutions with 100% foreign capital: 25%

đ. State and people-owned joint-stock credit institutions: 20%

e. Cooperative credit institutions: 10%

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

a. Unconditional deposits and deposits with terms less than 12 months from other credit institutions;

b. Unconditional deposits and deposits with terms less than 12 months from organizations and individuals;

c. Unconditional savings deposits and savings deposits with terms less than 12 months from individuals;

d. Domestic funds raised through the issuance of short-term securities.

Article 3. After this Decision takes effect, credit institutions that have a higher ratio of short-term capital used for medium-term and long-term loans than the maximum ratio prescribed in Clause 1, Article 2 of these Regulations shall not continue to use short-term capital for medium-term and long-term loans but must take measures to increase domestic fund raising within the framework of the law, recover medium-term and long-term loans according to their repayment periods, and reduce this ratio gradually over a period of three years to comply with the regulations.

In cases where credit institutions use short-term capital for medium-term and long-term loans as directed by the Government, they shall implement the regulations of the State Bank of Vietnam when the Government directs.

PART II
LIQUIDITY RATIO

Article 4.

1. At the end of each business day, credit institutions must maintain a minimum ratio of 1 between immediately payable assets ("Have") and immediately payable liabilities ("Debt") for the next business day.

2. Immediately payable assets include:

a. Cash;

b. Negotiable bills still in circulation;

c. Precious metals and gems that can be sold immediately;

d. Deposits at the State Bank of Vietnam (excluding mandatory reserve deposits);

đ. Unconditional deposits (principal and interest) at other domestic and foreign credit institutions;

e. Conditional deposits (principal and interest) at other domestic and foreign credit institutions due for payment;

g. Up to 95% of loans to other credit institutions due for collection;

h. Up to 90%% loans to organizations and individuals due for collection;

i. Various securities due for payment or that can be sold immediately or discounted at the State Bank of Vietnam;

k. Proceeds from foreign exchange commitments with terms due for execution;

l. Other receivables due for collection.

3. Immediately payable liabilities include:

a. At least 15% of unconditional deposits from organizations and individuals;

b. Conditional deposits from organizations and individuals due for payment (principal and interest);

c. At least 15% of unconditional savings deposits from individuals;

d. Conditional savings deposits from individuals due for payment (principal and interest);

đ. Loans from other credit institutions due for repayment (principal and interest);

e. Securities issued by the credit institution itself due for payment (principal and interest);

g. Amounts due under foreign exchange commitments with terms due for execution;

h. Amounts payable in guarantee and letter of credit transactions;

i. Advances made under standby credit facilities;

k. Other amounts due for payment.

Article 5. Credit institutions encountering difficulties in determining the liquidity ratio as prescribed in Article 4 of these Regulations must develop a resolution plan to submit to the Governor of the State Bank of Vietnam for consideration and decision.

PART III
MINIMUM CAPITAL ADEQUACY RATIO

Article 6.

1. Credit institutions (except foreign bank branches) must maintain a minimum ratio of 8% between own capital and total assets ("Have"), including off-balance sheet commitments, adjusted according to risk levels. Own capital and risky assets are defined as provided in Articles 7 and 8 of these Regulations.

2. As of the date this Decision takes effect, credit institutions with a minimum capital adequacy ratio lower than the level prescribed in Clause 1 of this Article must increase their minimum capital adequacy ratio to the prescribed level within three years from the date this Decision takes effect. The annual increase rate must be at least one-third (1/3) of the remaining shortfall.

Article 7.

1. Own capital of credit institutions includes: subscribed capital (issued capital, contributed capital) and supplementary capital reserves.

2. The provisions in Clause 1 of this Article will be adjusted in accordance with the operational situation of credit institutions and the provisions of Article 20 of the Law on Credit Institutions.

3. The total capital of a credit institution invested in another credit institution in the form of capital contribution or share purchase must be deducted from its own capital when calculating the safety ratios as stipulated herein.

Article 8.

Assets "Have", including off-balance sheet commitments, are adjusted according to risk levels (hereinafter referred to as risky assets "Have"), comprising the value of on-balance sheet assets "Have" adjusted according to risk levels (hereinafter referred to as risky on-balance sheet assets "Have") and the value of off-balance sheet commitments adjusted according to risk levels (hereinafter referred to as risky off-balance sheet assets "Have").

- Risky on-balance sheet assets "Have" are determined based on the value of each on-balance sheet asset "Have" and multiplied by the risk level of the asset "Have" as prescribed in Article 10 of this Regulation.

- Risky off-balance sheet assets "Have" are determined by first converting off-balance sheet commitments into corresponding on-balance sheet asset values according to the conversion factor specified in Article 9 of this Regulation, then determining them according to the risk level prescribed in Article 10 of this Regulation.

Article 9.

Conversion factors for off-balance sheet commitments

1. Off-balance sheet commitments with a conversion factor of 100%:

a. Loan guarantees;

b. Payment guarantees.

2. Off-balance sheet commitments with a conversion factor of 50%:

a. Performance guarantees;

b. Bid guarantees;

c. Other types of guarantees for organizations and individuals;

d. Commitments in letter of credit transactions.

3. Off-balance sheet commitments with a conversion factor of 2%:

Forward foreign exchange purchase and sale commitments.

Article 10. On-balance sheet assets "Have" and the corresponding on-balance sheet asset values of off-balance sheet commitments are classified into risk categories as follows:

1. Category of assets "Have" with a risk level of 0% includes:

a. Cash, negotiable banknotes still in circulation;

b. Gold;

c. Deposits at the State Bank of Vietnam;

d. Securities issued and guaranteed by the State Bank of Vietnam and the Government of Vietnam;

đ. Loans secured by savings deposits at the same credit institution;

e. Loans secured by securities issued by the same credit institution;

g. Loans secured by securities issued and guaranteed by the State Bank of Vietnam and the Government of Vietnam;

h. Loans guaranteed by the Government of Vietnam.

2. Category of assets "Have" with a risk level of 20% includes:

a. Deposits at other domestic and foreign credit institutions;

b. Securities guaranteed by provincial and municipal authorities and issued by other credit institutions;

c. Loans from entrusted funds;

d. Loans secured by securities guaranteed by provincial and municipal authorities and issued by other credit institutions;

đ. Loans to other credit institutions with collateral, without collateral;

e. Loans guaranteed by other credit institutions;

g. Financial leasing to other credit institutions.

3. Category of assets "Have" with a risk level of 50%.

4. Category of assets "Have" with a risk level of 100% includes:

a. Loans secured by real estate mortgages, pledges of movable property, and guarantees provided by other organizations and individuals in accordance with the law;

b. Unsecured loans;

c. Financial leasing to individuals;

d. Financial leasing to other organizations;

đ. Capital contributions and share purchases in enterprises;

e. Corresponding on-balance sheet asset values of guarantees, commitments in letter of credit transactions, and forward foreign exchange purchase and sale commitments;

g. Other assets "Have" (excluding capital contributions and share purchases in other credit institutions).

III - IMPLEMENTATION PROVISIONS

Article 11. Credit institutions shall report their compliance with the safety ratios stipulated in this Regulation according to the information reporting system of the State Bank of Vietnam.

Article 12. Credit institutions violating the provisions of this Regulation will be subject to administrative penalties depending on the severity of the violation.

Article 13. Amendments and supplements to the provisions of this Regulation shall be decided by the Governor of the State Bank of Vietnam./.