This circular stipulates the method for handling risks when auctioning collateralized assets to recover bank loans, including the use of the Special Reserve Fund and the Provision for Doubtful Debts. Commercial banks must establish a Committee to classify the causes of risk and handle them according to the provisions of the law.
Đối tượng áp dụng
Commercial banks, State Bank of Vietnam
Các điểm cốt lõi
- Commercial banks → must establish a Committee to classify the causes leading to the need to cover risks between the amount received from the auction of collateralized assets and the unpaid loan principal.
- For assets auctioned that are collateral or pledges: if caused by subjective reasons, the person at fault shall bear criminal or civil responsibility; if caused by objective reasons, the bank may record it in its business results.
- For assets seized that are not collateral or pledges for loans: the lending party violating current credit regulations shall be held responsible; if the debtor cannot pay the remaining difference after seizure, the bank may record it in its business results.
- The process of auctioning assets to recover loan capital must be carried out according to the current mechanisms for public auction and asset disposal; only the sources of compensation mentioned above can be used to address the discrepancy between the unpaid loan principal and the proceeds from the auction of assets.
- Commercial banks → report to the Ministry of Finance the results after each round of handling.
🌐 Tác động xã hội từ văn bản này
- Positive impact: Helps banks manage risks more effectively, reducing financial losses.
- Negative impact: May increase the burden on individuals and businesses if they are unable to fully repay the loan.
❓ Câu hỏi thường gặp
What must commercial banks do when auctioning collateralized assets?
Commercial banks must establish a Committee to classify the causes leading to the need to cover risks between the amount received and the unpaid loan principal.
If caused by subjective reasons, who will be held responsible?
The person at fault shall bear criminal or civil responsibility.
When can the Special Reserve Fund be used to cover risks?
The Special Reserve Fund can be used to cover risks caused by subjective reasons; if insufficient, the Provision for Doubtful Debts shall be used.
If the debtor cannot pay the remaining difference after seizure, what can the bank do?
The bank may record it in its business results and consider it a business risk in credit operations.
What regulations must be followed during the process of auctioning assets to recover loan capital?
Auctioning assets must be carried out according to the current mechanisms for public auction and asset disposal, using only the sources of compensation mentioned above.
Toàn văn
LETTER
OF THE MINISTRY OF FINANCE NUMBER 3953 TC/TCDN ON NOVEMBER 5, 1997
REGARDING THE HANDLING OF LOSSES AFTER AUCTIONING COLLATERALIZED ASSETS
FOR LOANS FROM BANKS
Respected: State Bank of Vietnam
In response to Circular No. 428/CV-ĐC dated August 12, 1997 of the State Bank of Vietnam regarding the proposal to use the "Special Reserve Fund" to cover losses after auctioning collateralized assets to recover overdue loans and non-performing loans, the Ministry of Finance provides the following opinions:
1. First, commercial banks must establish a Council to classify the causes leading to the need to cover losses between the amount received from the auction of collateralized assets and the amount of bank loans that cannot be repaid.
2. After classifying the causes:
a. For assets auctioned that are collateral for bank loans:
- If caused by subjective reasons such as: incorrectly assessing the value of the collateral, overestimating its value compared to its actual value, insufficient legal basis for the collateral, or lending amounts exceeding the prescribed ratio based on the value of the collateral... then the person at fault must first bear criminal or civil responsibility.
The difference between the loss and the compensation paid by the party responsible will be covered by the special risk reserve fund according to the Ordinance on Banks, Credit Cooperatives, and Financial Companies. If there is still a shortfall, it can be covered using the provision for doubtful debts under the current mechanism specifically provided for banks.
- In cases where the cause is objective, commercial banks are permitted to account for these as business risks in their operations.
b. For assets seized that are not collateral for bank loans:
- Responsibility is assigned in cases where the lender violates the current credit regulations and the person at fault must bear criminal or civil responsibility.
The difference between the loss and the compensation paid by the party responsible (the lender) will be handled as in paragraph a - Point 2.
- For seized assets where the full debt cannot be recovered due to the debtor's actions, the remaining difference must be borne by the debtor to repay the bank.
If the debtor is unable to pay the remaining difference after seizure, banks may account for this as a business risk in their credit operations.
3. The process of auctioning assets to recover loan capital must be carried out strictly in accordance with the current mechanisms for public auctions and asset sales. Only the sources of coverage mentioned above may be used to address the difference between the outstanding principal of bank loans and the proceeds from the sale of assets.
4. It is requested that the State Bank instruct state-owned commercial banks to implement the contents outlined above; simultaneously, report to the Ministry of Finance the results after each handling period.
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