Circular No. 41/2016/TT-NHNN on the capital adequacy ratio for banks and foreign bank branches

CIRCULAR

Regulations on capital adequacy ratio for

banks and foreign bank branches

                                                                             

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

Pursuant to Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

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;

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

The Governor of the State Bank of Vietnam (hereinafter referred to as the State Bank) issues this Circular regulating the capital adequacy ratio for banks and foreign bank branches.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

1. This Circular regulates the capital adequacy ratio for banks and foreign bank branches operating in Vietnam.

a) Banks: State-owned commercial banks, joint-stock commercial banks, joint venture banks, and wholly foreign-owned banks;

b) A foreign bank branch.

3. This Circular does not apply to banks placed under special supervision.

Article 2. Interpretation of Terms

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

1. Financial assets include the following types of assets:

a) Cash;

b) Capital instruments of other entities;

c) Rights under contracts to:

(i) Receive cash or other financial assets from other entities; or

(ii) Exchange financial assets or financial liabilities with other entities under conditions that may be advantageous to the bank or foreign bank branch;

d) Contracts that will or may be settled in the form of capital instruments of the bank.

2. Financial liabilities include the following obligations:

a) That are mandatory to:

(i) Pay cash or other financial assets to other entities;

(ii) Exchange financial assets or financial liabilities with other entities under conditions that are not advantageous to the bank or foreign bank branch; or

b) Contracts that will or may be settled in the form of capital instruments of the bank.

3. Financial instruments are contracts that increase the financial assets of one party and the financial liabilities or capital instruments of another party.

4. Capital instruments are contracts demonstrating residual interests in the assets of an entity after deducting all its liabilities. Capital instruments issued by the bank that have debt-like characteristics include preferred shares and other capital instruments meeting the following conditions:

a) They can be repurchased in accordance with the law and ensure compliance with prescribed limits and safety ratios after such repurchase;

b) They can be used to offset losses without requiring the bank to cease proprietary trading activities;

c) They do not pay dividends and do not carry over dividends to the next year if paying dividends would result in a loss for the bank.

5. Subordinated debt is debt where the creditor agrees to be paid after other creditors, both secured and unsecured, when the debtor entity is liquidated or dissolved.

6. Customers are individuals and legal entities (including credit organizations and foreign bank branches) having credit and deposit relationships with banks and foreign bank branches, except for counterparties specified in Clause 7 of this Article.

7. Counterparties are individuals and legal entities (including credit organizations and foreign bank branches) engaging in transactions specified in Clause 4 of Article 8 of this Circular with banks and foreign bank branches.

8. Claims of banks and foreign bank branches include:

a) Credit facilities, including entrusted credit facilities and purchases with retention of recourse rights to transferable securities and other negotiable instruments, excluding purchases with fixed terms of transferable securities and other negotiable instruments;

b) Negotiable instruments issued by other entities;

c) Rights under contracts to receive cash or other financial assets from other entities in accordance with the law, excluding items specified in points a and b of this clause;

9. Retail credit portfolio is a list of credit facilities provided to individual customers (excluding mortgage loans secured by real estate as stipulated in Clause 10 of this Article, mortgage loans for housing as stipulated in Clause 11 of this Article, and loans for securities trading) where the outstanding balance of a customer's credit facility (both disbursed and undisbursed) ensures simultaneously:

a) Not exceeding VND 8 billion;

b) Not exceeding 0.2% of the total outstanding balance of the entire retail credit portfolio (both disbursed and undisbursed) of the bank or foreign bank branch.

10. Real estate mortgage loan is a loan granted to individuals and legal entities to purchase real estate or implement real estate projects and secured by the real estate or project formed from the loan according to the provisions of the law on secured transactions.

a) The source of repayment funds is not rental income generated from the loan;

b) The house has been completed in accordance with the house purchase contract;

c) The bank or foreign bank branch has the legal right to dispose of the mortgaged house when the borrower fails to repay the loan in accordance with the law on secured transactions;

d) The house formed from this mortgage loan must be independently appraised (by a third party or by an independent department within the bank or foreign bank branch separate from the credit approval department) with prudence (the value not exceeding the market price at the time of loan approval) in accordance with the regulations of the bank or foreign bank branch.

12. Specialized lending is credit facilities provided to implement projects, invest in machinery and equipment, or purchase goods, meeting the following criteria:

a) The borrowing entity is a legal entity established solely for implementing the project, operating machinery and equipment, or trading goods formed from the credit facility, with no other business activities;

b) Secured by the project, machinery and equipment, or goods formed from the credit facility, and the entire source of repayment funds is derived from the operation, exploitation of the project, machinery, and equipment, and the sale of goods;

d) Implemented in the following forms:

(i) Project Finance credit is a specific credit facility granted to implement a project;

(ii) Income producing real estate finance credit is a specific credit facility granted to implement a real estate business project (office buildings, shopping centers, urban areas, mixed-use buildings, warehouses, hotels, industrial zones...);

(iii) Object Finance credit is a specific credit facility granted for investment in machinery and equipment (ships, aircraft, satellites, trains...);

(iv) Commodities Finance credit is a specific credit facility granted to purchase goods (crude oil, metals, grains...);

13. Business real estate is real estate that is invested in, purchased, acquired through transfer, leased, or leased with purchase option for the purpose of selling, transferring, leasing, subleasing, or leasing with purchase option to generate profit;

14. Repo transaction is a transaction in which one party sells and transfers ownership of financial assets to another party, while committing to repurchase and reclaim ownership of such financial assets at a specified price after a determined period;

16. Independent credit rating agencies include:

a) The credit rating organizations Moody's, Standard & Poor, Fitch Rating;

b) Credit rating agencies established in accordance with Vietnamese laws on credit rating services;

17. Voluntary credit rating is the independent credit rating agency's voluntary act of conducting credit ratings without an agreement with the rated entity;

18. Agreed credit rating is the act of an independent credit rating agency conducting credit ratings pursuant to an agreement between the independent credit rating agency and the rated entity;

19. OECD is the Organization for Economic Cooperation and Development (Organization for Economic Cooperation and Development);

20. International financial organizations include:

a) The World Bank Group comprising: The International Bank for Reconstruction and Development (The International Bank for Reconstruction and Development - IBRD), The International Finance Corporation (The International Financial Company - IFC), The International Development Association (The International Development Association-IDA), The Multilateral Investment Guarantee Agency (The Multilateral Investment Guarantee Agency-MIGA);

b) The Asian Development Bank (The Asian Development Bank - ADB);

c) The African Development Bank (The Africa Development Bank - AfDB);

d) The European Bank for Reconstruction and Development (The European Bank for Reconstruction and Development - EBRD);

đ) The Inter-American Development Bank (The Inter-American Development Bank - IADB);

e) The European Investment Bank (The European Investment Bank - EIB);

g) The European Investment Fund (The European Investment Fund - EIF);

h) The Nordic Investment Bank (The Nordic Investment Bank - NIB);

i) The Caribbean Development Bank (The Caribbean Development Bank - CDB);

k) The Islamic Development Bank (The Islamic Development Bank - IDB);

l) The Council of Europe Development Bank (The Council of Europe Development Bank - CEDB);

m) Other international financial organizations with capital contributions from governments of various countries;

21. Risk mitigation is the use by banks and foreign bank branches of measures to reduce part or all potential losses arising from risks in their operations;

22. Derivative products include:

a) Derivative products as prescribed in Clause 23, Article 4 of the Law on Credit Institutions, including:

(i) Credit derivative products comprising credit insurance contracts, credit risk swap contracts, credit-linked investment contracts, and other credit derivative contracts as prescribed by law;

(ii) Interest rate derivative products comprising forward interest rate contracts, single currency interest rate swap contracts, cross-currency interest rate swap contracts, interest rate option contracts, and other interest rate derivative contracts as prescribed by law;

(iii) Foreign exchange derivative products comprising forward foreign exchange transactions, foreign exchange swap transactions, foreign exchange option transactions, and other foreign exchange derivative transactions as prescribed by law;

(iv) Commodity price derivative products comprising commodity price swap contracts, commodity futures contracts, commodity price option contracts, and other commodity price derivative contracts as prescribed by law;

b) Derivative securities comprising futures contracts, options contracts, forward contracts, and other derivative securities as prescribed by law on derivative securities and derivative securities markets;

c) Other derivative products as prescribed by law;

23. Underlying asset is the original financial asset used as the basis for determining the value of derivative products;

24. Credit risk includes:

a) Credit risk is the risk arising from a customer's failure or inability to fulfill partially or fully their debt obligations under a contract or agreement with a bank or foreign bank branch, except for cases stipulated in point b of this clause;

b) Counterparty credit risk is the risk arising from a counterparty's failure or inability to fulfill partially or fully their payment obligations prior to or upon maturity of transactions as prescribed in Clause 4, Article 8 of this Circular;

25. Market risk is the risk arising from adverse fluctuations in interest rates, exchange rates, security prices, and commodity prices in the market. Market risk includes:

a) Interest rate risk is the risk arising from adverse fluctuations in interest rates in the market affecting the value of securities, interest-bearing financial instruments, and interest rate derivative products on the trading book of banks and foreign bank branches.

b) Foreign exchange risk is the risk arising from adverse fluctuations in exchange rates in the market when banks and foreign bank branches have foreign currency positions.

c) Stock price risk is the risk arising from adverse fluctuations in stock prices in the market affecting the value of stocks and the value of stock derivatives on the trading book of banks and foreign bank branches.

d) Commodity price risk is the risk arising from adverse fluctuations in commodity prices in the market affecting the value of commodity derivatives and the value of spot transactions subject to commodity price risk at banks and foreign bank branches.

26. Interest rate risk on the bank's books is the risk arising from adverse fluctuations in interest rates affecting income, asset value, liability value, and off-balance sheet commitment value of banks and foreign bank branches due to:

a) The time difference in setting new interest rate levels or re-setting interest rates;

b) Changes in the relationship between interest rate levels of different financial instruments with the same maturity date;

c) Changes in the relationship between interest rates at different tenors;

d) Impact from interest rate option products and products containing interest rate options.

27. Operational risk is the risk arising from insufficient or erroneous internal processes, human factors, system failures, or external factors causing financial losses or non-financial negative impacts on banks and foreign bank branches (including legal risks). Operational risk does not include:

a) Reputation risk;

b) Strategic risk.

28. Reputation risk is the risk arising from customers, partners, shareholders, investors, or the public having a negative reaction to the reputation of banks and foreign bank branches.

29. Strategic risk is the risk arising from banks and foreign bank branches having or not having timely response strategies or policies to changes in the business environment, thereby reducing the ability to achieve business strategies and profit targets of banks and foreign bank branches.

30. Exposure value is the portion of the value of assets, liabilities, and off-balance sheet commitments of banks and foreign bank branches that may suffer financial loss or non-financial negative impact from credit risk, market risk, liquidity risk, operational risk, and other risks.

31. Proprietary trading is the purchase, sale, or exchange transaction conducted by banks, foreign bank branches, or subsidiaries of banks in accordance with the law for the purpose of buying, selling, or exchanging within one year to earn profits from market price differences for banks and foreign bank branches involving financial instruments, including:

a) Financial instruments in the money market;

b) Various currencies (including gold);

c) Securities in the capital market;

d) Derivative products;

đ) Other financial instruments traded on formal markets.

32. Trading book is a record of the status of:

a) Proprietary trading transactions (excluding transactions specified in point b, Clause 33 of this Article);

b) Transactions to perform issuance guarantee operations for financial instruments;

c) Derivative product transactions to hedge risks of proprietary trading transactions of banks and foreign bank branches;

d) Foreign currency and financial asset purchase and sale transactions to serve customer and partner needs and transactions corresponding to these transactions.

33. Bank book is a record of the status of:

a) Repo and reverse repo transactions;

b) Derivative product transactions to hedge risks for items on the balance sheet (including off-balance sheet items) of banks and foreign bank branches, excluding transactions classified into the trading book of banks and foreign bank branches as specified in point c, Clause 32 of this Article;

c) Financial asset purchase and sale transactions for liquidity reserve purposes;

d) Remaining transactions not included in the trading book of banks and foreign bank branches.

Article 3. Organizational Structure and Internal Audit on Capital Adequacy Ratio Management

1. Banks and foreign bank branches must have an organizational structure, hierarchical delegation mechanism, and functions and responsibilities of each individual and department to manage the capital adequacy ratio, ensuring compliance with the provisions of this Circular and being suitable for the needs, characteristics, risk level in operations, business cycles, risk adaptability, and business strategy of the banks and foreign bank branches.

2. Banks and foreign bank branches must conduct internal audit on the capital adequacy ratio in accordance with the State Bank of Vietnam’s regulations on the internal control system of credit institutions and foreign bank branches.

Article 4. Data and Information Technology Systems

1. Banks and foreign bank branches must have complete data and appropriate information technology systems to calculate the capital adequacy ratio as prescribed in this Circular.

2. Banks and foreign bank branches must organize the collection and management of data to meet the following minimum requirements:

a) Having an organizational structure, functions, and tasks of individuals and departments; procedures; tools to manage data ensuring quality and completeness requirements of the data;

b) Having procedures for collecting, cross-checking data (internal and external), storing, accessing, supplementing, backing up, and destroying data to ensure the accuracy of the capital adequacy ratio as prescribed in this Circular;

c) Meeting the requirements according to the internal regulations of the banks and foreign bank branches and the State Bank of Vietnam’s regulations on reporting and statistical systems.

3. The information technology system must meet the following minimum requirements:

a) Connecting and centrally managing the entire system, ensuring security, safety, and efficiency when calculating the capital adequacy ratio as prescribed in this Circular;

b) Having tools connected to other systems to calculate Core Capital, Total Assets based on Credit Risk, capital requirement for each type of risk, and the capital adequacy ratio accurately and promptly;

c) Having procedures for reviewing, testing, backing up, handling incidents, regular maintenance;

d) Meeting the requirements according to the internal regulations of the banks and foreign bank branches and the State Bank of Vietnam’s regulations on reporting and statistical systems.

Article 5. Independent Credit Rating Enterprises

1. Banks and foreign bank branches may apply the results of independent credit rating enterprises established and operating in accordance with the laws on credit rating services to calculate the capital adequacy ratio as prescribed in this Circular when the independent credit rating enterprise meets the following conditions:

a) Objectivity: The credit rating must be rigorous, systematic, reviewed based on historical data ensuring accuracy at least for one year; carried out continuously and timely before changes in financial situations;

b) Independence: The credit rating enterprise must not be subject to political or economic pressure affecting the credit rating results;

c) Transparency: The credit rating must be widely announced to relevant parties (domestic and foreign) with legitimate interests;

d) Publicity: The credit rating enterprise must disclose information about rating methods, default concepts, meanings of each credit rating, actual default rates of each credit rating, and rating changes;

e) Competence: The credit rating enterprise must have sufficient resources to conduct high-quality ratings, implement qualitative and quantitative rating methods combined with regular and continuous contact with different levels of rated entities to enhance the quality of credit ratings;

f) Reliability: The credit rating must be trusted by organizations (investors, insurance companies, trading partners). The credit rating enterprise must have internal processes to prevent the misuse of confidential information related to rated entities.

2. Banks and foreign bank branches must uniformly use the credit ratings provided by independent credit rating enterprises to manage risks and apply credit risk weights as prescribed in this Circular.

3. The credit rating scale of independent credit rating enterprises is determined to correspond to the risk level when calculating the capital adequacy ratio as follows:

a) The credit ratings of Moody's, Standard & Poor's, and Fitch Ratings are distributed as follows:

b) In cases where the independent credit rating enterprise has a different credit rating scale from the one specified in point a of this clause, that independent credit rating enterprise must convert the credit ratings accordingly, aligning with the credit rating scale of Moody's, Standard & Poor's, or Fitch Ratings to determine the risk level of customers, partners, and receivables when calculating the capital adequacy ratio.

4. Banks and foreign bank branches using credit ratings from independent credit rating enterprises must adhere to the following principles:

a) Only use agreed-upon credit ratings, not voluntary credit ratings from independent credit rating enterprises;

b) If a customer has two or more credit ratings from different independent credit rating enterprises, the banks and foreign bank branches must use the credit rating corresponding to the highest credit risk weight for that customer;

c) Do not use the credit rating of a group to apply the credit risk weight for subsidiaries or associated companies within that group;

d) Only use credit ratings to apply risk weights for credit ratings of the same currency type.

đ) In the case where a claim has only one credit rating, the bank or foreign bank branch shall apply the credit risk weight for that claim based on the said credit rating in accordance with this Circular;

e) In the case where a claim has two or more credit ratings from different independent credit rating agencies, the bank or foreign bank branch must apply the highest credit risk weight corresponding to the credit rating for that claim;

g) In the case where a claim does not have a credit rating, the bank or foreign bank branch shall apply in the following order:

(i) If the customer or counterparty has other claims or financial liabilities with separate credit ratings, the bank or foreign bank branch may use the credit rating of such other claims or financial liabilities to apply the credit risk weight for the claim without a credit rating when such claim is paid out before the claims or financial liabilities with credit ratings;

(ii) If the customer or counterparty has a credit rating, the bank or foreign bank branch may use the credit rating of the customer or counterparty to apply the credit risk weight for the claims without a credit rating which are not secured and are paid out before the secondary debt of the customer or counterparty;

(iii) If the customer or counterparty meets the conditions set forth in sub-clause (ii) of point g of this clause and has other claims or financial liabilities with separate credit ratings meeting the conditions set forth in sub-clause (i) of point g of this clause, the bank or foreign bank branch shall use the credit rating of the customer or counterparty or the other claims or financial liabilities with credit ratings depending on which credit risk weight is higher to apply the credit risk weight for the claim without a credit rating;

(iv) For cases not provided for in sub-clauses (i), (ii), and (iii) of point g of this clause, the bank or foreign bank branch must consider the claim as having no credit rating.

Chapter II

SPECIFIC PROVISIONS

Section 1

CAPITAL ADEQUACY RATIO AND OWN FUNDS

Article 6. Capital Adequacy Ratio

1. The capital adequacy ratio (CAR) expressed as a percentage (%) is determined by the formula:

Where:

Ministry of Science and Technology: The Minister and Deputy Ministers, agencies and units under the Ministry;: Own funds;

- RWA: Total assets calculated according to credit risk;

- KOR: Required capital for operational risk;

- KMR: Required capital for market risk.

2. Banks without subsidiaries or foreign bank branches must maintain the capital adequacy ratio determined based on the bank's or foreign bank branch's financial reports at a minimum of 8% on a continuous basis.

3. Banks with subsidiaries must maintain:

a) The capital adequacy ratio determined based on the bank's financial report at a minimum of 8%;

b) The consolidated capital adequacy ratio determined based on the consolidated financial report of the bank at a minimum of 8%. In the case where the bank has an insurance company subsidiary, the consolidated capital adequacy ratio is determined based on the consolidated financial report of the bank but does not consolidate the insurance company subsidiary in accordance with the consolidation principles under accounting laws and financial reporting regulations for credit institutions.

4. For items denominated in foreign currencies, the bank or foreign bank branch shall convert them into Vietnamese Dong when calculating the capital adequacy ratio as follows:

a) In accordance with the provisions on foreign currency account recording under the accounting system laws;

b) As for foreign exchange risk, it shall be carried out as follows: (i) The exchange rate between the Vietnamese Dong and the US Dollar: the central exchange rate published by the State Bank of Vietnam on the reporting date; (ii) The exchange rate between the Vietnamese Dong and other foreign currencies: the spot selling exchange rate of the bank or foreign bank branch at the end of the reporting date.

5. Based on the results of supervision, inspection, and audit by the State Bank of Vietnam of banks and foreign bank branches, if necessary to ensure safety in the operations of banks and foreign bank branches, the State Bank of Vietnam may require banks and foreign bank branches to maintain a higher capital adequacy ratio than the level prescribed in this Circular, depending on the nature and degree of risk.

Article 7. Core Capital

1. The core capital of banks and foreign bank branches is the basis for calculating the capital adequacy ratio as prescribed in this Circular.

2. Core capital includes total Tier 1 Capital and Tier 2 Capital minus the deductions specified in Appendix 1 issued together with this Circular.

Section 2

ASSETS CALCULATED BASED ON CREDIT RISK

Article 8. Assets Calculated Based on Credit Risk

1. Total assets calculated based on credit risk (RWA) include total assets calculated based on credit risk (RWA_CR) and total assets calculated based on counterparty credit risk (RWA_CCR) calculated according to the following formula:

RWA = RWA_CR + RWA_CCR

Where:

- RWA_CR : Total assets calculated based on credit risk;

- RWA_CCR: Total assets calculated based on counterparty credit risk.

2. Total assets calculated based on credit risk (RWA_CR ) is the sum of all assets on the balance sheet calculated according to the following formula:

RWA_CR = ∑E_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.} x CRW_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.} + ∑Max {0, (E_{international}^* - SP_{international})} x CRW_{international}

Where:

- E_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}: Value of asset j (not being a receivable);

- CRW_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}: Credit risk weight of asset j as stipulated in Article 9 of this Circular;

- E_{international}^*: The value of the balance of receivable i (Ei) determined according to Clause 3 of this Article, reduced after adjustment according to risk mitigation measures prescribed in Articles 12, 13, 14, and 15 of this Circular;

- SP_{international}: Specific provision for receivable i;

- CRW_{international}: Credit risk weight of receivable i as stipulated in Article 9 of this Circular.

E_{international} = Eon_{international} + Eoff_{international} x CCF_{international}

Where:

- E_{international}: Balance value determined according to the original cost of receivable i;

- Eon_{international}: On-balance sheet portion of the balance of receivable i;

- Eoff_{international}: Off-balance sheet portion of the balance of receivable i;

- CCF_{international}: Conversion factor of the off-balance sheet portion of receivable i as stipulated in Article 10 of this Circular.

4. Counterparty credit risk assets (RWA_CCR) are calculated for:

a) Proprietary transactions;

b) Repo transactions and reverse repo transactions;

c) Derivative product transactions for risk management purposes;

d) Foreign exchange and financial asset transactions for customer and partner needs as stipulated in Sub-clause d, Clause 32, Article 2 of this Circular.

5. Transactions that have already been calculated for counterparty credit risk do not need to be calculated for credit risk when calculating the capital adequacy ratio. Counterparty credit risk assets (RWA_CCR) are calculated according to the guidelines in Appendix 2 issued together with this Circular.

Article 9. Credit Risk Weight (CRW)

1. Banks and foreign bank branches shall classify assets according to the provisions of this Article and the guidance in Appendix 6 to apply the credit risk weight.

When calculating the consolidated capital adequacy ratio, banks may apply the risk weight prescribed in the host country for receivables of subsidiaries, associated companies, and overseas branches.

2. For assets that are cash, gold, and cash equivalents of banks and foreign bank branches, the credit risk weight is 0%.

3. For assets that are receivables from the Government of Vietnam, State Bank of Vietnam, National Treasury, People's Committees of provinces and centrally-administered cities, policy banks, the credit risk weight is 0%. For receivables from the Vietnam Asset Management Corporation (VAMC) and the Vietnam Asset Acquisition and Disposal Corporation Limited (DATC), the risk weight is 20%.

4. For assets that are receivables from international financial organizations, the credit risk weight is 0%.

5. For assets that are receivables from governments and central banks of other countries, the credit risk weight is applied according to the credit rating as follows:

6. For assets that are receivables from public sector entities (PSEs) of governments (non-central government public sector entities (PSEs)), local governments of other countries, the credit risk weight is applied according to the risk weight for the government's receivables as stipulated in Clause 5 of this Article.

a) For foreign financial institutions (including foreign credit institutions) that are not international financial organizations as stipulated in Clause 20, Article 2 of this Circular, the credit risk weight is applied according to the credit rating as follows:

b) For foreign bank branches operating in Vietnam, the credit risk weight is applied according to the credit rating of the foreign credit institution which is the parent bank.

c) For assets that are receivables from domestic credit institutions, excluding receivables in the form of reverse repo transactions that have been calculated for counterparty credit risk as stipulated in Clause 4, Article 8 of this Circular, the credit risk weight is applied as follows:

8. For assets that are purchases, secondary debt investments, and other debt securities issued by other banks and foreign bank branches that are not deducted from Tier 2 Capital as stipulated in Item 19, Part I, Point A, Item 21, Part II, Point A, Item 13, Point B of Appendix 1 of this Circular, the credit risk weight is applied according to the provisions of Points b and c, Clause 7 of this Article.

a) For small and medium-sized enterprises (SMEs) defined according to laws on SME development support, the risk weight is 90%;

b) For other enterprises, banks and foreign bank branches must determine revenue targets, leverage ratios, and equity capital based on the financial statements (consolidated financial statements) audited at the most recent date for enterprises required to have independent audits; annual financial statements (audited, if any) submitted to tax authorities (with evidence of submission to tax authorities) at the most recent date for enterprises not required to have independent audits according to the provisions of the law as follows:

- Revenue data is taken from the Report on Business Operations Results;

- Leverage Ratio = Total Debt / Total Assets; Wherein:

Total Debt (total debt) is determined by the sum of short-term borrowing and finance lease liabilities with long-term borrowing and finance lease liabilities according to the current accounting regulations.

- Equity Capital data is taken from the Balance Sheet.

(i) The credit risk factor is applied based on the enterprise's revenue target, leverage ratio, and equity capital as follows:

(ii) A credit risk factor of 200% is applied to enterprises that do not provide financial statements to banks and foreign bank branches to calculate revenue targets, leverage ratios, and equity capital; (iii) For newly established enterprises (excluding cases of restructuring, change in legal form, etc.), which have been operating for less than one year, the credit risk factor is 150%.

c) For specialized credit facilities such as project financing, machinery and equipment financing, and goods financing, the credit risk factor shall apply the higher ratio between the 160% credit risk factor and the credit risk factor for enterprises as stipulated in point b, Clause 9 of this Article.

a) Banks and foreign bank branches must determine the Loan-to-Value ratio (LTV) for claims secured by real estate as follows:

(i) Loan-to-Value ratio (LTV) = Total outstanding claim balance / Value of collateral asset. Wherein:

- Total outstanding claim balance includes the total outstanding balance (disbursed and undisbursed) of the claim and the outstanding balance (disbursed and undisbursed) of other claims secured by the same real estate at the bank and foreign bank branch;

- The value of the collateral asset is the value of the real estate securing the claims at the time of loan approval;

(ii) The Loan-to-Value ratio (LTV) must be recalculated when the bank and foreign bank branch has information that the value of the collateral asset has decreased by more than 30% compared to the most recent valuation.

b) The credit risk factor is applied to claims secured by non-operational real estate based on the Loan-to-Value ratio (LTV) as follows:

c) For claims secured by operational real estate, the credit risk factor is applied based on the Loan-to-Value ratio (LTV) for claims secured by operational real estate as follows:

d) For claims secured by mixed-use real estate (operational and non-operational), the credit risk factor is determined separately for each operational and non-operational real estate according to the proportion of total floor area of the real estate;

đ) A credit risk factor of 150% is applied to claims secured by real estate where banks and foreign bank branches do not have information about the Loan-to-Value ratio (LTV);

e) A credit risk factor of 200% is applied to assets that are project financing for real estate business.

11. For assets that are mortgage loans on houses, banks and foreign bank branches shall implement as follows:

a) Determine the Loan-to-Value ratio (LTV) as prescribed in Article 10 and the Debt Service Coverage ratio (DSC) for mortgage loans on houses as follows:

(i) Debt Service Coverage ratio (DSC) = Total annual repayment balance / Annual income of the customer.

Where:

- Total annual repayment balance includes principal and interest balances;

- Annual income of the customer is the customer's annual income subject to income tax deduction and does not include rental income from the mortgaged property. In case the individual customer represents a household participating in the loan relationship, the annual income of the customer is determined based on the total income of the household members jointly responsible for debt repayment.

(ii) The Debt Service Coverage ratio (DSC) must be recalculated when the bank and foreign bank branch has information about changes in the customer's annual income.

c) A credit risk factor of 200% is applied to mortgage loans on houses where the bank and foreign bank branch do not have information about the Loan-to-Value ratio (LTV) and/or the Debt Service Coverage ratio (DSC).

13. For non-performing debts, the credit risk factor is applied as follows:

a) For non-performing loans with specific provisions less than 20% of the value of the non-performing loan (excluding non-performing loans that are mortgage loans with specific provisions less than 20% of the value of the non-performing loan), the credit risk weight is 150%;

b) For non-performing loans with specific provisions from 20% to 50% of the value of the non-performing loan, non-performing loans that are mortgage loans with specific provisions less than 20% of the value of the non-performing loan, the credit risk weight is 100%;

c) For non-performing loans with specific provisions greater than 50% of the value of the non-performing loan, non-performing loans that are mortgage loans and have specific provisions from 20% of the value of the non-performing loan upwards, the credit risk weight is 50%;

14. For assets being receivables arising from the sale of non-performing loans (excluding receivables arising during the process of selling non-performing loans to the Vietnam Asset Management Corporation and the Vietnam Joint Stock Company for Debt Collection), the credit risk weight is 200%;

15. For assets being equity instruments, purchasing shares of enterprises (excluding investment amounts deducted from own capital as specified in Appendix 1 attached hereto) and loans for securities investment and trading, and loans for margin trading of securities companies, the credit risk weight is 150%;

16. For assets being financial lease receivables, the credit risk weight shall apply the higher of the credit risk weight of 160% and the credit risk weight for the leasing enterprise according to point b clause 9 of this Article;

17. For assets being the purchase of receivables with recourse from finance companies and leasing companies as prescribed, the credit risk weight shall apply the credit risk weight of the receivable due from the seller;

For the purchase of receivables from finance companies and leasing companies, the credit risk weight shall apply the credit risk weight of the receivable due;

18. For other assets on the balance sheet except those specified in clauses 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and 17 of this Article, the credit risk weight is 100%;

Article 10. Conversion Factor (CCF)

1. The conversion factor of 10% applies to:

a) Off-balance sheet commitments (including unused credit limits) that banks and foreign bank branches have the right to cancel or automatically cancel when customers breach cancellation conditions or deteriorate in their ability to fulfill obligations;

b) Unused credit limits of credit cards.

2. The conversion factor of 20% applies to transactions issuing or confirming commercial letters of credit based on transport documents, with original terms up to one year;

3. The conversion factor of 50% applies to:

a) Transactions issuing or confirming commercial letters of credit based on transport documents, with original terms over one year;

b) Contingent liabilities based on specific activities (for example: performance guarantees, bid bonds, standby letters of credit for specific activities);

c) Guarantees for the issuance of securities, negotiable instruments.

4. The conversion factor of 100% applies to:

a) Off-balance sheet commitments equivalent to loans (for example: irrevocable loan commitments are loan commitments that cannot be canceled or changed in any form once established, except where required by law; guarantees, standby letters of credit securing financial obligations for debt or bonds; unused credit limits that are irrevocable,...);

b) Acceptances for payment (for example: post-dated acceptances for payment of documentary sets,...);

c) Payment obligations of banks and foreign bank branches in transactions selling negotiable instruments with recourse when the issuer does not fulfill the commitment;

d) Forward contracts on assets, deposits, and prepayment securities where banks and foreign bank branches commit to perform;

đ) Off-balance sheet commitments not specified in clause 1, clause 2, clause 3, point a, point b, point c, and point d clause 4 of this Article;

5. For off-balance sheet commitments being commitments to provide off-balance sheet commitments (for example: commitment to issue guarantees, commitment to issue letters of credit,...), the conversion factor is the lower of the conversion factor of the commitment to provide off-balance sheet commitments and the conversion factor of the off-balance sheet commitment provided.

Article 11. Mitigating Credit Risks

1. Banks and foreign bank branches may adjust the value of receivables and transactions according to credit risk mitigation measures prescribed in Clause 2 of this Article.

2. The credit risk mitigation measures prescribed in Clause 1 of this Article shall be implemented through one or a combination of the following methods:

a) Collateral assets;

b) Netting of on-balance sheet positions;

c) Guarantees from third parties;

d) Credit derivative products.

3. The credit risk mitigation measures prescribed in Clause 1 of this Article must ensure the following principles:

a) Credit risk mitigation measures must be carried out in accordance with relevant laws. Documentation (papers, documents, etc.) for credit derivative products and netting of on-balance sheet positions must be validly signed by all parties, clearly stating the responsibilities and obligations of participating parties, having legal effect, and regularly reviewed to ensure compliance with the requirements of validity and legality of such documentation;

b) For credit risk mitigation measures with a term (collateral assets, netting of on-balance sheet positions, credit derivative products) where the remaining term of the credit risk mitigation measure is shorter than the remaining term of the receivable, the adjustment to reduce the value of the receivable can only be made for credit risk mitigation measures with an original term of one year or more and a remaining term of three months or more;

c) The adjusted reduction value of the credit risk mitigation measure must be adjusted when the remaining term of the credit risk mitigation measure is shorter than the remaining term of the receivable, transaction (hereinafter referred to as maturity mismatch);

d) In cases where the credit risk mitigation measure and the receivable, transaction are not in the same currency (hereinafter referred to as currency mismatch), the adjusted reduction value of the credit risk mitigation measure must be adjusted according to the currency mismatch;

e) Banks and foreign bank branches must have strategies, policies, and procedures to manage other risks (operational risk, liquidity risk, market risk, etc.) arising from credit risk mitigation and ensure corresponding capital requirements for those risks as stipulated in this Circular;

E_{international}^* = max{0,[E_{international} - ∑C_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}^*(1-Hc_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}-Hfxc_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.})]} + max{0,[E_{international} -∑L_k^*(1-Hfxl_k)]} + max{0,[E_{international} - ∑G_l (1-CRWgtor_l/CRW_l)]} + max{0,[E_{international} - ∑CD_n^*(1- Hfxcd_n)]}

Where:

- E_{international}^*: The residual value of the i-th receivable, transaction is adjusted downward according to credit risk mitigation measures;

- E_{international} : The residual value of the i-th receivable, transaction is calculated according to the provisions of Article 8 of this Circular;

Ministry of Science and Technology: The Minister and Deputy Ministers, agencies and units under the Ministry;_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}^*: The value of collateral assets is adjusted according to maturity mismatch;

- Hc_{9. Travel distance is the distance traveled without using mechanical means (cars, motorcycles, motorboats) to reach locations for implementing technical forest management measures and patrolling to protect forests.}: Collateral asset adjustment factor;

-_k^*: The value of on-balance sheet liabilities is adjusted according to maturity mismatch;

: bid price after corrections and adjustments, minus any discount (if applicable) of the lowest bidder among those detailed financial evaluations;_l: The value of guarantees from third parties;

- CRWgtor_l: Counterparty credit risk factor;

- CRW_l: Customer credit risk factor;

- CD_n^*: The value of credit derivative products is adjusted according to maturity mismatch;

- Hfxc, Hfxl, Hfxcd: Currency mismatch adjustment factors corresponding to the receivable, transaction and credit risk mitigation measure. The currency mismatch adjustment factor is zero (0) when the receivable, transaction and credit risk mitigation measure are in the same currency.

1. The mitigation of credit risk through collateral assets shall only apply to the following collateral assets:

a) Cash, negotiable instruments, and savings cards issued by credit institutions and foreign bank branches;

b) Gold (standard gold, physical gold, jewelry gold with value converted to 99.99 gold);

c) Negotiable instruments issued or guaranteed for payment by the Government of Vietnam and the State Bank;

d) Debt securities issued by governments of other countries or government-established organizations rated at BB- or higher by independent credit rating agencies;

đ) Debt securities issued by enterprises rated at BBB- or higher by independent credit rating agencies;

e) Shares listed on the Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange.

2. Collateral assets specified in Clause 1 of this Article must ensure:

a) Compliance with legal provisions governing secured transactions;

b) Negotiable instruments, debt securities, and shares not being issued or guaranteed for payment by the customer and/or their parent company, subsidiary, or affiliated company.

3. The collateral asset adjustment factor (Hc) expressed as a percentage is applied according to the following principles:

a) For collateral assets specified in Points đ and e of Clause 1 of this Article, the adjustment factor is calculated based on the daily market reference price (daily mark-to-market) when there is a matching transaction within the ten consecutive working days prior to the calculation date. In the absence of a matching transaction within the ten working days before the calculation date, the adjustment factor is 100%;

b) The collateral asset adjustment factor is determined as follows:

(i) Cash, savings cards, and negotiable instruments issued by the same bank or foreign bank branch, negotiable instruments issued or guaranteed for payment by the Government of Vietnam, the State Bank, provincial People's Committees, central city People's Committees, policy banks have an adjustment factor of 0;

(ii) Savings cards, negotiable instruments, securities, and gold have the following adjustment factors:

4. The adjusted value of the collateral asset based on the time lag difference (C*) is calculated using the following formula:

C* = C x (t - 0.25) / (T - 0.25)

Where:

- C: the value of the collateral asset;

- T: is determined as the minimum value of (5 years, remaining term of the transaction, amount receivable calculated annually);

- t: is determined as the minimum value of (T calculated annually, remaining term of the collateral asset calculated annually).

5. The currency mismatch adjustment factor between the amount receivable, transaction, and collateral asset (H_fxc) is 8%.

Article 13. Minimizing Credit Risk through Netting of On-Balance Sheet Balances

1. Netting of on-balance sheet balances refers to the adjustment by banks and foreign bank branches to reduce the value of receivables based on the deposit balance of the same customer at the bank or foreign bank branch.

2. Banks and foreign bank branches may only adjust the value of receivables by netting on-balance sheet balances when calculating total assets based on credit risk if all of the following conditions are met:

a) Having complete legal documentation regarding the agreement on netting of asset balances and liabilities of customers and counterparties regardless of whether the customer or counterparty has lost their ability to pay or gone bankrupt;

b) Determining the asset balance and liability for each customer and counterparty according to the netting of on-balance sheet balances at all times;

c) Monitoring and controlling risks;

d) Monitoring and controlling the status of risks of netting of on-balance sheet balances.

3. The deposit balance of the customer is adjusted based on the time difference (L*) (L*) is calculated using the following formula:

L* = L x (t - 0.25) / (T - 0.25)

Where:

- L: Deposit balance of the customer;

- T: is determined as the minimum value of (5 years, remaining term of the transaction, amount receivable calculated annually);

- t: determined as the minimum value of (T calculated in years, remaining term of on-balance sheet liabilities calculated in years).

4. The adjustment factor for the time difference between receivables, transactions, and the customer's deposit balance (H_fxl) is 8%.

Article 14. Minimizing Credit Risk through Third-Party Guarantees

1. The reduction of credit risk through third-party guarantees applies only to guarantors specified in Clause 2 of this Article and must meet the conditions stipulated in Clause 3 of this Article.

2. Guarantors include:

a) Government, central bank, government public organizations, local authorities;

b) Credit institutions, foreign bank branches with a credit rating of BBB- or higher;

3. The reduction of credit risk through third-party guarantees must meet the following conditions:

a) Direct right to claim, clearly defined and irrefutable against the guarantor for each specific obligation of the customer, counterparty;

b) The guarantee commitment is irrevocable; the guarantor cannot unilaterally terminate the guarantee obligation or increase the guarantee fee when the customer's, counterparty's ability to fulfill obligations deteriorates; the guarantor must promptly fulfill the guarantee obligation when the customer, counterparty fails to perform the obligation as committed;

c) The guarantee contract has a minimum term equal to the term of receivables, transaction;

d) The guarantor must have a lower credit risk coefficient than the guaranteed party (or the guarantor has a better credit rating than the guaranteed party);

đ) The guarantor is not the parent company, subsidiary, or affiliate of the guaranteed party.

4. In cases where receivables are not fully guaranteed, banks and foreign bank branches can only adjust the reduction for the portion of the receivable balance that is guaranteed.

Article 15. Minimizing Credit Risk through Credit Derivative Products

1. Banks and foreign bank branches may only adjust the value of receivables by credit derivative products if they meet the following conditions:

a) Credit events agreed upon by both parties must include at least the following situations:

(i) The customer does not fulfill the obligations as committed within the agreed period and the credit derivative product is effective at the time of the event (with grace periods consistent with the grace periods of the underlying obligation);

(ii) The customer goes bankrupt; the customer refuses to perform or is unable to perform the obligations as committed when due and similar cases;

(iii) The customer restructures the obligations as committed (including interest relief) due to financial difficulties.

b) There is no difference between the underlying obligation of the customer, counterparty and the reference obligation of the credit derivative product;

c) The credit derivative product does not end before the grace period of the underlying obligation;

d) There are clear provisions determining the event and the responsibility of the parties in identifying the event. The protected party must have the right or ability to notify the protecting party when an event occurs.

2. Banks and foreign bank branches must calculate counterparty credit risk (RWA_CCR) according to Clause 4 of Article 8 of this Circular for the portion of credit risk reduced through credit derivative products.

3. The value of the credit derivative product is adjusted based on the time difference (CD^*) using the following formula:

CD^* = CD x (t - 0.25) / (T - 0.25)

Where:

- CD: Value of the credit derivative product;

- T: is determined as the minimum value of (5 years, remaining term of the transaction, amount receivable calculated annually);

- t: determined as the minimum value of (T calculated in years, remaining term of the credit derivative product calculated in years).

4. The adjustment factor for the time difference between receivables, transactions, and credit derivative products (Hf_xcd) is 8%.

Section 3

CAPITAL REQUIREMENT FOR OPERATIONAL RISK

Article 16. Capital Requirement for Operational Risk

1. The capital requirement for operational risk (KOR) is determined by the formula:

Where:

- BI_{year n}: The business indicator is determined based on the most recent quarter at the time of calculation;

- BI_{year n-1}, BI_{year n-2}: The business indicator is determined based on the corresponding quarter of the two consecutive years preceding the calculation year.

2. The business indicator is determined according to the following formula:

            BI = IC + SC + FC

Where:

- IC: The absolute value of Interest Income and similar income minus Interest Expense and similar expenses;

- SC: The total value of Service Activity Income, Service Activity Expenses, Other Operating Income, and Other Operating Expenses;

- FC: The total of the absolute value of Net Gain/Loss from Foreign Exchange Operations, Trading Securities, and Investment Securities.

The business indicator is determined in accordance with the guidelines set forth in Appendix 3 issued together with this Circular.

Section 4

CAPITAL REQUIREMENT FOR MARKET RISK

1. To determine the capital requirement for market risk, banks and foreign bank branches must have written provisions regarding the conditions and criteria for identifying items within the trading book scope to calculate market risk statuses, ensuring separation from the banking book. Banks and foreign bank branches must:

a) Distinguish transactions in the trading book and the banking book. Transaction data must be accurately, completely, and promptly recorded in the risk management database system and the accounting books of the bank or foreign bank branch;

b) Identify the business unit directly executing transactions;

c) Transactions in the trading book and the banking book must be reflected in the accounting books and must be reconciled with the transaction records of the business unit (transaction journal or other recording methods);

d) The internal audit department must regularly review and evaluate items in the trading book and the banking book.

2. Banks and foreign bank branches are only permitted to reclassify and transfer items from the trading book to the banking book when such items no longer meet the conditions and criteria stipulated in Clause 1 of this Article, and may not transfer financial instruments from the banking book to the trading book.

3. Banks and foreign bank branches must have policies and procedures for determining market risk status to calculate the capital requirement for market risk. Minimum policies and procedures include:

a) A proprietary trading strategy for each currency, financial instrument, derivative product, ensuring no restrictions on buying or selling or the ability to mitigate risks;

b) Market risk limits (loss cut-off levels, profit realization levels, proprietary trading limits for traders, currency concentration limits, maximum holding periods...); these limits must be reviewed and evaluated at least once a year or at times of significant changes affecting market risk status;

c) The process of managing market risk status must ensure:

(i) Market risk statuses are identified, measured, monitored, managed, and closely supervised;

(ii) There is a separate department to execute proprietary trading transactions, where traders have autonomy to conduct transactions within the limits and proprietary trading strategies; there is a management and accounting department to track proprietary trading transactions and items in the trading book;

(iii) Market risk statuses and risk measurement results must be reported to authorized levels according to the bank's risk management regulations;

(iv) All financial positions in the trading book must be measured and valued at market prices or official market data at least once a day to determine profit or loss and market risk status;

(v) Input market data must be collected from sources appropriate to the market and regularly reviewed for the appropriateness of input market data.

d) Regulations on the conditions and criteria for recording items in the trading book and transferring items between the trading book and the banking book in accordance with the law;

đ) Methods for measuring market risk (fully describing assumptions and parameters used); these methods must be reviewed and evaluated annually or when there are unusual changes affecting market risk status;

e) Procedures for monitoring market risk statuses and compliance with market risk limits according to the bank's proprietary trading strategy.

4. The provisions and procedures stipulated in Clause 1 and Clause 3 of this Article must be approved, issued, amended, supplemented by authorized levels of the bank or foreign bank branch at least once a year and subject to internal audit in accordance with the State Bank of Vietnam's regulations on the internal control system of credit organizations and foreign bank branches.

5. Banks and foreign bank branches must submit the provisions in Clause 1 and Clause 3 of this Article to the State Bank of Vietnam (Bank Inspection and Supervision Department) for supervision before implementation. If necessary, the State Bank of Vietnam (Bank Inspection and Supervision Department) will provide comments in writing to the bank or foreign bank branch to amend and supplement these provisions and procedures.

Article 18. Capital Requirement for Market Risk

1. Capital Requirement for Market Risk  and stamped)_MR) are determined according to the following formula:

signing and implementing Agreements_MR = K_IRR+ K_ER + K_FXR + K_CMR + K_OPT

Where:

- K_IRR: Capital requirement for interest rate risk, excluding option transactions;

- K_ER: Capital requirement for stock price risk, excluding option transactions;

- K_FXR: Capital requirement for foreign exchange risk (including gold), excluding option transactions;

- K_CMR: Capital requirement for commodity price risk, excluding option transactions;

- K_OPT : Capital requirement for option transactions.

2. Capital requirement for interest rate risk  and stamped)_IRR) shall be determined according to the following formula:

Where:

- K^SR_IRR: The specific capital requirement for interest rate risk arising from interest rate fluctuations due to factors related to each issuer shall be calculated in accordance with Appendix 4 issued together with this Circular; 

- K^GR_IRR: The general capital requirement for interest rate risk arising from interest rate fluctuations due to market interest rate factors shall be calculated in accordance with Appendix 4 issued together with this Circular. 

The capital requirement for interest rate risk shall be calculated in accordance with the guidance provided in Appendix 4 issued together with this Circular.

3. Capital requirement for stock price risk  and stamped)_ER) shall be determined according to the following formula:

Where:

- K^SR_ER: The specific capital requirement for stock price risk arising from stock price fluctuations due to factors related to each issuer shall be calculated in accordance with Appendix 4 issued together with this Circular; 

- K^GR_ER: The general capital requirement for stock price risk arising from stock price fluctuations due to market price factors shall be calculated in accordance with Appendix 4 issued together with this Circular. 

The capital requirement for stock price risk shall be calculated in accordance with the guidance provided in Appendix 4 issued together with this Circular.

5. Capital requirement for commodity price risk  and stamped)_CMR) shall be calculated in accordance with the guidance provided in Appendix 4 issued together with this Circular.

6. Capital requirement for option transactions  and stamped)_OPT) shall only apply when the total value of option transactions exceeds 2% of the bank's own capital. The capital requirement for option transactions  and stamped)_OPT) shall be calculated in accordance with the guidance provided in Appendix 4 issued together with this Circular.

Section 5

REPORTING REGIME AND INFORMATION DISCLOSURE

Article 19. Reporting System

Banks, foreign bank branches shall implement reporting on capital adequacy ratios in accordance with the State Bank of Vietnam's regulations on statistical reporting systems for credit institutions and foreign bank branches.

Article 20. Information Disclosure

1. Annually, every six months, banks, foreign bank branches shall disclose information on capital adequacy ratios in accordance with the contents stipulated in Appendix 5 issued together with this Circular.

2. Banks, foreign bank branches must establish information disclosure procedures ensuring:

a) Specific provisions on the form (such as printed materials or on the electronic information page...) and location (such as posted at the main office...) for disclosing capital adequacy ratio information to ensure transparency, clarity, and convenient access for individuals and organizations with relevant interests;

b) Disclosed information (especially quantitative information) must be consistent with financial report figures at the same time period;

c) There must be procedures and methods for collecting information (qualitative content and quantitative content) on capital adequacy ratios as prescribed in this Circular;

d) There must be policies and procedures for checking the accuracy, completeness, and timeliness of disclosed information as prescribed in this Circular;

đ) Full responsibilities, authorities, and cooperation among relevant departments and individuals in implementing information disclosure;

e) Information disclosure procedures must be communicated to relevant individuals and departments and reviewed, revised, and supplemented at least once a year.

3. Banks, foreign bank branches must submit their information disclosure procedures to the State Bank of Vietnam (Bank Inspection and Supervision Department) within ten days from the date of issuance, amendment, supplementation, or replacement.

Chapter III

RESPONSIBILITIES OF UNITS UNDER THE STATE BANK OF VIETNAM

Article 21. Responsibilities of the Banking Inspection and Supervision Agency

2. To take the lead and coordinate with relevant Departments and Bureaus to submit to the Governor of the State Bank for the application of a minimum capital adequacy ratio higher than 8% as stipulated in Article 6 of this Circular.

3. To coordinate with the Forecasting and Statistics Department to develop reporting templates for the capital adequacy ratio as prescribed by the State Bank's regulations on statistical reporting systems.

Article 22. Responsibilities of Other Units under the State Bank

1. The Forecasting and Statistics Department shall be responsible for submitting to the Governor of the State Bank for the issuance of reporting templates for statistics on the capital adequacy ratio as stipulated in this Circular.

Chapter IV

IMPLEMENTING PROVISIONS

1. This Circular shall take effect from January 1, 2020, except as provided in Clause 2 of this Article.

2. The provisions of this Circular shall be applied earlier than the date specified in Clause 1 of this Article for banks and foreign bank branches as specified in Clause 3 of this Article.

3. Banks and foreign bank branches capable of implementing the capital adequacy ratio as prescribed in this Circular before the date specified in Clause 1 of this Article shall submit a registration document to the State Bank (Banking Inspection and Supervision Agency) detailing their capability and proposed implementation date. The effective date of this Circular for banks and foreign bank branches that have submitted a registration document shall be notified in writing by the State Bank.

Article 24. Implementation Organization

The Director of the Office, the Head of the Banking Inspection and Supervision Agency, Heads of units under the State Bank, Governors of State Bank Branches in provinces and centrally-administered cities, Chairmen of Management Boards, Chairmen of Board of Members, and General Directors (Directors) of banks and foreign bank branches are responsible for organizing the implementation of this Circular.