Circular No. 52/2018/TT-NHNN on the ranking of credit institutions and foreign bank branches

 

CIRCULAR

Regulations on ranking credit institutions and foreign bank branches

 

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

Pursuant to the Law ofThe Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing Certain Provisions of the Law ofon Credit Institutions dated November 20 November 2017;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

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

The Governor of the State Bank of Vietnam issues this Circular regulating the ranking of credit institutions and foreign bank branches.

 

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the ranking of credit institutions and foreign bank branches.

Article 2. Applicability

1. This Circular applies to the following entities:

a) Credit institutions include: commercial banks (including state-owned commercial banks with over 50% state ownership, joint-stock commercial banks, cooperative banks, finance companies, leasing companies);

b) Foreign bank branches;

c) Organizations and individuals related to the ranking of credit institutions and foreign bank branches.

2. This Circular does not apply to credit institutions and foreign bank branches in any of the following cases:

a) Credit institutions and foreign bank branches currently placed under special supervision by the State Bank of Vietnam (hereinafter referred to as the State Bank);

b) Credit institutions and foreign bank branches that have submitted to the State Bank applications for dissolution (in the case of voluntary dissolution) or have been requested by the Banking Supervisory Authority to issue documents requiring liquidation of assets, establishment of a Liquidation Committee, and a Supervisory Liquidation Team (in the case of license revocation) according to the provisions of the law;

c) Time of operation has not reached 24 months from the date of commencement of operations.

Article 3. Explanation of Terms

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

1. Capital Adequacy Ratio is an indicator determined in accordance with Circular No. 36/2014/TT-NHNN dated November 20, 2014 issued by the Governor of the State Bank of Vietnam on limits and ratios ensuring safety in the operations of credit institutions and foreign bank branches and subsequent legal documents amending, supplementing, or replacing it (if applicable) (hereinafter referred to as Circular No. 36/2014/TT-NHNN). In the case where credit institutions and foreign bank branches implement the provisions of Circular No. 41/2016/TT-NHNN dated December 30, 2016 issued by the Governor of the State Bank of Vietnam on capital adequacy ratios for banks and foreign bank branches and subsequent legal documents amending, supplementing, or replacing it (if applicable) (hereinafter referred to as Circular No. 41/2016/TT-NHNN), the capital adequacy ratio shall be determined in accordance with Circular No. 41/2016/TT-NHNN.

2. Tier 1 Capital Adequacy Ratio is determined specifically as follows:

a) In the case where credit institutions and foreign bank branches implement the capital adequacy ratio according to Circular No. 36/2014/TT-NHNN, the Tier 1 Capital Adequacy Ratio is determined by the formula:

Determination of standalone Tier 1 Capital and standalone Risk-Weighted Assets as prescribed in Circular No. 36/2014/TT-NHNN.

b) In the case where credit institutions and foreign bank branches implement the capital adequacy ratio according to Circular No. 41/2016/TT-NHNN, the Tier 1 Capital Adequacy Ratio is determined by the formula:

Where:

-      RWA: Total assets calculated based on credit risk

: Required capital for operational risk

-  Required capital for market risk

Determination of Tier 1 Capital, RWA, as prescribed in Circular No. 41/2016/TT-NHNN.

3. Potential restructured debt becoming non-performing debt refers to debts that have not yet become non-performing due to restructuring of repayment terms and retention of the original risk category by credit institutions and foreign bank branches.

4. Non-performing debt sold to VAMC but not recovered refers to non-performing debts sold to Vietnam Asset Management Company (VAMC) through special bonds and not yet recovered by credit institutions and foreign bank branches.

5. Large loan customers refers to customers (excluding credit institutions and foreign bank branches) whose outstanding loans account for 5% or more of the credit institution's or foreign bank branch's own capital.

6. Operating expenses reflects the item Operating Expenses reported in the Statement of Financial Results in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

7. Total operating income is the sum of Net Interest Income, Net Service Income, Net Foreign Exchange Income, Net Trading Securities Income, Net Investment Securities Income, Net Other Income, and Income from Equity Investments and Shareholdings reflected in the Statement of Financial Results in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

8. Average shareholders' equity reflects the item Shareholders' Equity on the Balance Sheet in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches, calculated as the average of quarters in a year.

9. Average total assets reflects the item Total Assets on the Balance Sheet in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches, calculated as the average of quarters in a year.

10. Net Interest Margin (NIM) is an indicator evaluating the operational efficiency of credit institutions and foreign bank branches. This indicator reflects the difference between the average deposit rate and the average lending rate of credit institutions and foreign bank branches. This indicator is determined as follows:

Where:

- Net interest income is the item Net Interest Income reflected in the Statement of Financial Results in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

- Interest-bearing assets are the total of deposits at the State Bank, deposits at other credit institutions, and loans to other credit institutions (excluding risk provisions), loans to customers (excluding risk provisions), debt purchases (excluding risk provisions), investment securities (excluding impairment provisions), reflected on the Balance Sheet in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches, calculated as the average of quarters in a year.

11. Number of days to collect interest receivable is an indicator to evaluate the operational efficiency of credit institutions and foreign bank branches. This indicator reflects the number of days required to collect interest receivable recorded as income of credit institutions and foreign bank branches. This indicator is determined as follows:

Where:

- Interest and fees receivable is the item of interest and fees receivable reflected on the Balance Sheet in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

- Income from interest and similar items is income from interest and similar items reflected on the Profit and Loss Statement in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

- n takes the following values: n = 4 if the estimated number of days to collect interest receivable for the ranking year is based on quarterly data, n = 2 if the estimated number of days to collect interest receivable for the ranking year is based on six-month data, n = 4/3 if the estimated number of days to collect interest receivable for the ranking year is based on nine-month data, n = 1 if the number of days to collect interest receivable for the ranking year is determined based on annual data.

12. Average high liquidity assets are high liquidity assets determined in accordance with the legal regulations on safety ratios in the operation of credit institutions and foreign bank branches (liquidity ratio), calculated as the average of the last working days of each quarter in a year.

13. Large deposit customers are the top ten customers (excluding credit institutions and foreign bank branches) with the largest deposit balances at credit institutions and foreign bank branches.

14. Average ratio of total foreign currency position to individual capital When

Where:

- k takes values from 1 to 12, corresponding to the twelve months in the ranking year. In case k = 1, the individual capital of the previous month (k-1) is the individual capital at the end of December of the immediately preceding year.

- The positive total foreign currency position and negative total foreign currency position of month k are determined according to the legal regulations on the foreign currency position of credit institutions and foreign bank branches on the last working day of month k.

- Individual capital is determined according to the legal regulations on safety ratios in the operation of credit institutions and foreign bank branches (individual capital adequacy ratio).

15. Ratio of interest rate-sensitive assets to interest rate-sensitive liabilities to Shareholders' equity When

Where:

- Interest rate-sensitive assets are the total on-balance sheet interest rate-sensitive assets (excluding non-interest bearing assets) reflected in the Notes to Financial Statements in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

- Interest rate-sensitive liabilities are the total on-balance sheet interest rate-sensitive liabilities reflected in the Notes to Financial Statements in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

- Shareholders' equity is the shareholders' equity item reflected on the Balance Sheet in accordance with the legal regulations on financial reporting for credit institutions and foreign bank branches.

16. Average fine amount for violation is the average value of the maximum fine amount and the minimum fine amount within the fine range applicable to the violation of the entity as prescribed in the Decree stipulating administrative penalties in the field of monetary affairs and banking.

Article 4. Principles and Methods for Ranking Credit Institutions and Foreign Bank Branches

1. The ranking must ensure a full reflection of the actual operational status and risks of credit institutions and foreign bank branches and comply with legal regulations.

2. Credit institutions and foreign bank branches are divided into groups of similar rank, specifically as follows:

a) Group 1: Large-scale commercial banks (average total asset value per quarter during the ranking year exceeds 100,000 billion VND);

b) Group 2: Small-scale commercial banks (average total asset value per quarter during the ranking year is equal to or less than 100,000 billion VND);

c) Group 3: Foreign bank branches;

d) Group 4: Financial companies;

đ) Group 5: Financial leasing companies;

e) Group 6: Cooperative banks.

3. Credit institutions and foreign bank branches are ranked based on a set of criteria. Each ranking criterion includes a quantitative indicator group and a qualitative indicator group. The quantitative indicator group measures the health level of banking operations based on the operational data of credit institutions and foreign bank branches. The qualitative indicator group measures the degree of compliance with legal regulations by credit institutions and foreign bank branches.

4. The weight of each indicator group, the weight of each indicator within each group of similar rank is determined based on the importance of each indicator group and each indicator to the health level of banking operations and the requirements of supervisory work.

5. Based on the ranking score achieved, credit institutions and foreign bank branches are assigned to one of the following ranks: Excellent (A), Good (B), Average (C), Weak (D) or Very Weak (E).

Article 5. Documentation, Information, and Data for Ranking

1. Documentation, information, and data used for ranking:

a) Documentation, information, and data submitted by credit institutions and foreign bank branches to the State Bank of Vietnam in accordance with legal regulations on reporting and statistics;

b) Supervision, inspection, audit results of authorized agencies and organizations in accordance with legal regulations (including the State Bank of Vietnam, other state management agencies, and independent auditing companies);

c) Other documentation, information, and data submitted by credit institutions and foreign bank branches to the State Bank of Vietnam in accordance with legal regulations and at the request of the State Bank of Vietnam.

2. Data used to calculate ranking scores include:

a) Individual data of credit institutions and foreign bank branches (excluding subsidiaries and affiliated companies);

b) Data as of December 31 of each year of credit institutions and foreign bank branches, except for indicators calculated on average;

c) In cases where ranking is conducted urgently to meet state management requirements as stipulated in Clause 3, Article 21 of this Circular, the Governor of the State Bank of Vietnam decides the scope of documentation, information, and data used to calculate the ranking scores of credit institutions and foreign bank branches.

Article 6. System of Ranking Criteria

1. The system of criteria used for ranking credit institutions and foreign bank branches includes:

a) Capital (C);

b) Asset Quality (A);

c) Management Governance (M);

d) Business Operation Results (E);

đ) Liquidity Capacity (L);

e) Market Risk Sensitivity Level (S).

2. Credit institutions and foreign bank branches are scored according to the criteria and indicator groups specified in Articles 7, 8, 9, 10, 11, and 12 of this Circular.

 

Chapter II

SPECIFIC PROVISIONS

Section 1

  RANKING CRITERIA AND INDICATOR GROUPS

Article 7. Capital

The criteria for evaluating and scoring the capital of credit institutions and foreign bank branches shall be based on the following groups of indicators:

1. Quantitative Indicators Group:

a) Capital adequacy ratio;

b) Tier 1 capital adequacy ratio.

2. Qualitative Indicators Group:

a) Compliance with legal regulations on the issuance, review, examination, amendment, supplementation, and reporting of internal rules regarding asset quality assessment and compliance with the minimum capital adequacy ratio as prescribed;

b) Compliance with the minimum capital adequacy ratio as prescribed;

c) Compliance with legal regulations on the actual value of charter capital and authorized capital;

d) Compliance with legal regulations on internal capital adequacy assessment.

Article 8. Asset Quality

The criteria for evaluating and scoring the asset quality of credit institutions and foreign bank branches shall be based on the following groups of indicators:

1. Quantitative Indicators Group:

a) Ratio of non-performing loans, sold non-performing loans to the Vietnam Asset Management Company that have not been resolved, and potential restructured loans that may become non-performing loans to the total loan amount plus sold non-performing loans to the Vietnam Asset Management Company that have not been resolved;

b) Ratio of loans classified as category 2 to the total loan amount;

c) Ratio of credit extended to customers with large credit amounts to the total credit extended to economic organizations and individuals;

d) Ratio of off-balance sheet items from categories 3 to 5 to the total off-balance sheet items from categories 1 to 5;

đ) Ratio of credit extended to members of people's credit funds to the total credit extended;

e) Ratio of risk provisions for trading securities and investment securities (excluding risk provisions related to special bonds when selling debts to the Vietnam Asset Management Company) to the total balance of trading securities and investment securities (excluding balances of special bonds when selling debts to the Vietnam Asset Management Company);

g) Ratio of long-term investment write-down provisions to the total balance of long-term investments.

2. Qualitative Indicators Group:

a) Compliance with legal regulations on lending activities;

b) Compliance with legal regulations on the issuance, review, amendment, supplementation, and reporting of internal rules on credit granting, loan management, and risk provision policies;

c) Compliance with legal regulations on the internal credit rating system;

d) Compliance with legal regulations on asset classification, provisioning levels, risk provision methods, and the use of risk provisions to address risks in the operations of credit institutions and foreign bank branches;

đ) Compliance with legal regulations on the establishment and use of loss provisions for financial investments and difficult-to-collect receivables;

e) Compliance with legal regulations on the establishment and use of risk provisions for special bonds issued by the asset management companies of Vietnamese credit institutions;

g) Compliance with legal regulations on credit limits and restrictions;

h) Compliance with legal regulations on credit risk management.

Article 9. Governance and Management

The criteria for evaluating and scoring the governance and management of credit institutions and foreign bank branches shall be based on the following groups of indicators:

1. Quantitative Indicators Group: Ratio of operating expenses to total operating income.

2. Qualitative Indicators Group:

a) Compliance with legal regulations on shareholders, shares, and stocks;

b) Compliance with legal regulations on investment limits and share purchases;

c) Compliance with legal regulations on the Board of Directors, Board of Members, Supervisory Board, Management Board, and other legal regulations on governance and management of credit institutions and foreign bank branches;

d) Compliance with legal regulations on internal control systems including high-level supervision, internal controls, internal audits, and risk management (excluding credit risk management, liquidity risk management, and market risk management) of credit institutions and foreign bank branches;

đ) Compliance with legal regulations on independent audits;

e) Compliance with legal regulations on information and reporting systems;

g) Compliance with legal regulations on money and banking other than those mentioned in the qualitative indicators stipulated in Articles 7, 8, 10, 11, and 12 of this Circular and Points a, b, c, d, đ, and e of Clause 2 of this Article.

Article 10. Business Operation Results

The criteria for evaluating and scoring the business operation results of credit organizations and foreign bank branches are as follows:

1. Quantitative Indicators Group:

a) The ratio of pre-tax profit to average equity;

b) The ratio of pre-tax profit to average total assets;

c) Net Interest Margin (NIM);

d) Days Sales Outstanding (DSO).

2. Qualitative indicators: Compliance with legal regulations on financial systems for credit organizations and foreign bank branches.

Article 11. Liquidity

The criteria for evaluating and scoring the liquidity of credit organizations and foreign bank branches are as follows:

1. Quantitative Indicators Group:

a) The ratio of high liquidity assets to average total assets;

b) The ratio of short-term capital used for medium and long-term loans;

c) The ratio of loan balance to total deposits;

d) The ratio of customer deposits with large balances to total deposits.

2. Qualitative Indicators Group:

a) Compliance with legal regulations on solvency ratios, maximum short-term capital usage for medium and long-term loans, and loan-to-deposit ratios;

b) Compliance with legal regulations on the issuance, review, amendment, supplementation, and reporting of internal rules regarding liquidity management and other risk management regulations.

Article 12. Sensitivity to Market Risk

The criteria for evaluating and scoring the sensitivity to market risk of credit organizations and foreign bank branches are as follows:

1. Quantitative Indicators Group:

a) The ratio of total foreign currency position to average core capital;

b) The ratio of interest rate-sensitive assets minus interest rate-sensitive liabilities to equity.

2. Qualitative Indicators Group:

a) Compliance with legal limits on total foreign currency positions;

b) Compliance with legal regulations on market risk management.

Section 2

METHOD OF SCORING AND RANKING

Article 13. Calculation of Points for Each Quantitative Indicator and Group of Quantitative Indicators

The points for each quantitative indicator under the six ranking criteria are calculated based on levels of 1, 2, 3, 4, or 5; the points for a group of quantitative indicators are calculated based on levels from 1 to 5, where level 5 is the best and level 1 is the worst, specifically as follows:

1. The points for each quantitative indicator are determined by comparing the value of the quantitative indicator with the scoring threshold of that indicator. The quantitative scoring threshold is determined based on historical data of quantitative indicators of credit organizations and foreign bank branches. The specific point level for each quantitative indicator is determined as follows:

a) In cases where the higher the value of the quantitative indicator, the lower the risk level:

(i) Five points if the indicator value is greater than or equal to threshold 1;

(ii) Four points if the indicator value is greater than or equal to threshold 2 and less than threshold 1;

(iii) Three points if the indicator value is greater than or equal to threshold 3 and less than threshold 2;

(iv) Two points if the indicator value is greater than or equal to threshold 4 and less than threshold 3;

(v) One point if the indicator value is less than threshold 4.

b) In cases where the higher the value of the quantitative indicator, the higher the risk level:

(i) Five points if the indicator value is less than or equal to threshold 1;

(ii) Four points if the indicator value is less than or equal to threshold 2 and greater than threshold 1;

(iii) Three points if the indicator value is less than or equal to threshold 3 and greater than threshold 2;

(iv) Two points if the indicator value is less than or equal to threshold 4 and greater than threshold 3;

(v) One point if the indicator value is greater than threshold 4.

c) In cases where the quantitative indicator's value approaches zero, the risk level decreases:

(i) Five points if the absolute value of the indicator is less than or equal to threshold 1;

(ii) Four points if the absolute value of the indicator is less than or equal to threshold 2 and greater than threshold 1;

(iii) Three points if the absolute value of the indicator is less than or equal to threshold 3 and greater than threshold 2;

(iv) Two points if the absolute value of the indicator is less than or equal to threshold 4 and greater than threshold 3;

(v) One point if the absolute value of the indicator is greater than threshold 4.

d) Thresholds 1, 2, 3, and 4 for each quantitative indicator applicable to each peer group are specified in Article 14 of this Circular.

2. The points for a group of quantitative indicators at each criterion are determined by summing the points of each quantitative indicator after multiplying by the weight of each quantitative indicator. The weight of each quantitative indicator applicable to each peer group is specified in Article 15 of this Circular.

3. For the quantitative indicators prescribed in Point a and b Clause 1 Article 7 of this Circular, in cases where credit organizations and foreign bank branches implement the capital adequacy ratio according to Circular 41/2016/TT-NHNN, the points for the quantitative indicators prescribed in Point a and b Clause 1 Article 7 of this Circular will be increased by one point after being determined according to the provisions of Point a and d Clause 1 of this Article.

Article 14. Thresholds for each quantitative criterion

The thresholds 1, 2, 3, and 4 of each quantitative criterion according to each group of peers are determined specifically as follows:

Article 15. Weight of each quantitative criterion

The weight of each quantitative criterion applied to each group of peers is determined specifically as follows:

Article 16. Method for calculating points for qualitative criteria groups

1. Points for the qualitative criteria group at each ranking criterion are determined based on the assessment of compliance with legal regulations by credit institutions and branches of foreign banks, with 5 points being the best and 0.1 point being the worst, specifically as follows:

2. Five points if credit institutions and branches of foreign banks comply with all legal regulations stipulated in each criterion within the qualitative criteria group.

3. Credit institutions and branches of foreign banks will receive progressively lower points when violating the legal regulations specified in the qualitative criteria group stipulated in Articles 7, 8, 9, 10, 11, and 12 of this Circular. Violations by credit institutions and branches of foreign banks used to calculate points shall be based on the following principles:

a) Violations discovered during the ranking year:

(i) For violations with fines prescribed under the Decree on administrative penalties in the field of monetary policy and banking, the points for the qualitative criteria group will be determined based on the average fine amount for the violation, specifically as follows:

- Four points if the average fine amount for the violation is less than or equal to 100 million VND;

- Three points if the average fine amount for the violation is less than or equal to 200 million VND and greater than 100 million VND;

- Two points if the average fine amount for the violation is less than or equal to 300 million VND and greater than 200 million VND;

- One point if the average fine amount for the violation is greater than 300 million VND.

(ii) For other violations, credit institutions and branches of foreign banks will receive four points;

(iii) In cases where multiple different regulations (within the same qualitative criteria group) correspond to different point values, credit institutions and branches of foreign banks will receive the lowest point value among those corresponding to the violations;

(iv) After determining the points for the qualitative criteria group based on the provisions set out in Point a(i), a(ii), and a(iii) of this Clause, credit institutions and branches of foreign banks will continue to lose points subject to the condition that the maximum number of points deducted does not exceed 0.9 points according to the following principle:

- In cases where the same regulation is violated multiple times, credit institutions and branches of foreign banks will lose 0.1 point for each violation (applicable from the second violation onwards);

- In cases where multiple different regulations are violated multiple times (within the same qualitative criteria group), credit institutions and branches of foreign banks will lose 0.1 point for each violation (applicable from the second violation onwards).

b) Violations discovered before the ranking year but not yet fully rectified will be used to score in the ranking year according to the provisions set out in Point a(i), a(ii), a(iii), and a(iv) of this Clause until credit institutions and branches of foreign banks complete the rectification;

c) Violations used to calculate points for the qualitative criteria group include:

(i) Violations identified through supervisory, inspection, audit, and examination results of authorized agencies and organizations (including the State Bank of Vietnam, other state management agencies, and independent auditing companies) or administrative penalty decisions made by competent authorities;

(ii) Violations reported by credit institutions and branches of foreign banks themselves.

3. If credit institutions and branches of foreign banks are not required to comply with one or more criteria in the qualitative criteria group stipulated in Articles 7, 8, 9, 10, 11, and 12 of this Circular according to legal regulations, they will not be scored for those criteria.

Article 17. Points for each criterion

The points for each criterion are defined in Article 7, 8, 9, 10, 11, and 12 of this Circular by the total points of the quantitative indicators group and the points of the qualitative indicators group belonging to the criterion after being multiplied by the weight of each quantitative indicators group and each qualitative indicators group. The weight of each quantitative indicators group and each qualitative indicators group is specified in Article 18 of this Circular.

Article 18. Weight of each criterion, quantitative indicators group, and qualitative indicators group within each criterion

1. The weight of each criterion, quantitative indicators group, and qualitative indicators group is determined specifically as follows:

2. For finance companies, financial leasing companies, and cooperative banks, the weight of the Market Risk Sensitivity Level criterion is 5%, the weight of the quantitative indicators group of the Market Risk Sensitivity Level criterion is 5%, and the weight of the qualitative indicators group of the Market Risk Sensitivity Level criterion is 0%.

Article 19. Calculation of total ranking points

1. The total ranking points of credit institutions and foreign bank branches are determined based on the total points of each criterion after being multiplied by the weight of each criterion. The weight of each criterion is specified in Article 18 of this Circular.

2. The total ranking points of credit institutions and foreign bank branches will be deducted points when the points of the qualitative indicators group of four criteria or more are less than or equal to 1 point according to the following cases:

a) In case the total ranking points are greater than 1, the total ranking points of credit institutions and foreign bank branches will be deducted by 1 point;

b) In case the total ranking points are less than or equal to 1, the total ranking points of credit institutions and foreign bank branches will be deducted by 0.1 point.

Article 20. Ranking

Credit institutions and foreign bank branches are ranked as follows:

1. Credit institutions and foreign bank branches are ranked A (Good) if the Total Ranking Points are greater than or equal to 4.5.

2. Credit institutions and foreign bank branches are ranked B (Fair) if the Total Ranking Points are less than 4.5 and greater than or equal to 3.5.

3. Credit institutions and foreign bank branches are ranked C (Average) if the Total Ranking Points are less than 3.5 and greater than or equal to 2.5.

4. Credit institutions and foreign bank branches are ranked D (Weak) if the Total Ranking Points are less than 2.5 and greater than or equal to 1.5.

5. Credit institutions and foreign bank branches are ranked E (Poor) if the Total Ranking Points are less than 1.5.

6. In addition to the provisions stipulated in Clause 4 of Article 20 of this Circular, credit institutions and foreign bank branches are ranked (D) if they fall into one of the situations prescribed in Point a, b of Clause 1 of Article 130a of the Law on Credit Institutions (amended and supplemented).

7. In addition to the provisions stipulated in Clause 5 of Article 20 of this Circular, credit institutions and foreign bank branches are ranked E if they fall into one of the situations prescribed in Point a, b, c of Clause 1 of Article 145 of the Law on Credit Institutions (amended and supplemented) and have not been placed under special supervision by the State Bank.

Section 3

RANKING RESULTS

Article 21. Frequency, time of implementation, approval of ranking

1. Before June 10 each year, the Banking Inspection and Supervision Agency shall submit to the Governor of the State Bank of Vietnam for approval the ranking results of the immediately preceding year for credit institutions and foreign bank branches.

2. Before June 30 each year, the Governor of the State Bank of Vietnam shall approve the ranking results of the immediately preceding year for credit institutions and foreign bank branches.

3. In cases where there is an urgent need for state management requirements, the Governor of the State Bank of Vietnam may decide on a different time for implementing the ranking and approving the ranking results from those specified in Clauses 1 and 2 of this Article.

Article 22. Notification of Ranking Results

1. Within fifteen days from the date the Governor of the State Bank of Vietnam approves the ranking results, the Banking Inspection and Supervision Agency shall notify the ranking results to each credit institution and foreign bank branch, and the State Bank of Vietnam branch in the province or city where the credit institution or foreign bank branch is headquartered.

2. Contents of the notification of ranking results:

a) For credit institutions and foreign bank branches: Notification of the ranking results (including the grade and total ranking points) of the credit institution or foreign bank branch;

b) For State Bank of Vietnam branches in provinces and cities: Notification of the ranking results (including the grade and total ranking points) of credit institutions and foreign bank branches with headquarters located within their respective provincial or municipal areas.

3. The Banking Inspection and Supervision Agency shall be responsible for providing the ranking results of credit institutions and foreign bank branches to other units under the State Bank of Vietnam to serve state management requirements according to the functions and tasks of these units upon approval by the Governor of the State Bank of Vietnam.

4. The State Bank of Vietnam shall provide the ranking results of credit institutions and foreign bank branches to other state management organizations in accordance with the provisions of the law.

5. The notification of ranking results for joint venture banks, wholly foreign-owned banks, foreign bank branches, and non-bank foreign credit institutions to central banks and foreign financial supervisory agencies shall be carried out in accordance with the Memorandum of Cooperation between the State Bank of Vietnam and the central banks and foreign banking supervisory agencies.

Article 23. Management of Ranking Results

1. Credit institutions and foreign bank branches shall not provide ranking results to third parties (including the parent bank of foreign bank branches) in any form.

2. The Banking Inspection and Supervision Agency, State Bank of Vietnam branches in centrally administered provinces and cities, other units under the State Bank of Vietnam, and other state management organizations that are recipients of ranking results of credit institutions and foreign bank branches as stipulated in Clause 4 of Article 22 of this Circular must implement storage and use of ranking results in accordance with the laws on protecting state secrets in the banking sector.

 

Chapter III

IMPLEMENTATION

Article 24. Responsibilities of credit institutions and foreign bank branches

1. Credit institutions and foreign bank branches shall be fully responsible for the accuracy and truthfulness of the provided documents, information, and data, and shall have the responsibility to explain and report additional contents related to the ranking upon the request of the State Bank of Vietnam.

2. Manage the results of the ranking as prescribed in Clause 1 of Article 23 of this Circular and other relevant laws.

Article 25. Responsibilities and authorities of the Banking Inspection and Supervision Authority

1. Serve as the coordinating body, cooperating with the State Bank of Vietnam branch in provinces and centrally-administered cities to implement the ranking of credit institutions and foreign bank branches.

2. Advise and submit to the Governor of the State Bank of Vietnam for approval the results of the ranking of credit institutions and foreign bank branches.

3. Advise and submit to the Governor of the State Bank of Vietnam measures to handle credit institutions and foreign bank branches according to the provisions of the law based on the approved ranking results.

4. Store, announce, and provide the ranking results of credit institutions and foreign bank branches in accordance with the provisions of this Circular and other relevant legal documents.

Article 26. Responsibilities and authorities of the State Bank of Vietnam branch in provinces and centrally-administered cities

1. The State Bank of Vietnam branch in provinces and centrally-administered cities shall cooperate with the Banking Inspection and Supervision Authority to implement the ranking of credit institutions and foreign bank branches.

2. Advise and submit to the Governor of the State Bank of Vietnam measures to handle credit institutions and foreign bank branches according to the provisions of the law based on the approved ranking results.

3. Store the ranking results of credit institutions and foreign bank branches in accordance with the provisions of this Circular and other relevant legal documents.

Article 27. Effective Date

1. This Circular takes effect from April 1, 2019, and begins to apply for the ranking of credit institutions and foreign bank branches starting from 2019.

2. Repeal Decision No. 06/2008/QĐ-NHNN dated March 12, 2008, issued by the Governor of the State Bank of Vietnam on the regulations for classifying joint-stock commercial banks.

Article 28. Implementation Organization

The Director of the Office of the State Bank of Vietnam, the Director of the Banking Inspection and Supervision Authority, the Governor of the State Bank of Vietnam branch in provinces and centrally-administered cities, the Heads of relevant units under the State Bank of Vietnam, the Chairmen of the Board of Directors, the Chairmen of the Board of Members, and the General Directors (Directors) of credit institutions and foreign bank branches within their respective functions and powers are responsible for organizing and implementing this Circular.