Circular No. 36/2024/TT-NHNN on the classification of assets of credit institutions that are cooperatives

CIRCULAR

Regulations on classification of assets held by credit institutions that are cooperatives

is a cooperative

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating 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 regulate the classification of assets held by credit institutions that are cooperatives. a credit organization is a cooperative.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

Article 1. This Circular regulates the classification of assets (hereinafter referred to as debts) arising from the following activities:

a) Lending;

b) Discounting, rediscounting negotiable instruments and other securities;

c) Credit issuance in the form of credit cards;

d) Paying on behalf of off-balance sheet commitments (including payment obligations of customers in guarantee operations, letter of credit transactions (excluding cases specified in point i of this Clause) and other paying on behalf of off-balance sheet commitments);

đ) Purchasing unlisted bonds issued by other credit institutions on the securities market or not registered for trading on the Upcom system (hereinafter referred to as unlisted bonds);

e) Entrusted credit issuance;

g) Deposits (excluding demand deposits) at credit institutions, foreign bank branches in accordance with the provisions of the law;

h) Purchasing deposit certificates issued by other credit institutions, foreign bank branches;

i) Letter of credit issuance with deferred payment terms where the beneficiary can be paid immediately or before the due date of the letter of credit, and the refund of letters of credit according to agreements with customers to be settled by the bank's funds from the date of refund settlement to the beneficiary; negotiation of letter of credit payments;

k) Purchasing documentary credits free of recourse presented under letters of credit, except when the cooperative bank purchases documentary credits free of recourse presented under letters of credit issued by the cooperative bank itself.

Article 2. Cooperative banks shall classify debts arising from the activities specified in Clause 1 and off-balance sheet commitments as stipulated in Clause 4 of this Article.

Article 3. People's Credit Funds shall classify debts arising from the activity specified in point a of Clause 1 of this Article.

Article 4. Guarantees, letter of credit operations (except for cases specified in point i of Clause 1 of this Article), acceptance of payment, irrevocable loan commitments, and other commitments generating credit risk (hereinafter referred to as off-balance sheet commitments) must be classified in accordance with this Circular to manage and monitor the quality of credit issuance activities of cooperative banks.

Article 5. For debts that have been provided for risk reserves in accordance with the Government Decree on the level, method of establishing risk reserves, and the use of reserves to handle risks in the operation of credit institutions, foreign bank branches, and cases where credit institutions allocate interest receivable write-offs (hereinafter referred to as the Decree on Risk Reserve Establishment), credit institutions that are cooperatives shall manage and monitor in accordance with the provisions of the Decree on Risk Reserve Establishment, without classifying debts in accordance with this Circular.

Article 6. Debts for which the Government, Prime Minister has regulations or decisions on the classification of assets, credit institutions that are cooperatives shall implement in accordance with those regulations or decisions of the Government, Prime Minister.

Article 2. Applicability

Article 3. Credit organizations that are cooperatives include:

a) Cooperative banks;

b) People's Credit Funds.

2. Other organizations and individuals related to the classification of debts of credit institutions that are cooperatives.

Article 3. Explanation of Terms

In this Circular, the following terms shall be understood as follows:

Article 1. Credit risk in the operation of credit institutions that are cooperatives (hereinafter referred to as risk) is the possibility of loss occurring to the debts of credit institutions that are cooperatives due to customers being unable to repay or lacking the ability to repay part or all of their debt according to contracts or agreements (hereinafter referred to as agreements) with credit institutions that are cooperatives. (hereinafter referred to as risk) is the possibility of loss occurring for the debt of a credit organization that is a cooperative due to the customer being unable to pay or lacking the ability to pay part or all of their debt according to the contract or agreement (hereinafter referred to as the agreement) with the credit organization that is a cooperative.

Article 2. A debt is the amount of money that a cooperative credit institution has deposited, paid, disbursed in installments according to agreements (for cases where each disbursement has a different final deadline for repayment period) or the amount of money that a cooperative credit institution has disbursed according to agreements (for cases where multiple disbursements have the same final deadline for repayment period) for a customer's outstanding debt. (for the case where each disbursement has a final deadline for the repayment period and term differing) or the amount disbursed by the credit organization that is a cooperative according to the agreement (for the case of multiple disbursements but having the same final deadline for the repayment period and term) for the unpaid debt of a customer.

Article 3. An overdue debt is a debt that the customer cannot repay on time part or all of the principal and/or interest according to agreements with cooperative credit institutions. For credit issuance in the form of credit card issuance, an overdue debt is a debt that the customer using the card cannot repay their due payment obligation according to the agreement on credit card issuance, usage, and payment with the cooperative bank.

Article 4. Non-performing loans (NPL) are non-performing loans recorded in the balance sheet (on-balance sheet non-performing loans), including debts belonging to groups 3, 4, and 5 as stipulated in this Circular.

Article 5. The ratio of non-performing loans is the ratio between non-performing loans and the total of debts from groups 1 to 5 as stipulated in this Circular.

Article 6. The ratio of bad credit is the ratio between the total of non-performing loans and off-balance sheet commitments from groups 3 to 5 and the total of debts and off-balance sheet commitments from groups 1 to 5.

Article 7. Restructured debt is debt restructured in terms of repayment deadlines in accordance with the regulations of the State Bank of Vietnam (hereinafter referred to as the State Bank).

Article 8. Customer is an organization (including credit institutions, foreign bank branches), individual, or other subjects as prescribed by civil law who have obligations or may generate obligations to repay and settle debts to cooperative banks, people's credit funds according to agreements and the State Bank's regulations on cooperative banks and people's credit funds.

Article 9. Other commitments generating credit risk are off-balance sheet commitments where if the cooperative bank fulfills its obligations according to the commitment with the customer, it will create assets as specified in Clause 1 of Article 1 of this Circular.

Article 4. Periodic Classification of Debts

1. At least once a month, within the first seven days of the month, credit organizations that are cooperatives shall base on the provisions of Clause 6, Article 1, Articles 8, 9, and 10 of this Circular to independently classify debts and off-balance sheet commitments up to the end of the last day of the preceding month.

In addition to the aforementioned classification time points, credit organizations that are cooperatives may independently classify debts and off-balance sheet commitments according to their internal regulations.

2. Based on the results of inspections, audits, supervision, and relevant credit information:

a) The State Bank of Vietnam (the Banking Inspection and Supervision Authority) has the right to require cooperative banks to re-evaluate and reclassify specific debts in accordance with the risk levels of those debts;

b) The State Bank of Vietnam branch in provincial and centrally-administered city has the right to require subordinate units of cooperative banks and people's credit funds to re-evaluate and reclassify specific debts in accordance with the risk levels of those debts.

Article 5. Internal Credit Rating System

1. Cooperative banks must establish an internal credit rating system to support debt classification and credit quality management consistent with the scope of operations and actual conditions of the cooperative bank. The minimum requirements for the internal credit rating system include:

a) Legal bases related to the establishment and business sectors of customers;

b) Comprehensive economic indicators related to business and financial situations, assets, and the ability to fulfill obligations under commitments;

c) Reputation with credit institutions previously transacted with;

d) Detailed and systematic criteria for evaluating customers (assessing industry and local factors) based on which specific ratings are assigned to customers.

2. People's credit funds have the right to apply the provisions of Clause 1 of this Article.

3. At least once a year, the internal credit rating system must be reviewed, amended, and supplemented based on customer data and information collected during the year.

4. Within ten (10) days from the date of issuance, amendment, supplementation, or replacement of the internal credit rating system, cooperative banks must submit it to the State Bank of Vietnam (the Banking Inspection and Supervision Authority). If applicable, people's credit funds must submit it to the State Bank of Vietnam branch in provincial and centrally-administered city through direct submission or postal service.

Article 6. Internal Regulations on Credit Granting, Debt Management, and Risk Reserve Policy

1. Credit organizations that are cooperatives must issue internal regulations on credit granting, debt management, and risk reserve policy in compliance with this Circular, the Decree on Establishing Risk Reserves, and other relevant laws.

2. Minimum requirements for internal regulations on credit granting and debt management include:

a) Established based on collected customer information and credit rating results according to the internal credit rating system (if applicable);

b) Uniformly and consistently applied throughout the system, serving as a basis for assessing and approving credit grants and managing specific customer debts;

c) Specifies credit policies for customers, including conditions for credit grants, credit limits, interest rates, application procedures, approval processes, and debt management;

d) Includes provisions for management to ensure compliance with the State Bank of Vietnam's regulations on limits and ratios ensuring safety in the operations of credit organizations that are cooperatives;

đ) Specifies responsibilities and authorities of units and individuals in credit assessment and approval, credit quality management, and collateral asset management;

e) Specifies procedures and contents for pre-, during-, and post-grant credit checks and controls;

g) Specifies guarantee measures, collateral asset assessment, and management;

h) Specifies valuation procedures for collateral assets, including principles, periodicity, methods, and responsibilities of each unit and individual involved in collateral asset valuation in accordance with the law to ensure the market value of collateral assets when calculating specific risk reserve amounts as stipulated in the Decree on Establishing Risk Reserves;

i) Specifies measures for debt recovery.

3. Minimum requirements for risk reserve policy include:

a) Consistent with accounting and financial systems; reporting and statistical systems;

b) Procedures for collecting customer information to ensure accurate debt classification, off-balance sheet commitments (if any), bad debt management, bad loan balance management, and full risk reserve provisioning as required;

c) Specific provisions on debt classification, off-balance sheet commitments (if any), risk reserve provisioning rates and methods, and the use of risk reserves in operations for different customer categories periodically or ad hoc;

d) Authorities and responsibilities of units and individuals in debt classification, off-balance sheet commitments (if any), risk reserve provisioning, and use in operations;

đ) Mechanisms for monitoring, supervising, and reporting on the contents specified from point a to point d of this Clause.

Article 7. Report on internal regulations on credit granting, debt management, and risk prevention policies

1. Within 10 (ten) days from the date of issuance, amendment, or supplementation of internal regulations on credit granting, debt management, and risk prevention policies as stipulated in Article 6 of this Circular, credit organizations that are cooperatives must directly submit or send through postal service to the State Bank in accordance with Clause 2 of this Article the following documents:

a) In case of new issuance: Internal regulations on credit granting, debt management, and risk prevention policies;

b) In case of amendment or supplementation:

(i) A report document on the amendment or supplementation of internal regulations on credit granting, debt management, and risk prevention policies, clearly reporting the reasons for amendment or supplementation;

(ii) The amended or supplemented internal regulations on credit granting, debt management, and risk prevention policies.

2. Credit organizations that are cooperatives shall submit reports to the State Bank in accordance with Clause 1 of this Article as follows:

a) Cooperative banks shall submit reports to the State Bank (Supervisory Authority);

b) People's Credit Funds shall submit reports to the State Bank branch in the province or centrally-administered city where the main office of the People's Credit Fund is located.

Chapter II
SPECIFIC PROVISIONS

Article 8. Principles of Self-Classification

1. All outstanding debts and off-balance-sheet commitments of a customer at a cooperative credit organization must be classified into the same loan category and the highest risk level among all loan categories and/or off-balance-sheet commitments of that customer.

2. For joint credit facilities, each participating cooperative credit organization has the responsibility to notify other participating cooperative credit organizations about the results of self-classification of loans according to the provisions of Article 9 of this Circular. 3. For discounting transferable instruments and other securities:

a) Under the form of purchase with term: Cooperative banks classify the discounting amount as a loan to the beneficiary;

b) Under the form of purchase with recourse: Cooperative banks classify the discounting amount as a loan to the beneficiary as follows:

Before the cooperative bank has the right to exercise the recourse according to the discount agreement, the cooperative bank bases its classification on the actual performance of the issuer's obligations to repay and settle, as well as information and data on the beneficiary's repayment capacity.

From the time the cooperative bank has the right to exercise the recourse according to the discount agreement, the cooperative bank bases its classification on the overdue period according to the issuance agreement of the transferable instrument and the beneficiary's repayment capacity to continue classifying the discounting amount into an appropriate risk level loan category.

4. For the amount purchased of unlisted bonds, cooperative banks classify the bond purchase amount as a loan to the bond issuer; if the bond is issued by another credit organization and guaranteed, it is classified as a guaranteed loan to the bond issuer. If the unlisted bond purchase amount is extended according to the law, it is classified as a loan with extended repayment period.

5. For entrusted credit disbursement where the entrustee has not disbursed the full entrusted amount according to the entrustment agreement, the cooperative bank must classify the entrusted but undisbursed amount as a loan to the entrustee. The overdue period is determined from the date the entrustee fails to disburse according to the agreed disbursement period in the entrustment agreement.

6. For the amount purchased of deposit certificates issued by other credit organizations or foreign bank branches, the cooperative bank classifies the purchase amount as a loan to the issuing credit organization or foreign bank branch.

7. For debts arising from letter of credit transactions:

a) For the issuance of letters of credit:

(i) In cases of immediate or deferred payment letters of credit (except for cases specified in point a(ii) of this Clause), the issuing bank classifies the payment obligation according to the letter of credit commitment under Clause 2 of Article 10 of this Circular for the applicant, starting from the date the issuing bank pays the beneficiary;

(ii) In cases of deferred payment letters of credit with terms allowing the beneficiary to be paid immediately or before the due date, the issuing bank classifies the debt arising from the letter of credit transaction as a loan to the applicant, starting from the date the bank completes the payment to the beneficiary;

b) For confirmation of letters of credit:

The confirming bank classifies the payment obligation according to the letter of credit commitment for the issuing bank, and the issuing bank classifies the payment obligation according to the letter of credit commitment for the applicant under Clause 2 of Article 10 of this Circular, starting from the date the confirming bank pays the beneficiary;

c) For negotiation of letters of credit:

The negotiating bank classifies the debt arising from the letter of credit transaction to the beneficiary as discounting of transferable instruments and other securities under Clause 3 of this Article;

d) For reimbursement of letters of credit:

(i) In cases of reimbursement of letters of credit in the form of issuing a reimbursement undertaking, the reimbursing bank classifies the payment obligation according to the letter of credit commitment under Clause 2 of Article 10 of this Circular for the issuing bank, starting from the date the reimbursing bank pays the beneficiary;

(ii) In cases of reimbursement of letters of credit in the form of settlement with the customer using the reimbursing bank's funds (except for cases specified in point d(i) of this Clause), the reimbursing bank classifies the debt arising from the letter of credit transaction as a loan to the issuing bank, starting from the date the reimbursing bank pays the beneficiary;

(i) In the case of reimbursement of a letter of credit through issuance of a reimbursement undertaking, the bank classifies the substituted payment according to the undertaking in the letter of credit as prescribed in Clause 2 Article 10 of this Circular for the issuing bank, from the date the bank makes the reimbursement payment to the beneficiary;

(ii) In the case of reimbursement of a letter of credit through an agreement with the customer to settle using the funds of the reimbursing bank (except for the case provided for in point d(i) of this Clause), the reimbursing bank classifies the debt arising from the letter of credit business as a loan to the issuing bank, from the date the reimbursing bank makes the payment to the beneficiary;

d) For the amount purchased outright without recourse for the presented documentary credit instruments, the cooperative bank shall classify such amount as a loan to the issuing bank or confirming bank.

8. For debts violating the provisions set forth at point c(iv) Clause 1 Article 9 of this Circular, upon discovery of the violation, the credit organization that is a cooperative must immediately issue a decision to recover the debt in accordance with the law. The decision to recover the debt must be issued promptly in accordance with the law.

For debts that need to be recovered based on audit conclusions, inspection decisions, administrative penalty decisions (hereinafter referred to as recovery based on audit conclusions, inspections), the credit organization that is a cooperative must issue a recovery decision according to the audit conclusions, inspections.

For debts violating the provisions set forth at point c(iv) Clause 1 Article 9 of this Circular, debts that need to be recovered based on audit conclusions, inspections, the credit organization that is a cooperative shall not restructure the repayment period and during the time when the debt has not been recovered according to the recovery decision, the credit organization that is a cooperative shall classify the debt in accordance with the provisions of this Circular.

9. For debts that have been restructured in terms of the repayment period, the number of times the repayment period is restructured is the total number of times the restructuring of the repayment period is carried out for each debt, from the date the debt arises until the customer completes all obligations to repay the debt and settle with the cooperative bank, people's credit fund.

Article 9. Debt Classification

1. Credit organizations that are cooperatives shall classify debts (excluding substitute payments under off-balance sheet commitments) into five groups as follows:

a) Group 1 (Standard Debts) includes:

(i) Debts within the due date and assessed as fully recoverable both principal and interest on time;

(ii) Overdue debts up to 10 days and assessed as fully recoverable both overdue principal and interest and remaining principal and interest on time;

(iii) Debts classified into Group 1 according to the provisions of Clause 2 of this Article;

b) Group 2 (Debts of Concern) includes:

(i) Overdue debts up to 90 days, except for debts specified in point a(ii) of this Clause and Clause 3 of this Article;

(ii) Debts whose repayment term was adjusted for the first time and remain within the due date, except for debts specified in point b of Clause 2 and Clause 3 of this Article;

(iii) Debts classified into Group 2 according to the provisions of Clause 2 and Clause 3 of this Article;

c) Group 3 (Substandard Debts) includes:

(i) Overdue debts from 91 to 180 days, except for debts specified in Clause 3 of this Article;

(ii) Debts extended for the first time and remain within the due date, except for debts specified in point b of Clause 2 and Clause 3 of this Article;

(iii) Debts exempted or reduced in interest due to the borrower's inability to pay full interest as agreed, except for debts specified in Clause 3 of this Article;

(iv) Debts falling into one of the following situations that have not been recovered within 30 days from the date the credit organization that is a cooperative signs a recovery notice (hereinafter referred to as the recovery decision date):

- Debts violating the provisions of Clauses 1, 3, and 6 of Article 134 of the Law on Credit Institutions;

- Debts violating the provisions of Clauses 1, 2, 3, and 4 of Article 135 of the Law on Credit Institutions;

- Debts violating the provisions of Clauses 1, 5, and 9 of Article 136 of the Law on Credit Institutions;

- Debts violating the regulations on lending by people's credit funds as stipulated by the State Bank;

(v) Debts within the recovery period according to audit conclusions, inspections;

(vi) Debts that need to be recovered according to the early recovery decision of the credit organization that is a cooperative due to the customer's breach of agreement with the cooperative credit institution but have not been recovered within 30 days from the recovery decision date;

(vii) Debts classified into Group 3 according to the provisions of Clause 2 and Clause 3 of this Article;

(viii) Debts that must be classified into Group 3 according to the provisions of Clause 2 of Article 4 of this Circular;

d) Group 4 (Doubtful Debts) includes:

(i) Overdue debts from 181 to 360 days, except for debts specified in Clause 3 of this Article;

(ii) Debts restructured in terms of the repayment period for the first time and overdue up to 90 days according to the restructured repayment period, except for debts specified in Clause 3 of this Article;

(iii) Debts restructured in terms of the repayment period for the second time and remain within the due date, except for debts specified in point b of Clause 2 and Clause 3 of this Article;

(iv) Debts specified at point c(iv) Clause 1 of this Article that have not been recovered within 30 to 60 days from the recovery decision date;

(v) Debts that need to be recovered according to audit conclusions, inspections but have not been recovered within 60 days beyond the recovery period according to the audit conclusions, inspections;

(vi) Debts that need to be recovered according to the early recovery decision of the credit organization that is a cooperative due to the customer's breach of agreement with the cooperative credit institution but have not been recovered within 30 to 60 days from the recovery decision date;

(vii) Debts classified into Group 4 according to the provisions of Clause 2 and Clause 3 of this Article;

(viii) Debts that must be classified into Group 4 according to the provisions of Clause 2 of Article 4 of this Circular;

đ) Group 5 (Loss Probable Debts) includes:

(i) Overdue debts over 360 days;

(ii) Debts restructured in terms of the repayment period for the first time and overdue for 91 days or more according to the restructured repayment period;

(iii) Debts restructured in terms of the repayment period for the second time and overdue according to the restructured repayment period for the second time;

(iv) Debts restructured in terms of the repayment period for the third time or more, except for debts specified in point b of Clause 2 of this Article;

(v) Debts specified at point c(iv) Clause 1 of this Article that have not been recovered within 60 days from the recovery decision date;

(vi) Debts that need to be recovered according to audit conclusions, inspections but have not been recovered within 60 days beyond the recovery period according to the audit conclusions, inspections;

(vii) Debts that need to be recovered according to the early recovery decision of the credit organization that is a cooperative due to the customer's breach of agreement with the cooperative credit institution but have not been recovered within 60 days from the recovery decision date;

(viii) Debts of customers who are credit institutions currently under special supervision, branches of foreign banks currently having their capital and assets frozen.

(ix) The debt is classified into Group 5 according to the provisions of Clause 3 of this Article;

(x) The debt must be classified into Group 5 according to the provisions of Clause 2 of Article 4 of this Circular.

2. The debt shall be classified into a lower risk group in the following cases:

a) For overdue debts, credit organizations that are cooperatives shall reclassify such debts into a lower risk group (including Group 1) when meeting all of the following conditions:

(i) The customer has fully repaid the principal and overdue interest (including interest applied to overdue principal) and the principal and interest of subsequent payment periods (if any) for at least three (3) months for medium-term and long-term debts, and one (1) month for short-term debts, starting from the date of full repayment of the overdue principal and interest;

(ii) There are documents and records proving the customer's repayment;

(iii) The credit organization that is a cooperative has sufficient information and documents to assess the customer's ability to fully repay the remaining principal and interest on time;

b) For debts with restructured repayment terms, credit organizations that are cooperatives shall reclassify such debts into a lower risk group (including Group 1) when meeting all of the following conditions:

(i) The customer has fully repaid the principal and interest according to the restructured repayment terms (if any) for at least three (3) months for medium-term and long-term debts, and one (1) month for short-term debts, starting from the date of full repayment of the principal or interest according to the restructured terms; if the principal and interest have the same repayment period, it starts from the date of full repayment of the principal and interest;

(ii) There are documents and records proving the customer's repayment;

(iii) The credit organization that is a cooperative has sufficient information and documents to assess the customer's ability to fully repay the remaining principal and interest on the restructured terms;

c) For debts with interest waived or reduced according to the State Bank's regulations on restructuring repayment terms, waiving or reducing interest and fees, and maintaining the same risk group to support customers affected by the COVID-19 pandemic, credit organizations that are cooperatives shall reclassify such debts into a lower risk group (including Group 1) when meeting all of the following conditions:

(i) The customer has fully repaid the principal and interest for at least three (3) months for medium-term and long-term debts, and one (1) month for short-term debts, starting from the date the customer begins to fully repay the principal or interest of the nearest payment period after the customer no longer receives interest waiver or reduction; if the principal and interest have the same repayment period, it starts from the date of full repayment of the principal and interest of the nearest payment period after the customer no longer receives interest waiver or reduction;

(ii) There are documents and records proving the customer's repayment;

(iii) The credit organization that is a cooperative has sufficient information and documents to assess the customer's ability to fully repay the remaining principal and interest on time;

3. The debt shall be classified into a higher risk group in the following cases:

a) Indicators of profitability, solvency, debt-to-equity ratio, and cash flow leading to the customer's ability to repay the debt continuously decline over three consecutive assessments or classifications;

b) The customer fails to provide complete, timely, and truthful information as required by the credit organization that is a cooperative to assess the customer's ability to repay the debt;

c) The debt has been classified into Groups 2, 3, or 4 according to point a and point b of this Clause for one (1) year or more but does not meet the conditions to be classified into a lower risk group;

d) The debt where the lending behavior is subject to administrative penalties under the law;

đ) Debts of customers classified by other credit organizations or foreign bank branches into a higher risk group (if there is information).

Article 10. Classification of Off-Balance-Sheet Commitments and Substituted Payments under Off-Balance-Sheet Commitments

For off-balance-sheet commitments and substituted payments under off-balance-sheet commitments, cooperative banks must classify them into the groups specified in Article 9 of this Circular as follows:

1. Classification of Off-Balance-Sheet Commitments:

a) Classify into Group 1 if the cooperative bank assesses that the customer has the ability to fully perform their obligations under the commitment;

b) Classify into Group 2 or higher if the cooperative bank assesses that the customer does not have the ability to perform their obligations under the commitment;

c) Classify into Group 3 or higher for off-balance-sheet commitments falling within any of the cases prescribed in point c(iv) Clause 1 of Article 9 of this Circular.

2. Classification of Substituted Payments under Off-Balance-Sheet Commitments:

a) The overdue date is calculated from the day the cooperative bank performs its obligation under the commitment;

b) Substituted payments under off-balance-sheet commitments shall be classified as follows:

(i) Classify into Group 3 if overdue for less than 30 days;

(ii) Classify into Group 4 if overdue from 30 days up to less than 90 days;

(iii) Classify into Group 5 if overdue for 90 days or more.

In case the substituted payment is classified into a lower risk group than the off-balance-sheet commitment it replaces according to points b and c Clause 1 of this Article, it must be reclassified into the group of the off-balance-sheet commitment.

Article 11. Reporting

Cooperative credit organizations must report the results of loan classification, off-balance-sheet commitments, provision establishment and utilization for risk management in accordance with the reporting and statistical system applicable to cooperative credit organizations issued by the State Bank of Vietnam.

Chapter III
IMPLEMENTATION

Article 12. Responsibilities of the State Bank

1. The Banking Inspection and Supervision Authority is responsible for:

a) Receiving internal regulations on credit granting, debt management, and risk reserve policies of cooperative banks as stipulated in Article 7 of this Circular to serve micro safety supervision, inspection, and audit work;

b) Inspecting, supervising, auditing, and handling violations in the implementation of loan classification, off-balance-sheet commitments, provision establishment and utilization for risk management of cooperative banks and people's credit funds according to its authority and legal provisions.

2. The Financial Accounting Department shall base on the provisions of this Circular to develop and submit to the Governor of the State Bank of Vietnam documents guiding the implementation of relevant accounting systems as provided by law.

3. Branches of the State Bank of Vietnam in provinces and centrally-administered cities are responsible for:

a) Receiving internal regulations on credit granting, debt management, and risk reserve policies of people's credit funds as stipulated in Article 7 of this Circular to serve micro safety supervision, inspection, and audit work;

b) Inspecting, supervising, auditing, and handling violations in the implementation of loan classification, off-balance-sheet commitments, provision establishment and utilization for risk management of units subordinate to cooperative banks and people's credit funds within their jurisdiction according to their authority and legal provisions.

Article 13. Transitional Provisions

The amount purchased of promissory notes and bills issued by other credit organizations and foreign bank branches before the effective date of this Circular, cooperative banks shall classify the purchase amount as the purchase amount of deposit certificates as prescribed in Clause 6, Article 8 of this Circular.

Article 14. Implementation clause

1. This Circular takes effect from August 15, 2024.

2. This Circular abolishes:

a) Decision No. 493/2005/QĐ-NHNN dated April 22, 2005, of the Governor of the State Bank of Vietnam promulgating the Regulations on Loan Classification, Provision Establishment and Utilization for Risk Management in Banking Activities of Credit Organizations;

b) Decision No. 18/2007/QĐ-NHNN dated April 25, 2007, amending and supplementing certain articles of the Regulations on Loan Classification, Provision Establishment and Utilization for Risk Management in Banking Activities of Credit Organizations promulgated together with Decision No. 493/2005/QĐ-NHNN dated April 22, 2005.

Article 15. Responsibility for Organizing Implementation

The Director of the Office, the Director of the Banking Inspection and Supervision Authority, the Heads of Units under the State Bank of Vietnam, cooperative banks, and people's credit funds are responsible for organizing the implementation of this Circular./.

Dao Minh Tu