Circular No. 30/2014/TT-NHNN on entrusting and being entrusted by credit institutions and foreign bank branches

 

CIRCULAR

Regulations on Entrusting and Accepting Entrustment of

 of credit institutions, branches of foreign banks

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

No. 06/2013/UBTVQH13 dated March 18, 2013;

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 (hereinafter referred to as the State Bank);

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

The Governor of the State Bank issues this Circular regulating entrusting and accepting entrustment of credit institutions and foreign bank branches.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. Credit institutions and foreign bank branches may only carry out entrusting and accepting entrustment as prescribed in this Circular for the following activities:

a) Lending;

b) Financial leasing;

c) Contributing capital, purchasing shares;

d) Investing in production and business projects;

đ) Purchasing corporate bonds.

2. The acceptance of entrustment from the Government by credit institutions and foreign bank branches shall be carried out in accordance with the provisions of the Government.

Article 2. Applicability

1. Credit institutions include:

a) Commercial banks;

b) Policy banks;

c) Cooperative banks;

d) Financial companies;

đ) Financial leasing companies;

e) Microfinance organizations;

g) People's Credit Funds.

2. Branches of foreign banks.

3. Organizations that are not credit institutions or foreign bank branches in Vietnam (hereinafter referred to as organizations), resident individuals, non-resident individuals related to entrusting and accepting entrustment activities regulated in this Circular.

Article 3. Explanation of Terms

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

1. Entrusting is the act where one party (the entrusting party) transfers funds to another party (the entrusted party) to carry out the activities specified in Clause 1, Article 1 of this Circular for the entrusted object, the entrusting party bears all risks, and the entrusted party receives the entrusting fee.

2. The entrusted object is the beneficiary of the entrusted funds, including:

a) Individuals, organizations, including credit institutions and foreign bank branches as borrowing customers, financial leasing customers;

b) Enterprises, credit institutions receiving capital contributions, issuing corporate bonds, stocks;

c) Production and business projects.

3. Entrusted lending is the act where the entrusting party entrusts the entrusted party to lend to borrowing customers.

4. Entrusted financial leasing is the act where the entrusting party entrusts the entrusted party to provide financial leasing services to financial leasing customers.

5. Entrusted capital contribution and share purchase is the act where the entrusting party entrusts the entrusted party to contribute capital and purchase shares of enterprises and credit institutions.

6. Entrusted corporate bond purchase is the act where the entrusting party entrusts the entrusted party to purchase corporate bonds, including convertible bonds.

7. Entrusted investment in production and business projects is the act where financial companies accept entrustment from project investors to invest capital in production and business projects based on joint venture contracts.

8. The term of entrusting is the period calculated from the time the entrusted party starts implementing the entrusted content until the completion of the entrusted content, as stipulated in the entrusting contract.

9. Entrusted capital is the amount of money transferred by the entrusting party to the entrusted party to implement the entrusted content.

10. Entrusting fee is the amount of money paid by the entrusting party to the entrusted party to implement the entrusted content, as stipulated in the entrusting contract, in compliance with the provisions of the law.

1. Entrusting must be established in writing in a contract, in accordance with the provisions of this Circular and other relevant laws.

2. The entrusting party may only entrust the entrusted party to perform entrusted contents that the entrusting party is allowed to perform and entrust according to the law; the entrusted party may only accept entrustment for entrusted contents that the entrusted party is allowed to perform and accept entrustment according to the law.

3. The entrusted party may not re-entrust to a third party.

4. The transfer of entrusted capital must be consistent with the progress of implementing the entrusted content.

5. The entrusted party may not use entrusted capital contrary to the purpose and content of the entrusted activity as stipulated in the entrusting contract.

6. Credit institutions and foreign bank branches entrusting other credit institutions, foreign bank branches, and other organizations must calculate the balance of entrusted items within the limits and ratios ensuring safety in the operations of credit institutions and foreign bank branches as prescribed by the State Bank.

7. Foreign bank branches accepting entrustment from parent banks and foreign branches of parent banks to lend and purchase bonds must comply with the provisions of this Circular and the laws on foreign borrowing, debt repayment, foreign exchange management, and other relevant laws.

8. Entrusted items denominated in foreign currency must comply with the provisions of the law on foreign exchange management and other relevant laws.

9. The entrusting party being a credit institution or foreign bank branch must classify debts, set aside reserves, and use reserves to handle risks in accordance with the regulations of the State Bank for the balance of entrusted items. The entrusted party being a credit institution or foreign bank branch does not need to classify debts, set aside reserves, and use reserves to handle risks in accordance with the regulations of the State Bank for the balance of accepted entrusted items.

10. For entrusting abroad, credit institutions and foreign bank branches may only entrust foreign banks and fund management companies to carry out certain activities specified in Clause 1, Article 1 of this Circular within the scope of foreign exchange operations of credit institutions and foreign bank branches on the international market as prescribed by the State Bank.

Article 5. Entrusted Contract

1. An entrusted contract must include at least the following contents:

a) The name and address of the entrusting party and the entrusted party;

b) The object of entrustment: It must specify by name or provide specific information sufficient to identify the object of entrustment. In the case of entrusting the purchase of bonds, in addition to specifying by name or providing information to determine the issuing organization, it must specifically define the type of bond and the term of the bond;

c) The purpose of entrustment;

d) Scope and content of entrustment;

đ) Term of entrustment;

e) Entrustment fee;

g) Entrustment capital; time for transferring entrustment capital;

h) Currency for implementing entrustment (if applicable);

i) Rights and obligations of the entrusting party and the entrusted party, including clearly defining that the entrusting party bears all risks and enjoys all benefits from the entrusted activity, and the entrusted party receives the entrustment fee;

k) Termination of the contract before the expiration date;

l) Dispute resolution.

2. In addition to the contents prescribed in Clause 1 of this Article, the entrusted contract may include other contents agreed upon by the parties in accordance with the provisions of this Circular and relevant laws.

Article 6. Rights and Obligations of the Entrusting Party

1. The entrusting party has the following rights:

a) Requesting the entrusted party to provide documents and evidence proving that the entrusted party is authorized to carry out entrusted activities according to the law;

b) Requesting the entrusted party to report and provide materials and information on the implementation status and results of the entrusted contract;

c) Supervising and inspecting the entrusted party's performance of the entrusted content and scope as stipulated in the entrusted contract;

d) Other rights as stipulated in the entrusted contract in accordance with the law.

2. The entrusting party has the following obligations:

a) Reviewing and evaluating the functions, scope of operations, management and operational capacity, personnel, expertise, technology, and infrastructure of the entrusted party to ensure that the entrusted party has the ability to perform entrusted activities;

b) Transferring entrustment capital to the entrusted party according to the progress of performing the entrusted content as stipulated in the entrusted contract;

c) Providing the entrusted party with information and documents related to the entrustment as stipulated in the entrusted contract;

d) Paying the entrustment fee to the entrusted party as stipulated in the entrusted contract;

đ) Other obligations as stipulated in the entrusted contract in accordance with the law.

Article 7. Rights and Obligations of the Entrusted Party

1. The entrusted party has the following rights:

a) Refusing requests from the entrusting party related to the scope and content of entrustment, objects not specified in the entrusted contract or not in accordance with the law;

b) Receiving the entrustment fee as stipulated in the entrusted contract;

c) Requesting the entrusting party to provide information and documents related to the entrustment as stipulated in the entrusted contract;

d) Other rights as stipulated in the entrusted contract in accordance with the law.

2. The entrusted party has the following obligations:

a) Reviewing and evaluating the functions and scope of operations of the entrusting party to ensure that the entrusting party is authorized to carry out entrusted activities according to the law;

b) Performing the entrusted content and scope as stipulated in the entrusted contract;

c) Conducting inspections and supervision of the use of entrustment capital by the entrustment object as stipulated in the entrusted contract;

d) Timely and fully informing the entrusting party about the implementation status of the entrusted content as stipulated in the entrusted contract;

đ) Returning to the entrusting party all legitimate benefits, related documents, and papers as stipulated in the entrusted contract. In the case of terminating the entrusted contract prematurely, the entrusted party returns to the entrusting party the un-disbursed entrustment amount, all legitimate benefits, and related documents and papers as of the termination date of the entrusted contract as stipulated in the entrusted contract;

e) Fulfilling other obligations as stipulated in the entrusted contract.

Credit institutions and foreign bank branches shall implement and accept entrustment when they meet all of the following conditions:

1. Entrustment activities must be recorded in the License for Establishment and Operation.

2. There must be internal regulations on managing entrustment activities, including provisions on identifying, measuring, and managing risks associated with entrustment activities that are appropriate to the nature and scale of operations of credit institutions and foreign bank branches.

3. Entrustment activities must be managed by a risk management department.

4. The entrustee must have physical infrastructure, network, and staff with adequate qualifications and expertise to ensure the implementation of entrusted tasks.

5. In cases where credit institutions and foreign bank branches accept entrusted capital from organizations and individuals to invest in production projects, business ventures, financial leasing, lending, in addition to the conditions stipulated in Clauses 1 to 4 of this Article, at the time of entrustment, the entruster must not owe any loans to credit institutions and foreign bank branches.

Chapter II

ENTRUSTMENT AND ACCEPTANCE OF ENTRUSTMENT BY CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES

Article 9. Cases Where Entrustment and Acceptance of Entrustment Are Not Allowed

1. Credit institutions and foreign bank branches shall not entrust or accept entrustment for lending to entrustors who fall under the categories prohibited from receiving credit as specified in Articles 126 and 127 of the Law on Credit Institutions and the State Bank's regulations on limits and ratios ensuring safety in the operations of credit institutions and foreign bank branches.

2. Commercial banks, foreign bank branches, cooperative banks, people's credit funds, and microfinance organizations shall not entrust or accept entrustment for financial leasing.

3. Credit institutions (excluding commercial banks) and foreign bank branches shall not entrust or accept entrustment for capital contribution or share purchase. Commercial banks shall not entrust or accept entrustment for capital contribution or share purchase from entrustors falling under the categories prohibited from contributing capital or purchasing shares as specified in Clause 5 of Article 129 of the Law on Credit Institutions and the State Bank's regulations on limits and ratios ensuring safety in the operations of credit institutions and foreign bank branches.

4. Credit institutions (excluding finance companies) and foreign bank branches shall not entrust or accept entrustment for investment in production and business projects.

5. Finance companies, financial leasing companies, cooperative banks, people's credit funds, and microfinance organizations shall not entrust or accept entrustment for purchasing corporate bonds.

6. Credit institutions and foreign bank branches shall not entrust or accept entrustment for purchasing bonds of other credit institutions or foreign bank branches.

Article 10. Entrustment and Acceptance of Entrustment by Commercial Banks

1. Commercial banks may entrust to:

a) Other commercial banks, foreign bank branches, and finance companies to provide loans to customers;

b) Cooperative banks to provide loans to non-member customers;

c) People's credit funds to provide loans to non-member customers;

d) Microfinance organizations to provide loans to low-income individuals, households, and very small enterprises;

e) Other commercial banks and organizations permitted to engage in securities trading according to the law to contribute capital or purchase shares of other enterprises or credit institutions;

f) Other commercial banks, foreign bank branches, and organizations permitted to engage in securities trading according to the law to purchase corporate bonds.

2. Commercial banks may accept entrustment from:

a) Other commercial banks, policy banks, foreign bank branches, finance companies, cooperative banks, and organizations to provide loans to customers;

b) Other commercial banks and organizations permitted to engage in securities trading according to the law to contribute capital or purchase shares of other enterprises or credit institutions;

c) Other commercial banks, foreign bank branches, and organizations permitted to engage in securities trading according to the law to purchase corporate bonds.

Article 11. Entrusting and Accepting Entrustment by Branches of Foreign Banks

1. Branches of foreign banks may be entrusted to:

a) Commercial banks, other branches of foreign banks, financial companies to provide loans to customers;

b) Cooperative banks to provide loans to non-member customers;

c) People's credit funds to provide loans to non-member customers;

d) Microfinance organizations to provide loans to low-income individuals, households, and very small enterprises;

d) Commercial banks, other branches of foreign banks, organizations permitted to operate securities according to the law to purchase corporate bonds.

2. Branches of foreign banks may accept entrustment from:

a) Parent banks, other branches of parent banks, commercial banks, policy banks, other branches of foreign banks, cooperative banks, organizations to provide loans to customers;

b) Parent banks, other branches of parent banks, commercial banks, other branches of foreign banks, organizations permitted to operate securities according to the law to purchase corporate bonds.

Article 12. Entrusting and Accepting Entrustment by Financial Companies

1. Financial companies may be entrusted to:

a) Commercial banks, other financial companies to provide loans to customers;

b) Cooperative banks to provide loans to customers who are not members of cooperative banks;

c) People's credit funds to provide loans to non-member customers;

d) Microfinance organizations to provide loans to low-income individuals, households, and very small enterprises;

d) Financial leasing companies, other financial companies to carry out financial leasing.

2. Financial companies may:

a) Accept entrustment for investment in production and business projects of organizations and individuals;

b) Accept entrustment from commercial banks, policy banks, branches of foreign banks, other financial companies, cooperative banks, organizations, and individuals to provide loans to customers;

c) Accept entrustment from financial leasing companies, other financial companies to carry out financial leasing.

Article 13. Entrusting and Accepting Entrustment by Financial Leasing Companies

1. Financial leasing companies may be entrusted to other financial leasing companies, financial companies to carry out financial leasing.

2. Financial leasing companies may accept entrustment from financial companies, other financial leasing companies to carry out financial leasing.

3. Financial leasing companies may accept entrusted capital from organizations and individuals to carry out financial leasing.

Article 14. Entrusting and Accepting Entrustment by Cooperative Banks

1. Cooperative banks may be entrusted to commercial banks, branches of foreign banks, financial companies to provide loans to customers who are not members of cooperative banks.

2. Cooperative banks may be entrusted to people's credit funds to provide loans to customers who are not members of people's credit funds.

3. Cooperative banks may accept entrustment from commercial banks, branches of foreign banks, financial companies to provide loans to customers who are not members of cooperative banks.

Article 15. Accepting Entrustment by People's Credit Funds

1. People's credit funds may accept entrusted capital for lending from organizations and individuals.

2. People's credit funds may accept entrustment from commercial banks, branches of foreign banks, financial companies, cooperative banks to provide loans to customers who are not members of people's credit funds.

Article 16. Entrusting and Accepting Entrustment by Microfinance Organizations

1. Microfinance organizations may entrust other microfinance organizations to provide loans to individuals, households with low income, and micro-enterprises.

2. Microfinance organizations may accept entrustment from commercial banks, financial companies, foreign bank branches, and other microfinance organizations to provide loans to individuals, households with low income, and micro-enterprises.

Chapter III

ACCOUNTING, REPORTING, AND TRANSFER PROVISIONS

Article 17. Accounting

1. Credit institutions and foreign bank branches acting as entrusters shall record on-balance-sheet accounts for entrusted capital used to carry out lending, leasing finance, investment in production and business projects, equity contributions, purchase of shares, and corporate bonds for the benefit of the entrusted party in accordance with the accounting laws.

2. Credit institutions and foreign bank branches acting as entrusted parties shall record off-balance-sheet accounts for entrusted capital that has been lent, leased, invested in production and business projects, contributed to equity, purchased shares, and corporate bonds in accordance with the accounting laws.

Article 18. Reporting

1. Credit institutions and foreign bank branches must report their entrusting and accepting entrustment activities according to the reporting and statistical system regulations of the State Bank of Vietnam applicable to credit institutions and foreign bank branches.

2. Credit institutions and foreign bank branches have the responsibility to provide information about the results of their entrusting and accepting entrustment activities to the National Credit Information Center in accordance with the credit information activity regulations of the State Bank of Vietnam.

Article 19. Transitional Provisions

For entrustment contracts signed before this Circular takes effect, credit institutions and foreign bank branches may continue to implement them according to the agreements already signed and the laws at the time of signing until the end of the contract period and cannot extend the contract. Any amendments or supplements to such contracts can only be made if they comply with the provisions of this Circular and relevant laws.

Chapter IV

IMPLEMENTATION

Article 20. Responsibilities of the Banking Inspection and Supervision Agency

1. Supervise, inspect, and audit the implementation of entrusting and accepting entrustment activities of credit institutions and foreign bank branches in accordance with this Circular.

2. Administer administrative penalties for violations in entrusting and accepting entrustment activities of credit institutions and foreign bank branches in accordance with the laws on administrative penalties in the monetary and banking sectors.

3. Coordinate with the Department of Forecasting and Statistics, the Department of Finance and Accounting, and the Department of Foreign Exchange Management in managing the entrusting and accepting entrustment activities of credit institutions and foreign bank branches.

Article 21. Responsibilities of Related Units

1. Responsibilities of the Department of Foreign Exchange Management: Monitor and manage foreign loan and repayment flows related to entrusting and accepting entrustment activities of credit institutions and foreign bank branches in accordance with the law.

2. Responsibilities of the State Bank Branches in Provinces and Central Cities:

a) Inspect and supervise the State Bank Branches in provinces and central cities where there is no Banking Inspection and Supervision Bureau to conduct supervision, inspection, and auditing of entrusting and accepting entrustment activities of credit institutions and foreign bank branches within their jurisdiction according to their functions and tasks;

b) Report to the Governor of the State Bank of Vietnam on cases of violation and handling of violations within their authority.

3. Responsibilities of the National Credit Information Center:

a) Receive and compile information on entrusting and accepting entrustment activities provided by credit institutions and foreign bank branches;

b) Provide information on entrusting and accepting entrustment activities of credit institutions and foreign bank branches in accordance with the credit information activity regulations of the State Bank of Vietnam.

Chapter V

IMPLEMENTING PROVISIONS

Article 22. Effectiveness

1. This Circular takes effect from January 1, 2015.

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

- Circular No. 04/2012/TT-NHNN dated March 8, 2012, of the State Bank of Vietnam on entrusted and entrusting operations of credit institutions and foreign bank branches;

- Section II of Circular No. 05/2006/TT-NHNN dated July 25, 2006, of the State Bank of Vietnam guiding certain contents regarding leasing finance activities and entrusted leasing finance services as stipulated in Decree No. 16/2001/NĐ-CP dated May 2, 2001, and Decree No. 65/2005/NĐ-CP dated May 19, 2005, of the Government.

3. The Director of the Office, the Director of the Banking Inspection and Supervision Department, the Heads of units under the State Bank of Vietnam, the Governors of State Bank Branches in provinces and central cities, the Chairmen of the Board of Directors, the Chairmen of the Board of Members, and the General Managers (Directors) of credit institutions and foreign bank branches are responsible for implementing this Circular.