Decision No. 457/2005/QD-NHNN on the issuance of "Regulations on safety ratios in the operation of credit institutions"

DECISION

On issuing the "Regulations on Safety Ratios in the Operation of Credit Institutions"

throughout the activities of credit institutions"

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated December 12, 1997, and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

Pursuant to the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997, and the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

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;

Based on the proposal of the Director of the Department of Banks and Non-Bank Credit Institutions,

DECISION:

Article 1. The attached Decision issues the "Regulations on Safety Ratios in the Operation of Credit Institutions".

Article 2. This Decision takes effect fifteen days from the date of publication in the Official Gazette. The following Decisions shall cease to be effective:

1. Decision No. 296/1999/QĐ-NHNN dated August 25, 1999 of the Governor of the State Bank of Vietnam on the limit for lending to a single customer of credit institutions;

2. Decision No. 297/1999/QĐ-NHNN dated August 25, 1999 of the Governor of the State Bank of Vietnam on the issuance of the Regulations on Safety Ratios in the Operation of Credit Institutions;

3. Decision No. 381/2003/QĐ-NHNN dated April 23, 2003 of the Governor of the State Bank of Vietnam on amending and supplementing certain provisions of the Regulations on Safety Ratios in the Operation of Credit Institutions issued pursuant to Decision No. 297/1999/QĐ-NHNN dated August 25, 1999 of the Governor of the State Bank of Vietnam;

4. Decision No. 492/2000/QĐ-NHNN dated November 28, 2000 of the Governor of the State Bank of Vietnam on the issuance of the Regulations on the Investment and Purchase of Shares by Credit Institutions.

Article 3. The Heads of the Office, the Directors of the Department of Banks and Non-Bank Credit Institutions, the Heads of Units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam Branches in provinces and cities, the Chairmen of the Boards of Management, and the General Managers (Managers) of credit institutions are responsible for implementing this Decision./.

  

REGULATIONS ON SAFETY RATIOS IN THE OPERATION OF CREDIT INSTITUTIONS
(Issued together with Decision No. 457/2005/QĐ-NHNN

dated April 19, 2005 of the Governor of the State Bank of Vietnam)
1. Credit institutions operating in Vietnam (hereinafter referred to as credit institutions), except for grassroots people's credit funds, must maintain the following safety ratios:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

Article 1.

a. Minimum capital adequacy ratio.

b. Credit limits for customers.

c. Liquidity ratio.

d. Maximum proportion of short-term sources of funding used for medium- and long-term loans.

đ. Limit on investment and purchase of shares.

2. The safety ratios prescribed in Clause 1 of this Article do not include the safety ratios of affiliated credit institutions.

3. Based on the results of inspections and examinations by the Inspectorate of the State Bank of Vietnam regarding the operation of credit institutions, the State Bank may require credit institutions to maintain higher safety ratios than those stipulated in Articles 4 and 8 of these Regulations.

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

Article 2.

1. Total risk-weighted assets consist of the value of risk-weighted assets of credit institutions as specified in Article 6 and off-balance sheet commitments as specified in Article 5 of these Regulations.

2. Receivables are on-balance-sheet assets formed from deposits, loans, advances, investments, discounting, rediscounting, and financial leasing.

3. Borrower real estate includes the residence of the borrower or property leased by the borrower and agreed by the tenant to be used as collateral during the lease period.

4. A customer is a legal entity, individual, household, cooperative, private enterprise, partnership company, or other organization that has a credit relationship with a credit institution.

5. Related customer group includes two or more customers having a credit relationship with a credit institution, falling into one of the following categories:

5.1 Ownership relationship:

5.1.1 An individual customer owns at least 25% of the charter capital of another corporate customer; or

5.1.2 A corporate customer owns at least 50% of the charter capital of another corporate customer.

5.2 Management, control, membership relationship:

5.2.1 An individual customer:

a. Is a member of a family household as defined in the Civil Code where the family household is a customer of a credit institution; or

b. Is a member of a cooperative as defined in the Civil Code where the cooperative is a customer of a credit institution; or

c. Is a general partner of a limited liability partnership where the limited liability partnership is a customer of a credit institution; or

d. Is the owner of a private enterprise where the private enterprise is a customer of a credit institution; or

đ. Holds a management, control, or supervisory position within the organizational structure of another corporate customer of a credit institution (Chairman of the Board of Directors or General Manager (Manager), Head of the Supervisory Board for state-owned enterprises and joint-stock companies; Chairman of the Board of Members, General Manager (Manager), Head of the Supervisory Board for limited liability companies with two or more members; Chairman of the Board of Directors or Company Chairman, General Manager (Manager) for limited liability companies with one member).

5.2.2 A corporate customer has its representative holding a management, control, or supervisory position within the organizational structure of another corporate customer of a credit institution (Chairman of the Board of Directors, Chairman of the Board of Members, General Manager (Manager), Head of the Supervisory Board).

5.3 Credit institutions are strictly and specifically regulated beyond the provisions of Clause 5 of this Article to ensure safety in banking operations.

6. Total loan outstanding (including loans repaid on behalf of customers) includes loans within the term, overdue loans, written-off loans, and loans awaiting disposal by credit institutions.

7. Total financial leasing amount includes financial leasing within the term and overdue financial leasing of financial leasing companies.

8. Interest rate transaction contracts include interest rate swap contracts, forward interest rate contracts, and interest rate option contracts.

8. Interest rate swap contracts include interest rate swap agreements, forward rate agreements, and interest rate option contracts.

9. Foreign currency trading contracts include foreign currency swap contracts, foreign currency forward contracts, and foreign currency option contracts.

10. Investment securities are securities held by credit institutions with the purpose of earning income, not for resale on the market to profit from price differences.

11. Undistributed profits are the portion of profits determined through auditing by an independent auditing organization after tax payment and setting aside funds according to legal regulations, retained to supplement the capital of credit institutions in accordance with legal regulations. The undistributed profits of joint-stock credit institutions must be approved by the General Meeting of Shareholders.

12. Trading advantage is the larger difference between the purchase price of a financial asset and its book value. This financial asset is fully reflected in the balance sheet of the credit institution.

13. OECD: Organization for Economic Cooperation and Development.

14. IBRD: International Bank for Reconstruction and Development.

15. IADB: Inter-American Development Bank.

16. ADB: Asian Development Bank.

17. AfDB: African Development Bank.

18. EIB: European Investment Bank.

19. EBRD: European Bank for Reconstruction and Development.

II. SPECIFIC PROVISIONS

PART I. OWN CAPITAL

Article 3:

1. Own capital of credit institutions includes:

1.1. Tier 1 Capital:

a. Charter capital (capital that has been issued, contributed capital).

b. Supplementary reserve fund for charter capital.

c. Financial reserve fund.

d. Business development investment fund.

đ. Undistributed profits.

Tier 1 capital serves as the basis for determining the limit on purchasing and investing in fixed assets by credit institutions.

1.2. Tier 2 Capital:

a. Fifty percent of the additional value of fixed assets revalued according to legal regulations.

b. Forty percent of the additional value of investment securities (including investment stocks, contributions) revalued according to legal regulations.

c. Convertible bonds or preferred shares issued by credit institutions satisfying the following conditions:

(i). Initial term, remaining period before conversion into ordinary shares is at least five years;

(ii) Not guaranteed by the assets of the credit institution itself;

(iii) The credit institution may not repurchase at the request of the holder or on the secondary market, or the credit institution may only repurchase after obtaining written approval from the State Bank;

(iv) The credit institution may suspend interest payments and carry over accumulated interest to the next year if making interest payments results in a loss for the business in the current year;

(v) In the event of liquidation of the credit institution, holders of convertible bonds will only be paid after the credit institution has settled all secured and unsecured creditors;

(vi) Any increase in interest rates can only be implemented after five years from the date of issuance and adjusted once during the entire term before conversion into ordinary shares.

d. Other debt instruments satisfying the following conditions:

(i) Debt where the creditor is subordinate to other creditors: in all cases, the creditor is only paid after the credit institution has settled all secured and unsecured creditors;

(ii) Initial term of at least ten years;

(iii) Not guaranteed by the assets of the credit institution itself;

(iv) The credit institution may suspend interest payments and carry over accumulated interest to the next year if making interest payments results in a loss for the business in the current year;

(v) The creditor may only be repaid early by the credit institution after obtaining written approval from the State Bank;

(vi) Any increase in interest rates can only be implemented after five years from the date of contract signing and adjusted once during the entire loan term.

đ. General provision, maximum equal to 1.25% of total risk-weighted assets.

2. Limits when determining own capital:

2.1. Limit when determining Tier 1 capital: Tier 1 capital must be reduced by trading advantage.

2.2. Limit when determining Tier 2 capital:

a. The total value of items specified in points c and d, paragraph 1.2 of this Article shall not exceed fifty percent of the value of Tier 1 capital.

b. During the last five years before maturity, the value of other debt instruments and convertible bonds included in Tier 2 capital will be deducted annually by twenty percent of their initial value.

c. The total value of Tier 2 capital shall not exceed one hundred percent of the value of Tier 1 capital.

3. Items to be deducted from own capital:

3.1. The entire reduction in value of fixed assets due to revaluation according to legal regulations.

3.2. The entire reduction in value of investment securities (including investment stocks, contributions) revalued according to legal regulations.

3.3. Total capital invested by credit institutions in other credit institutions in the form of contributions, stock purchases.

3.4. Contributions, joint ventures, stock purchases of investment funds, other enterprises exceeding fifteen percent of the credit institution's own capital.

3.5. Business losses, including cumulative losses.

PART II. MINIMUM CAPITAL ADEQUACY RATIO

Article 4.

1. Credit institutions, except foreign bank branches, must maintain a minimum ratio of 8% between own funds and total risk-weighted assets.

2. At the time this Regulation takes effect, state commercial banks with a minimum capital adequacy ratio lower than the level prescribed in Clause 1 of this Article shall increase their minimum capital adequacy ratio to the prescribed level within a maximum period of three years. The annual increase rate must be at least one third (1/3) of the remaining shortfall.

3. The method for determining the minimum capital adequacy ratio is set out in Appendix A of this Regulation.

Article 5. Risk-weighted assets of off-balance sheet commitments:

1. Guarantees and financing provided to customers:

1.1. Conversion factor:

1.1.1. Conversion factor 100%: Irrevocable commitments that cannot be substituted for direct credit facilities but have a similar level of risk, including:

a. Loan guarantees.

b. Payment guarantees.

c. Confirmations of letters of credit; standby letters of credit for financial guarantees on loans and securities issuance; Acceptances for payment including deferred payment acceptances, except for negotiable instrument acceptances as stipulated in point 1.1.3.b, Clause 1 of this Article.

1.1.2. Conversion factor 50%: Irrevocable commitments related to the liability to pay on behalf of the credit institution, including:

a. Performance guarantees.

b. Bid bonds.

c. Other guarantees.

d. Standby letters of credit other than those specified in point 1.1.1.c, Clause 1 of this Article.

e. Other commitments with an initial term of one year or more.

1.1.3. Conversion factor 20%: Commitments related to trade, including:

a. Irrevocable letters of credit.

b. Short-term negotiable instrument acceptances secured by goods.

c. Delivery guarantees.

d. Other trade-related commitments.

1.1.4. Conversion factor 0%:

a. Revocable letters of credit.

b. Other irrevocable unconditional commitments with an initial term of less than one year.

1.2. Risk weight:

The risk weight of off-balance sheet commitments after conversion according to Clauses 1.1.1, 1.1.2, and Clause 1.1.3 of this Article is as follows:

1.2.1 Guaranteed or fully collateralized by cash, savings certificates, deposits, or securities issued by the Government or the State Bank of Vietnam: The risk weight is 0%.

1.2.2 Secured by real estate of the borrower: The risk weight is 50%.

1.2.3 Other cases: The risk weight is 100%.

2. Interest rate swap contracts and foreign exchange swap contracts:

2.1. Conversion factor:

2.1.1 Interest rate swap contracts:

a. With an initial term of less than one year: 0.5%

b. With an initial term of one year to less than two years: 1.0%

c. With an initial term of two years or more: 1.0% for the portion under two years plus 1.0% for each subsequent year.

2.1.2 Foreign exchange swap contracts:

a. With an initial term of less than one year: 2.0%

b. With an initial term of one year to less than two years: 5.0%

c. With an initial term of two years or more: 5.0% for the portion under two years plus 3.0% for each subsequent year.

2.2. Risk weight: The risk weight for interest rate swap contracts and foreign exchange swap contracts after conversion as stipulated in Clause 2.1 of this Article is 100%.

Article 6.

"Assets" are classified into risk categories as follows:

1. Group of assets with a risk weight of 0% includes:

a. Cash.

b. Gold.

c. Deposits in Vietnamese dong maintained by state credit institutions at the Social Policy Bank pursuant to Decree No. 78/2002/ND-CP dated October 4, 2002 of the Government on credit for the poor and other policy targets.

d. Loans made with sponsored investment funds under agency agreements where the credit institution only receives agency fees and does not bear risks.

e. Claims against the Government of Vietnam and the State Bank of Vietnam in Vietnamese dong.

f. Discounted and rediscounted securities issued by the credit institution itself.

g. Claims against the Government of Vietnam and the State Bank of Vietnam in Vietnamese dong guaranteed by securities issued by the credit institution itself; Claims fully collateralized by cash, savings certificates, deposits, or securities issued by the Government or the State Bank of Vietnam.

h. Claims against central governments and central banks of countries belonging to the OECD.

i. Claims guaranteed by central governments of countries belonging to the OECD or guaranteed by the central government of these countries.

2. Group of assets with a risk weight of 20% includes:

a. Claims against other domestic and foreign credit institutions, for each currency type.

b. Claims against provincial People's Committees; Foreign currency claims against the Government of Vietnam and the State Bank of Vietnam.

c. Claims guaranteed by securities issued by other credit institutions established in Vietnam.

d. Claims against state financial organizations; Claims guaranteed by securities issued by state financial organizations.

e. Precious metals (excluding gold), precious stones.

f. Cash in the process of collection.

g. Claims against IBRD, IADB, ADB, AfDB, EIB, EBRD banks and claims guaranteed by these banks or guaranteed by securities issued by these banks.

Claims against banks established in OECD countries and claims guaranteed by these banks.

i. Claims against securities companies established in OECD countries that comply with risk-based capital management and supervision agreements and claims guaranteed by these companies.

k. Claims against banks established outside OECD countries with a remaining maturity of less than one year and claims with a remaining maturity of less than one year guaranteed by these banks.

3. Group of assets with a risk weight of 50% includes:

a. Investments in projects under contracts as stipulated in Decree No. 79/2002/ND-CP dated October 25, 2002 of the Government on the organization and operation of finance companies.

b. The receivables secured by Real Estate of the borrower.

4. The "Assets" category with a risk weight of 100% includes:

a. Capital contributions to subsidiaries that are not credit institutions, have legal personality, and operate independently.

b. Investments in the form of capital contributions or share purchases in other enterprises or economic organizations.

c. Receivables from banks established in non-OECD countries with remaining terms of one year or more.

d. Receivables from the central governments of non-OECD countries, except for loans denominated in and funded by the local currency of those countries.

đ. Real estate, machinery, equipment, and other fixed assets.

e. Other receivables not covered by the provisions of Clauses 1, 2, and 3 of this Article.

MỤC III. CREDIT LIMITS FOR CUSTOMERS

Article 7.

1. Based on these Provisions and actual operations, development strategies, credit institutions, excluding foreign bank branches, must establish internal policies regarding criteria for identifying a customer and related customer groups, credit limits applicable to a single customer and related customer groups, including the following contents:

a. Criteria for identifying a customer and related customer groups.

b. Credit limits applicable to a single customer and a related customer group.

c. Maximum lending and guarantee limits as a percentage of total credit debt for a specific industry or economic sector.

d. Strategy for diversifying "Assets," policies, and methods for monitoring loans and guarantees exceeding five percent of the credit institution's own capital.

đ. Loans and total loans exceeding ten percent of the credit institution's own capital must be approved by the Board of Directors, the Chairman of the Board of Directors, or a person authorized by the Board of Directors or the Chairman of the Board of Directors.

e. In cases where related customers have economically dependent relationships, credit institutions need to carefully assess to make accurate decisions ensuring safety in banking operations.

2. At least once every six months or in special circumstances, the Board of Directors of the credit institution must review and reassess the situation and implementation of this policy by the credit institution.

Article 8.

1. Lending and Guarantee Limits:

1.1. The total outstanding loans of the credit institution to a single customer shall not exceed fifteen percent of the credit institution's own capital.

The total amount of loans and guarantees provided by the credit institution to a single customer shall not exceed twenty-five percent of the credit institution's own capital.

1.2. The total outstanding loans of the credit institution to a related customer group shall not exceed fifty percent of the credit institution's own capital, wherein the loan amount to a single customer shall not exceed the ratio specified in Clause 1.1 of this Article.

The total amount of loans and guarantees provided by the credit institution to a related customer group shall not exceed sixty percent of the credit institution's own capital.

1.3. The total outstanding loans of a foreign bank branch to a single customer shall not exceed fifteen percent of the foreign bank's own capital.

The total amount of loans and guarantees provided by a foreign bank branch to a single customer shall not exceed twenty-five percent of the foreign bank's own capital.

The total outstanding loans of a foreign bank branch to a related customer group shall not exceed fifty percent of the foreign bank's own capital, wherein the loan amount to a single customer shall not exceed fifteen percent of the foreign bank's own capital.

The total amount of loans and guarantees provided by a foreign bank branch to a related customer group shall not exceed sixty percent of the foreign bank's own capital.

2. Leasing Limits:

2.1. The total leasing amount provided to a single customer by a financial leasing company shall not exceed thirty percent of the financial leasing company's own capital.

2.2. The total leasing amount provided to a related customer group by a financial leasing company shall not exceed eighty percent of the financial leasing company's own capital, wherein the leasing amount to a single customer shall not exceed the ratio specified in Clause 2.1 of this Article.

Article 9.

The limits prescribed in Article 8 of these Provisions shall not apply to the following cases:

1. Loans and financial leasing from entrusted funds of the Government or other organizations.

2. Loans to the Government of Vietnam.

3. Loans to other credit institutions operating in Vietnam with terms under one year.

4. Loans secured by government bonds or bonds issued by OECD member countries' governments.

5. Loans fully secured by deposits, including savings deposits and escrow accounts at credit institutions.

6. Loans fully secured by debt securities issued by the credit institution itself.

7. Loans exceeding fifteen percent of the credit institution's own capital specifically decided by the Prime Minister; loans and guarantees exceeding twenty-five percent of the credit institution's own capital approved in writing by the State Bank before the fact.

Article 10.

Upon the effective date of these Provisions, if a credit institution has already made loans, guarantees, or financial leasing exceeding the ratios stipulated in Article 8 of these Provisions, it shall not continue to provide loans, guarantees, or financial leasing to such customers, and within a maximum period of three years, must take measures to self-adjust to ensure compliance with the prescribed ratios, except in cases approved by the State Bank.

PART IV. RATIO OF PAYMENT CAPABILITY

Article 11.

Credit organizations must base on the provisions of this Regulation, other legal regulations, and actual operations to issue internal regulations on managing payment capability, ensuring safety in banking activities. The credit organization's internal regulations on managing payment capability must include the following contents:

1. Must organize a department (at least at the department level or equivalent) to implement strategic and policy management for ensuring payment capability, managed daily by an officer at least at the department level or equivalent, and overseen by a member of the Board of Directors (Board of Management).

2. Propose plans and solutions (including contingency plans) to ensure payment capability and liquidity in cases of temporary shortage of payment capability, as well as in liquidity crises.

3. Establish an early warning system for temporary shortages of payment capability and optimal handling measures.

4. Policies regarding cash management, income, expenditure, and daily sources of funds, as well as policies regarding holding securities with high liquidity.

5. Measures and policies for controlling and maintaining payment capability for each type of currency and gold.

Article 12.

Credit organizations must regularly ensure the ratio of payment capability for each type of currency and gold as follows:

1. A minimum ratio of 25% between the value of immediately payable assets ("Have") and liabilities ("Debt") due for repayment within the next month.

2. A minimum ratio of 1 between the total value of immediately payable assets ("Have") within the next 7 working days and the total liabilities ("Debt") due for repayment within the next 7 working days.

Article 13.

1. Immediately payable assets include:

a. Cash.

b. Gold.

c. Deposits at the State Bank.

d. The excess amount between deposits without term at other credit organizations and deposits without term received from those organizations.

đ. Term deposits at other credit organizations that have matured for repayment.

e. Securities issued or guaranteed by the Government of Vietnam:

(i) With remaining maturity of up to 1 year: 100% of the book value.

(ii) With remaining maturity over 1 year: 95% of the book value.

g. Securities issued or guaranteed by credit organizations operating in Vietnam:

(i) With remaining maturity of up to 1 month: 100% of the book value.

(ii) With remaining maturity over 1 month to 1 year: 95% of the book value.

(iii) With remaining maturity over 1 year: 90% of the book value.

h. Securities issued by governments of OECD countries:

(i) With remaining maturity of up to 1 year: 100% of the book value.

(ii) With remaining maturity over 1 year: 95% of the book value.

i. Securities issued by banks of OECD countries:

(i) With remaining maturity of up to 1 month: 100% of the book value.

(ii) With remaining maturity over 1 month to 1 year: 95% of the book value.

(iii) With remaining maturity over 1 year: 90% of the book value.

k. Foreign bank-accepted export documentary drafts with remaining maturity of up to 1 month: 100% of the face value.

1. 80% of secured loans, financial leases due for repayment (principal and interest) within 1 month.

m. 75% of unsecured loans due for repayment.

n. Other types of securities:

(i) With remaining maturity under 1 month: 100%

(ii) With remaining maturity from 1 month to 1 year: 90%

(iii) With remaining maturity over 1 year: 85%

0. Other receivables due for collection.

2. Liabilities due for repayment include:

a. The excess amount between deposits received from other credit organizations and deposits at those organizations due for repayment.

b. 15% of non-term deposits of the organization (excluding deposits from other credit organizations), individuals.

c. The value of loan commitments of the credit organization due for implementation.

d. All other liabilities due for repayment.

3. Credit organizations shall base on the provisions of Clause 1 and 2 of this Article to implement the payment capability ratio for each type of currency specified in Article 12 and analyze the immediately payable assets ("Have") and liabilities ("Debt") due for repayment within the time periods specified in Article 14 of this Regulation.

Article 14.

1. Credit organizations must develop a table analyzing immediately payable assets ("Have") and liabilities ("Debt") due for repayment for each type of currency in the following time periods:

a. The day after.

b. From 2 to 7 days.

c. From 8 days to 1 month.

d. From 1 month to 3 months.

đ. From 3 months to 6 months.

2. The table analyzing immediately payable assets ("Have") and liabilities ("Debt") due for repayment for each type of currency in the time periods specified in Clause 1 of this Article is stipulated in Appendix B of this Regulation.

PART V. MAXIMUM RATIO OF SHORT-TERM CAPITAL USED FOR MEDIUM-TERM AND LONG-TERM LOANS

FOR MEDIUM-TERM AND LONG-TERM LOANS

Article 15.

1. The maximum ratio of short-term capital of credit institutions used for medium-term and long-term loans:

a. Commercial banks: 40%

b. Other credit institutions: 30%

2. Short-term capital of credit institutions used for medium-term and long-term loans includes:

a. Demand deposits and time deposits under 12 months of organizations (including other credit institutions) and individuals.

b. Demand savings deposits and time savings deposits under 12 months of individuals.

c. Capital raised through the issuance of short-term securities.

d. The excess amount between the amount borrowed by other credit institutions and the amount lent to them with a term under 12 months.

3. In cases where credit institutions use short-term capital for medium-term and long-term loans as directed by the Government, they shall comply with the regulations of the State Bank.

4. Credit institutions using short-term capital for medium-term and long-term loans exceeding the ratio prescribed in Clause 1 of this Article must submit a written request to the State Bank for approval, stating the reasons, the maximum ratio, and management measures to ensure liquidity. The State Bank may only consider and approve such requests from credit institutions that have adhered to other safety ratios in banking operations, have a non-performing loan (NPL) ratio below 3% of total outstanding debt, and have a good system for managing assets "Have" and assets "Debt".

PART VI. LIMITS ON EQUITY INVESTMENTS AND PURCHASE OF SHARES

Article 16.

1. Credit institutions may use charter capital and reserve funds to invest in enterprises, investment funds, projects, and other credit institutions (hereinafter referred to as commercial investments) in the forms of equity investment, joint ventures, and share purchases in accordance with this Regulation and other relevant laws.

2. Decisions on commercial investments by credit institutions must be thoroughly reviewed and evaluated by the Management Board and approved by the Board of Directors of the credit institution.

Article 17.

1. The level of investment in a single commercial investment by a credit institution shall not exceed 11% of the charter capital of the enterprise, investment fund, or 11% of the value of the investment project.

2. The total level of investment in all commercial investments by a credit institution shall not exceed 40% of its charter capital and reserve funds.

3. A credit institution investing in a single commercial investment exceeding the ratio prescribed in Clause 1 of this Article must obtain prior written approval from the State Bank on the condition that the investment is reasonable and the credit institution has complied with safety ratios in banking operations, with a non-performing loan (NPL) ratio of 3% or less of total outstanding debt.

Article 18.

Credit institutions that have invested in equity, joint ventures, or share purchases in enterprises, investment funds, investment projects, and other credit institutions exceeding the levels prescribed in Article 17 of this Regulation shall not continue to make equity investments or purchase shares during the period when these ratios exceed the prescribed levels, and within a maximum period of two years from the date this Regulation takes effect, they must take self-adjustment measures to comply with the provisions, except in cases where the State Bank approves otherwise.

SECTION VII. REPORTING AND HANDLING OF VIOLATIONS

Article 19.

Credit organizations shall report on the implementation of the regulations on safety ratios in accordance with the current provisions of the Governor of the State Bank of Vietnam regarding the Statistical Reporting System applicable to units under the State Bank and credit organizations.

Article 20.

In case credit organizations violate the provisions of this Regulation, they will be subject to administrative penalties depending on the nature and extent of the violation, in accordance with the provisions of the law.

III. IMPLEMENTATION PROVISIONS

Article 21.

Amendments and supplements to the Articles and Clauses of this Regulation shall be decided by the Governor of the State Bank of Vietnam./.