Decision No. 41/2007/QD-NHNN on the issuance of the Regulation on the establishment, management, and utilization of risk reserve funds of the State Bank of Vietnam

Pursuant to …;

REGARDING THE ISSUANCE OF REGULATIONS ON ESTABLISHMENT, MANAGEMENT

AND USE OF THE RISK RESERVE FUNDS OF THE STATE BANK OF VIETNAM

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GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam 1997; the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam 2003;

Pursuant to Decree No. 52/2003/NĐ-CP dated May 19, 2003 of the Government on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Decree No. 07/2006/NĐ-CP dated January 10, 2006 of the Government on the financial regime of the State Bank of Vietnam;

After reaching consensus with the Ministry of Finance in Document No. 13463/BTC-TCNH dated October 8, 2007;

At the proposal of the Director of the Accounting and Finance Department,

DECISION:

Article 1. These regulations on establishment, management, and use of the risk reserve funds of the State Bank of Vietnam are hereby issued.

Article 2. This Decision shall take effect fifteen days from the date of publication in the Official Gazette and shall replace Decision No. 171/2002/QĐ-NHNN dated March 8, 2002 of the Governor of the State Bank of Vietnam on the issuance of regulations on establishment, management, and use of the risk reserve funds of the State Bank of Vietnam.

Article 3. The Heads of the Office, the Director of the Accounting and Finance Department, the Heads of units under the State Bank of Vietnam, and the Governors of the State Bank of Vietnam Branches in provinces and centrally-administered cities are responsible for implementing this Decision./.

 

REGULATIONS

Establishment, Management, and Use of the Risk Reserve Funds of the State Bank of Vietnam

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(Issued together with Decision No. 41/2007/QĐ-NHNN dated November 6, 2007 of the Governor of the State Bank of Vietnam)

Chapter I

GENERAL PROVISIONS

Article 1These regulations stipulate the procedures for establishing, managing, and using the risk reserve funds of the State Bank of Vietnam to offset losses caused by external factors in its credit activities, payment services, and treasury operations, and the difference in losses after collective or individual compensation in accordance with the law.

Debts that are currently being written off or extended according to decisions of the Prime Minister are not within the scope of these regulations.

Article 2Annually, the State Bank of Vietnam will establish the risk reserve fund and record it as an expense equal to 10% of total income excluding expenses not yet included in the risk reserve fund (excluding revenues and expenditures from state budget funds).

Article 3The risk reserve fund of the State Bank of Vietnam shall be established, recorded, and managed centrally at the State Bank of Vietnam (Accounting and Finance Department).

Article 4If the risk reserve fund of the State Bank of Vietnam is not fully utilized in a year, the remaining amount shall be carried over to the next year for continued use.

In cases where the risk reserve fund is insufficient to cover losses as prescribed in these regulations, the State Bank of Vietnam shall coordinate with the Ministry of Finance to submit to the Prime Minister for handling the shortfall.

Article 5Authority to handle losses through the risk reserve fund

The Governor of the State Bank of Vietnam decides on the handling of losses of the State Bank of Vietnam.

Article 6Principles for handling losses through the risk reserve fund

1. The Governor of the State Bank of Vietnam examines and handles losses that have sufficient legal evidence at the time of handling.

2. For losses handled through the risk reserve fund of the State Bank of Vietnam, units causing such losses shall not notify the debtors and must continue to take measures to recover debts as if they were regular receivables not yet handled through the risk reserve fund, except in cases where the Prime Minister has decided to write off the debts.

3. All amounts recovered from losses already handled through the risk reserve fund must be remitted to the State Bank of Vietnam (Accounting and Finance Department) to be recorded as income of the State Bank of Vietnam.

Chapter II

SPECIFIC PROVISIONS

, Clause 1, Clause 2 Article 7a of this Regulation.Annually, the Accounting and Finance Department shall calculate, establish, and record in the "Establishment of Risk Reserve Fund" account to create a source for handling losses as prescribed in these regulations.

Article 8The risk reserve fund is used to handle losses arising during the operation of the State Bank of Vietnam, including:

1. Losses arising from lending activities:

a) Debts written off according to the decision of the Prime Minister but not funded by the government to compensate the State Bank of Vietnam.

b) Debts owed by financial institutions that have clear evidence of being unrecoverable when the financial institution is dissolved or declared bankrupt in accordance with the law.

2. Losses due to external factors occurring while performing payment transactions, such as technical failures in payment networks, technology...

3. Losses related to money, gold, precious assets, and negotiable instruments arising from external factors in treasury operations:

a) Losses during transportation due to unforeseen incidents including accidents, theft, destruction, natural disasters, war, terrorism, or other unforeseen incidents.

b) Destruction of cash reserves due to natural disasters, war, terrorism, or other external factors.

c) Losses of cash, precious assets, and negotiable instruments at transaction locations due to destruction or theft.

4. Losses from other activities:

a) Receivables from organizations or individuals involved in embezzlement or abuse that have clear evidence of being unrecoverable.

b) Receivables based on compensation conclusions by legal authorities or the Governor of the State Bank of Vietnam, but even after the organization or individual has compensated, there is still an inability to recover the full amount as concluded; and/or the difference in losses after collective or individual compensation in accordance with legal authorities or the Governor of the State Bank of Vietnam.

c) Losses of money, gold, and negotiable instruments deposited in foreign banks due to unforeseen incidents such as the country where the State Bank of Vietnam deposits money being at war, terrorism, bankruptcy, natural disasters, and the foreign bank being unable to pay.

d) Other losses during operations that have reliable evidence of no longer having a recipient or the recipient no longer being able to pay.

5. Other cases as decided by the Governor of the State Bank of Vietnam.

Article 9Composition of the Council for Inspection and Handling of Losses of the State Bank of Vietnam

- A Deputy Governor of the State Bank of Vietnam - Chairman of the Council.

Members of the Council:

- Director of the Accounting and Finance Department - Standing Member.

- Director of the Credit Department.

- Director of the General Supervision Department.

- Chief Inspector of the State Bank of Vietnam.

- Director of the Issuance and Treasury Department.

- Director of the Legal Affairs Department.

- Director of the Organization and Cadres Department.

Article 10. ||| Duties of the Loss Examination and Resolution Council.

When loss cases requiring resolution from the risk reserve fund arise, based on reports and recommendations from the head of the unit where the losses occurred, the Loss Examination and Resolution Council shall develop plans to analyze and assess debts and losses.

- Submit to the Governor for review and send to the Ministry of Finance for comments and then submit to the Prime Minister for approval regarding debt write-offs under point a, Clause 1, Article 8 of this Regulation.

- Submit to the Governor for review and send to the Ministry of Finance for comments regarding losses due to force majeure as stipulated in Clauses 2 and 3, and point c, Clause 4, Article 8 of this Regulation.

- Submit to the Governor for review and handle loss cases as specified in point b, Clause 1; points a, b, and d, Clause 4; and Clause 5, Article 8 of this Regulation.

- Inspect the implementation of loss resolutions following decisions made by competent authorities.

Article 11. Legal documents serving as the basis for loss resolution.

Legal documents at the State Bank for resolving losses must ensure legality, including:

1. Decisions of the Prime Minister on debt write-offs for specific debts and borrowers; accompanied by files and documents on the debts being written off (applicable to point a, Clause 1, Article 8 of this Regulation);

2. Decisions of the Governor of the State Bank on handling losses for specific receivables and specific entities;

3. Files and documents related to losses;

4. Reports and recommendations from the unit where the losses occurred;

5. Petitions and minutes of the Loss Examination and Resolution Council;

6. Decisions of authorized legal agencies or the Governor of the State Bank assigning liability for compensation to organizations and individuals, accompanied by lists and amounts to be compensated for each organization and individual; or

7. Copies of decisions declaring bankruptcy or dissolution by authorized bodies according to the law and copies of documents settling debts and asset distribution plans for bankrupt or dissolved credit institutions and enterprises (for organizations and businesses);

8. Copies of death certificates or missing person confirmations issued by authorized bodies or opinions of authorized functional agencies confirming objective reasons for non-payment of debts (for individuals).

Article 12Procedure for loss resolution.

All loss resolution cases at the State Bank (Headquarters) shall be carried out according to the following procedure:

- Heads of units with loss accounts must direct relevant departments including the Head of the Accounting and Settlement Department, the Supervisor or supervisory officer (where there is no supervisor), the Head of the Organization and Administration Department, and the Head or department where the losses occurred to explain, examine, and provide statements, prepare minutes along with loss account files, report to the Governor of the State Bank (through the Accounting and Finance Department).

- The Accounting and Finance Department shall review the files and related documents of the losses. Based on this, the Accounting and Finance Department shall draft a proposal to the Organization and Cadres Department to request the Governor of the State Bank to establish the Loss Examination and Resolution Council as provided for in Article 9 of this Regulation.

- The Loss Examination and Resolution Council shall examine, propose solutions, and carry out tasks as prescribed in Article 10 of this Regulation.

- After the Governor of the State Bank issues a decision on loss resolution, the files and related documents shall be transferred to the Accounting and Finance Department for further processing.

Chapter III

IMPLEMENTATION

Article 13Members of the Loss Examination and Resolution Council of the State Bank are responsible to the Governor of the State Bank for organizing and implementing loss resolutions in accordance with the provisions of this Regulation.

Article 14The Director of the Accounting and Finance Department is responsible for guiding accounting entries and using the risk reserve fund to resolve losses according to the Governor's loss resolution decisions.

Article 15The Director of the General Supervision Department is responsible for coordinating and inspecting the implementation of this Regulation./.