Decree No. 86/2024/ND-CP on the level of provision for impairment, methods of establishing provisions for risk, the use of provisions to handle risks in the operations of credit institutions and foreign bank branches, and cases where credit institutions allocate receivable interest to be withdrawn.

DECREE

Regulations on the amount to be set aside, methods for establishing provisions for risks,

using provisions to handle risks in the operations of credit institutions,

foreign bank branches and cases where credit institutions

allocate interest receivable to be withdrawn

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Pursuant to the Law on the Organization of the Government dated June 19, 2015; the Law Amending and Supplementing Certain Provisions of the Law on the Organization of the Government and the Law on the Organization of Local Administration dated November 22, 2019;

Pursuant to the Law on Credit Organizations January 18, 2024;

At the proposal of shareholders,;

Cthe Government promulgates this Decree stipulating the amount to be set aside, methods for establishing provisions for risks and using provisions to handle risks in operations of of credit institutions, branches of foreign banks and cases where credit institutions allocate interest receivable to be withdrawn.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Decree stipulates on:

a) The amount to be set aside, methods for establishing provisions for risks and using provisions to handle credit risks in the operations of credit institutions, branches of foreign banks as prescribed in Clause 3 Article 147 of the Law on Credit Institutions for assets specified in Clause 2 Article 3 of this Decree;

b) Cases where credit institutions have a period for allocating interest receivable to be withdrawn exceeding five years but not more than ten years as prescribed in point b Clause 2 Article 159 of the Law on Credit Institutions.

2. The establishment and use of provisions for inventory write-downs, provisions for losses on financial investments, provisions for losses on non-performing loans, except for the provisions specified in Clause 2 Article 3 of this Decree shall be carried out in accordance with the laws on the establishment and handling of provisions for inventory write-downs, losses on investments, non-performing loans, and product warranties, goods, services, and construction projects at enterprises.

3. The establishment and use of risk provisions for special bonds issued by the Vietnam Asset Management Company to purchase non-performing loans from credit institutions shall be carried out in accordance with the laws on the purchase, sale, and handling of non-performing loans of the Vietnam Asset Management Company.

4. For debts where the Government has regulations on the amount to be set aside, methods for establishing provisions for risks and using provisions to handle other risks that differ from the provisions of this Decree, credit institutions, branches of foreign banks shall implement according to those regulations of the Government.

5. For debts where the Prime Minister decides on the amount to be set aside, methods for establishing provisions for risks and using provisions to handle risks as prescribed in Clause 4 Article 147 of the Law on Credit Institutions, credit institutions, branches of foreign banks shall implement according to such decisions of the Prime Minister.

Article 2. Applicability

This Decree applies to:

1. Credit institution: Commercial bank, non-bank credit institution, credit institution which is a cooperative (cooperative bank, people's credit fund) and microfinance institution.

2. Branches of foreign banks, except in cases where branches of foreign banks apply the risk provision policies of foreign banks as prescribed in Article 16 of this Decree.

MECHANISMS AND POLICIES REGARDING THE PRICE OF AUCTION SERVICES FOR ASSETS THAT MUST BE SOLD THROUGH AUCTIONS AS PRESCRIBED BY LAW

Article 3. Explanation of Terms

In this Decree, the following terms shall be understood as follows:

1. Credit risk in the operations of credit institutions, branches of foreign banks (hereinafter referred to as risk) is the possibility of loss occurring to the debt of credit institutions, branches of foreign banks due to customers being unable to repay part or all of their debt according to the contract or agreement (hereinafter referred to as agreement) with credit institutions, branches of foreign banks.

2. Assets (hereinafter referred to as debt) of credit institutions, branches of foreign banks arise from the following activities:

a) Lending;

b) Financial leasing;

c) Discounting, rediscounting transferable instruments and other negotiable instruments;

d) Factoring;

đ) Providing credit in the form of issuing credit cards;

e) Paying on behalf of off-balance sheet commitments (including payment obligations of customers in guarantee transactions, documentary credit business (except for cases prescribed in point n of this clause) and other payments on behalf of off-balance sheet commitments);

g) Purchasing and entrusting the purchase of corporate bonds (including corporate bonds issued by other credit institutions) not listed on the securities market or registered for trading on the Upcom system (hereinafter referred to as unlisted bonds), excluding purchases of unlisted bonds with entrusted funds where the entruster bears the risk;

h) Entrusted lending;

i) Deposits (excluding demand deposits at credit institutions, branches of foreign banks, deposits at the Social Policy Bank as prescribed by the Governor of the State Bank of Vietnam regarding state-owned credit institutions maintaining deposit balances at the Social Policy Bank) at credit institutions, branches of foreign banks in accordance with the law and deposits (excluding demand deposits) at foreign credit institutions;

k) Buying and selling debts as prescribed by the Governor of the State Bank of Vietnam (hereinafter referred to as the State Bank);

l) Buying and selling government bonds on the securities market as prescribed by the laws on issuance, registration, custody, listing, and trading of government debt instruments on the securities market;

m) Purchasing certificates of deposit issued by other credit institutions, branches of foreign banks;

n) Documentary credit business with deferred payment terms containing an agreement that the beneficiary can be paid immediately or before the due date of the documentary credit and the business of refunding documentary credits through an agreement with the customer paying from the bank's refunding funds from the day the bank refunds payment to the beneficiary; documentary credit negotiation business;

o) Purchasing clean bills of exchange presented under documentary credits, except when credit institutions, branches of foreign banks purchase clean bills of exchange under documentary credits issued by themselves.

3. Debt amount is the sum of money that credit institutions, foreign bank branches have deposited, paid, disbursed in installments according to agreements (in cases where each disbursement has a different final deadline for repayment period) or the sum of money that credit institutions, foreign bank branches have disbursed according to agreements (in cases of multiple disbursements but with the same final deadline for repayment period) for debts not yet repaid by a customer.

4. Risk provision is the amount of money set aside to cover potential risks associated with the debts of credit institutions, foreign bank branches. Risk provisions include specific risk provisions and general risk provisions.

5. Specific risk provision is the amount of money set aside to cover potential risks associated with each specific debt.

6. General risk provision is the amount of money set aside to cover potential risks that cannot be identified at the time of setting aside specific risk provisions.

7. Customer is an organization (including credit institutions, foreign bank branches), individual, other subjects as prescribed by civil law who have the obligation to repay debts and make payments to credit institutions, foreign bank branches according to agreements.

8. Using risk provisions to handle risks is the act of credit institutions, foreign bank branches changing accounting entries for debts, transferring debts handled for risks out of accounting on off-balance sheet accounts; using risk provisions to handle risks does not change the debt repayment obligations of customers for debts for which risk provisions are used and the responsibility of related organizations and individuals for such debts.

9. Group 1, group 2, group 3, group 4, and group 5 debts defined in this Decree are debts classified according to the provisions of Clause 2 Article 147 of the Law on Credit Institutions.

Chapter II

ESTABLISHING RISK PROVISIONS AND USING RISK PROVISIONS

TO HANDLE RISKS

Section 1

LEVEL OF RISK PROVISIONS AND METHODS FOR ESTABLISHING RISK PROVISIONS

Article 4. Level of establishing specific risk provisions

1. The amount of specific risk provision that must be established for each customer of credit institutions, foreign bank branches shall be calculated according to the following formula:

Where:

R: Total amount of specific risk provisions that must be established for each customer;

: Is the total amount of specific risk provisions of the customer from the first outstanding debt balance to the nth outstanding debt balance.

 Ri: Is the amount of specific risk provision that must be established for the customer for the principal outstanding debt balance of the ith debt. Ri is determined according to the formula

 Ri = (Ai - Ci) x r

Where:

Ai: Principal outstanding debt balance of the ith debt. For debts that have been sold but not fully recovered, Ai is the unsold debt amount not fully recovered.

Ci: Deductible value of collateral assets, financial lease assets, transferable instruments, other securities in discounting activities, government bond repurchase transactions (hereinafter referred to as collateral assets) of the ith debt.

 r: Ratio of establishing specific risk provisions by group as stipulated in Clause 2, Clause 3 of this Article.

In case Ci > Ai then Ri is calculated as 0.

2. The ratio of establishing specific risk provisions for debts classified from Group 1 to Group 5 of credit institutions (excluding microfinance organizations), foreign bank branches is as follows:

a) Group 1: 0%;

b) Group 2: 5%;

c) Group 3: 20%;

d) Group 4: 50%;

đ) Group 5: 100%.

3. The ratio of establishing specific risk provisions for debts classified from Group 1 to Group 5 of microfinance organizations is as follows:

a) Group 1: 0%;

b) Group 2: 2%;

c) Group 3: 25%;

d) Group 4: 50%;

đ) Group 5: 100%.

4. Collateral assets to be deducted when calculating the amount of specific risk provisions (Ri) as stipulated in Clause 1 of this Article must meet the following conditions:

a) Collateral assets (except financial lease assets, transferable instruments, other securities in discounting activities, government bond repurchase transactions) must comply with the provisions of the law on guaranteeing the performance of obligations and relevant laws; financial lease assets, transferable instruments, other securities in discounting activities, government bond repurchase transactions must comply with relevant laws;

b) Credit institutions, foreign bank branches have the right to dispose of collateral assets according to agreements and the provisions of the law when customers fail to fulfill their obligations under agreements.

5. The deductible value of collateral assets must be considered as 0 in the following cases:

a) Collateral assets do not meet the conditions stipulated in Clause 4 of this Article;

b) Exceeding one year for non-real estate collateral assets and exceeding two years for real estate collateral assets, counted from the time credit institutions, foreign bank branches have the right to dispose of collateral assets according to agreements and the provisions of the law.

6. The deductible value of collateral assets is determined by multiplying the value of collateral assets as stipulated in Article 5 of this Decree with the deduction rate for each type of collateral asset as stipulated in Article 6 of this Decree.

7. In cases where the Government, Prime Minister has regulations, decisions on classifying assets of credit institutions, foreign bank branches without provisions on establishing risk provisions, credit institutions, foreign bank branches shall implement risk provisions establishment according to this Decree based on the debt groups classified according to the regulations, decisions of the Government, Prime Minister.

8. Early intervention credit institutions shall establish risk provisions according to point a Clause 2 Article 159 of the Law on Credit Institutions after being approved in writing by the State Bank.

9. Special supervision credit institutions shall establish risk provisions according to Clause 1 Article 166 of the Law on Credit Institutions.

Article 5. Value of collateral for deduction when setting aside specific provisions for risk

The value of collateral for deduction when setting aside specific provisions for risk shall be determined as follows:

1. Gold bars: The purchase price at the headquarters of the enterprise or credit institution owning the gold bar brand on the last day of the nearest trading day before the specific provision setting date.

2. Listed securities (including shares, fund certificates, derivative securities, listed guaranteed warrant): The closing price on the nearest trading day before the specific provision setting date. In cases where listed securities on the market have no transactions within 30 days prior to the specific provision setting date, and on the specific provision setting date, the securities are delisted, suspended from trading, or halted from trading, the credit institution, foreign bank branch shall determine the value of the collateral according to the provisions of Clause 6 of this Article.

3. Shares registered for trading on the Upcom trading system: The reference price on the nearest trading day before the specific provision setting date announced by the Stock Exchange. In cases where shares of joint-stock companies registered for trading on the Upcom trading system have no transactions within 30 days prior to the specific provision setting date, and on the specific provision setting date, the shares are delisted, suspended from trading, or halted from trading, the credit institution, foreign bank branch shall determine the value of the collateral according to the provisions of Clause 6 of this Article.

4. Government bonds listed on the Stock Exchange: The average transaction prices during the session of guaranteed bid offers according to the Government's regulations on issuance, registration, custody, listing, and trading of government debt instruments on the securities market; guiding documents of the Ministry of Finance and any amendments, supplements, or replacements (if any). In cases where there are no transaction prices during the session of guaranteed bid offers mentioned above, the bond price for deduction purposes is the average transaction prices on the secondary market within the nearest 10 working days up to the specific provision setting date. In cases where there are no transactions within the nearest 10 working days up to the specific provision setting date, the credit institution, foreign bank branch shall determine the value of the collateral according to its face value.

5. Local government bonds, government-guaranteed bonds, and corporate bonds (including credit institutions) listed or registered for trading: The average transaction prices on the secondary market within the nearest 10 working days before the specific provision setting date announced by the Stock Exchange. In cases where there are no transactions within the nearest 10 working days up to the specific provision setting date, the credit institution, foreign bank branch shall determine the value of the collateral according to its face value.

6. Unlisted securities, deposit certificates issued by enterprises (including credit institutions, foreign bank branches): Determined according to their face value.

In cases where, at the specific provision setting date, the equity capital is lower than the actual investment capital of the owners in the issuing organization, the value of the collateral shall be determined as follows:

The face value of the securities, valuable papers multiplied (x) by the equity capital of the issuing organization divided (: ) by the actual investment capital of the owners in the issuing organization.

Wherein: The actual investment capital of the owners in the issuing organization and the equity capital of the issuing organization are determined based on the most recent balance sheet before the specific provision setting date according to the accounting regime for enterprises guided by the Ministry of Finance.

In cases where the equity capital of the issuing organization is negative or zero, the deduction value of the collateral (Ci) must be considered as zero.

7. Financial lease assets: The value of financial lease assets is appraised according to the provisions of Clause 10 of this Article or the remaining value of financial lease assets over time calculated by the formula:

The value of financial lease assets divided (: ) by the lease period according to the contract multiplied (x) by the remaining lease period according to the contract.

8. Deposits and deposit certificates: The principal balance of deposits and deposit certificates on the nearest day before the specific provision setting date.

9. The value of collateral for deduction in the sale of debts but not fully recovered is the value of collateral according to the debt purchase and sale contract (if any).

10. The determination of the value of collateral for deduction when calculating specific provision amounts for each movable, immovable asset, or other types of collateral, except for those specified in Clauses 1, 2, 3, 4, 5, 6, 7, and 8 of this Article, shall be carried out as follows:

a) Credit institutions, foreign bank branches must hire an appraisal organization with appraisal functions according to the law to determine the value of collateral for deduction when calculating specific provision amounts at the end of the fiscal year in the following cases:

Collateral whose value is determined by credit institutions, foreign bank branches for deduction purposes is 50 billion VND or more for customer loans related to credit institutions, foreign bank branches and restricted lending objects according to Article 135 of the Law on Credit Institutions; collateral whose value is determined by credit institutions, foreign bank branches for deduction purposes is 200 billion VND or more.

The appraisal results of collateral by the appraisal organization with appraisal functions according to the law still valid on the specific provision setting date shall be used by credit institutions, foreign bank branches to determine the value of collateral for deduction.

In cases where there is no appraisal document of collateral by the appraisal organization, the deduction value of the collateral must be considered as zero.

b) Except for the cases provided for in point a of this clause, credit institutions and foreign bank branches shall determine the value of collateral assets to be deducted when calculating specific provisions according to the internal regulations of credit institutions and foreign bank branches.

Article 6. Deduction Ratio of Collateral Assets

1. Credit institutions and foreign bank branches shall independently determine the deduction ratio for each type of collateral asset based on the assessment of the recoverability when disposing of such collateral assets; the lower the liquidity of the collateral asset and the greater the price fluctuation, the lower the deduction ratio for the collateral asset; the maximum deduction ratio for each type of collateral asset is specified in Clause 2 of this Article.

2. The maximum deduction ratio for collateral assets shall be determined as follows:

a) Deposit balances (including mandatory savings and voluntary deposits for microfinance organizations), and Vietnamese dong-denominated deposit certificates at the same credit institution or foreign bank branch: 100%;

b) Government bonds, gold bars in accordance with the law on gold trading activities; foreign currency deposit balances and foreign currency-denominated deposit certificates at the same credit institution or foreign bank branch: 95%;

c) Local government bonds, government-guaranteed bonds; transferable instruments, bonds issued by the credit institution itself; deposit balances and deposit certificates issued by other credit institutions or foreign bank branches:

Remaining term under 1 year: 95%;

Remaining term from 1 year to 5 years: 85%;

Remaining term over 5 years: 80%;

d) Securities listed on the stock exchange issued by other credit institutions: 70%;

đ) Securities listed on the stock exchange issued by enterprises (excluding credit institutions): 65%;

e) Unlisted securities and negotiable instruments, except those specified in point c of this clause, issued by other credit institutions that have their shares listed on the stock exchange: 50%;

Unlisted securities and negotiable instruments, except those specified in point c of this clause, issued by other credit institutions that have not had their shares listed on the stock exchange: 30%;

g) Unlisted securities and negotiable instruments issued by enterprises that have their shares listed on the stock exchange: 30%;

Unlisted securities and negotiable instruments issued by enterprises that have not had their shares listed on the stock exchange: 10%;

Real estate: 50%;

Other types of collateral assets: 30%.

Article 7. General Provision Level

1. For credit institutions (excluding microfinance organizations) and foreign bank branches, the amount of general provisions to be set aside shall be calculated as 0.75% of the total balance of loans classified from Group 1 to Group 4 debt, excluding the following items:

a) Deposits at credit institutions and foreign bank branches in accordance with the law and deposits at foreign credit institutions;

b) Loans and purchases of negotiable instruments with fixed terms between credit institutions and foreign bank branches in Vietnam;

c) Purchases of deposit certificates and bonds issued by other credit institutions and foreign bank branches within Vietnam;

d) Resales of government bonds on the securities market in accordance with the law on issuance, registration, custody, listing, and trading of government debt instruments on the securities market;

đ) Other debts arising from activities specified in Clause 2 of Article 3 of this Decree between credit institutions and foreign bank branches in Vietnam in accordance with the law.

2. For microfinance organizations, the amount of general provisions to be set aside shall be calculated as 0.5% of the total balance of loans classified from Group 1 to Group 4 debt (excluding deposits at credit institutions and foreign bank branches in accordance with the law).

Article 8. Supplementing and Reimbursing the Amount of Provision

1. In cases where the specific provision and general provision amounts unused from the previous accounting period are less than the amount of specific provision and general provision that must be set aside for the current accounting period, credit organizations and foreign bank branches must supplement the difference.

2. In cases where the specific provision and general provision amounts unused from the previous accounting period are greater than the amount of specific provision and general provision that must be set aside for the current accounting period, credit organizations and foreign bank branches must reimburse the excess amount.

Article 9. Time of Setting Aside Provisions for Risk

1. Commercial banks, non-bank credit institutions, and foreign bank branches shall implement setting aside provisions for risk as follows:

a) Within the first seven days of each month, commercial banks, non-bank credit institutions, and foreign bank branches shall set aside provisions based on the highest risk level group of debts according to the classification results of debts at the end of the last month before the current month, as stipulated by the Governor of the State Bank of Vietnam regarding asset classification in the operations of commercial banks, non-bank credit institutions, and foreign bank branches.

The debt group according to the self-classification results of debts at the end of the last month before the current month, as prescribed by the Governor of the State Bank of Vietnam on asset classification in the operations of commercial banks, non-bank credit institutions, and foreign bank branches; and

The debt group adjusted according to the customer list provided by the National Credit Information Center (CIC) at the nearest time point, as prescribed by the Governor of the State Bank of Vietnam on asset classification in the operations of commercial banks, non-bank credit institutions, and foreign bank branches.

b) For the first month of each quarter, within three days from receiving the customer list provided by CIC for the end of the last month before the current month, commercial banks, non-bank credit institutions, and foreign bank branches shall adjust the amount of provisions set aside for risk at the end of the last month before the current month based on the debt classification results adjusted according to the customer list provided by CIC, as prescribed by the Governor of the State Bank of Vietnam on asset classification in the operations of commercial banks, non-bank credit institutions, and foreign bank branches, and reflect this amount of provisions set aside for risk on the financial report for the end of the last month before the current month.

2. Credit institutions that are cooperatives and microfinance organizations shall implement setting aside provisions for risk as follows:

Within the first seven days of each month, credit institutions that are cooperatives and microfinance organizations shall set aside provisions for risk at the end of the last month before the current month based on the debt classification results according to the Governor of the State Bank of Vietnam's regulations on asset classification in the operations of credit institutions that are cooperatives and microfinance organizations.

Section 2

USING PROVISIONS FOR RISK MANAGEMENT

Article 10. Risk Management Council

1. Composition of the Risk Management Council:

a) Commercial banks must establish a Risk Management Council consisting of one member who is a member of the Board of Directors or Board of Members as Chairman; one other member who is a member of the Risk Management Committee; one other member who is the General Director (Director), and at least two other members decided by the Board of Directors or Board of Members;

b) Foreign bank branches and non-bank credit institutions must establish a Risk Management Council consisting of the General Director (Director) as Chairman and at least two other members decided by the General Director (Director);

c) Microfinance organizations must establish a Risk Management Council consisting of one member who is a member of the Board of Members as Chairman; one other member who is a member of the Risk Management Committee; one other member who is the General Director (Director), and at least two other members decided by the Board of Members;

d) Credit institutions that are cooperatives must establish a Risk Management Council consisting of one member who is a member of the Board of Directors as Chairman; one other member who is the General Director (Director), and at least two other members decided by the Board of Directors.

2. Responsibilities of the Risk Management Council of credit institutions and foreign bank branches for debts using provisions to manage risks:

a) Approving the consolidated system-wide report on the results of collecting debts that have used provisions to manage risks, including the results of handling collateral assets and clearly stating the basis for approval;

b) Deciding or approving the classification of debts, setting aside provisions, and using provisions to manage risks system-wide for debts that have used provisions to manage risks;

c) Deciding or approving measures to collect debts that have used provisions to manage risks system-wide, including the handling of collateral assets.

3. The Risk Management Council operates when at least two-thirds of the total number of members are present and decisions are made by majority rule.

Article 11. Principles and Risk Management Files

1. Credit organizations (excluding microfinance organizations), foreign bank branches shall use provisions to manage risks in the following cases:

a) The customer is an organization that has been dissolved or declared bankrupt; an individual who has died or gone missing;

b) Debts classified as Group 5.

2. Microfinance organizations shall use provisions to manage risks in the following cases:

a) Customers falling under the circumstances stipulated in Clause 1 of this Article;

b) Individual customers who have become permanently disabled and are no longer capable of generating income through labor.

3. Credit organizations, foreign bank branches shall use provisions to manage risks according to the following principles:

a) In the case where credit organizations, foreign bank branches have already disposed of collateral assets to recover debts in accordance with agreements between the parties and the provisions of the law, credit organizations, foreign bank branches shall use specific provisions to manage risks for the remaining balance of the debt; if using specific provisions is insufficient to cover the risk of the debt, general provisions shall be used to manage risks;

b) In the case where credit organizations, foreign bank branches have not yet disposed of collateral assets to recover debts, credit organizations, foreign bank branches shall use provisions to manage risks according to the following principles:

(i) Use specific provisions to manage risks for that debt;

(ii) Promptly proceed to dispose of collateral assets in accordance with agreements with the customer and the provisions of the law to recover debts;

(iii) If using specific provisions and the amount recovered from disposing of collateral assets is insufficient to cover the risk of the debt, general provisions shall be used to manage risks;

c) Credit organizations, foreign bank branches shall record off-balance-sheet the residual debt after using specific provisions and general provisions to manage risks as specified in points a and b of this clause.

4. Using provisions to manage risks is a form of changing accounting treatment for debts, transferring managed-risk debts out of on-balance-sheet accounts to off-balance-sheet accounts; it is an internal activity of credit organizations, foreign bank branches; it does not change the obligation of the customer to repay the debt managed by provisions and the responsibility of related organizations and individuals towards the debt. Credit organizations, foreign bank branches shall not inform customers about the use of provisions to manage risks. After managing risks, credit organizations, foreign bank branches must monitor and take full and thorough measures to recover the managed-risk debt, except in the case where the managed-risk debt is sold by credit organizations, foreign bank branches to other organizations or individuals, and the full sale proceeds are received in accordance with the Debt Purchase and Sale Contract.

5. Risk management files include:

a) Loan application files and debt collection files for debts managed by provisions;

b) Collateral asset files and other relevant documents (if any);

c) Decision or approval of the Risk Management Council on the results of debt classification and risk provision allocation for debts managed by provisions;

d) Decision or approval of the Risk Management Council on the use of provisions to manage risks;

đ) In the case where the customer is an organization or enterprise that has been declared bankrupt or dissolved, in addition to the files mentioned in points a, b, c, and d of this clause, there must be an original or certified copy or a copy from the original Bankruptcy Declaration Decision of the Court or the dissolution decision of the enterprise in accordance with the law;

e) In the case where the customer is an individual who has died or gone missing, in addition to the files prescribed in points a, b, c, and d of this clause, there must be an original or certified copy or a copy from the original Death Certificate or substitute death certificate issued by the competent authority in accordance with the law, or the declaration of disappearance decision in accordance with the law;

g) In the case where the customer of a microfinance organization is an individual who has become permanently disabled and is no longer capable of generating income through labor, in addition to the files prescribed in points a, b, c, and d of this clause, there must be a copy of the document proving permanent disability and inability to generate income through labor issued by the competent authority.

Article 12. Monitoring of Debt Already Utilized for Risk Provisioning and Written Off from Off-Balance Sheet

1. After a minimum period of five years from the date of utilizing the risk provision and after implementing all measures to recover the debt but failing to do so, credit institutions and foreign bank branches may decide to write off the risk-provisioned debt from the off-balance sheet.

Debts written off from the off-balance sheet must be monitored within the management system of credit institutions and foreign bank branches according to regulations on setting aside and handling provisions for inventory markdowns, investment losses, difficult-to-collect receivables, and warranty products, goods, services, and construction projects at enterprises for a minimum period of ten years from the date of the decision to write off the risk-provisioned debt from the off-balance sheet, except for debts where the debtor is an organization that has been declared bankrupt or dissolved under the law, or where the debtor is an individual who has died or been declared missing by court decision and their estate and obligations have been fully settled according to the law.

2. For commercial banks in which the State owns more than 50% of the charter capital or total voting shares, the write-off of debt from the off-balance sheet as stipulated in Clause 1 of this Article can only be implemented when the following conditions are met:

a) There must be documentation proving that all measures to recover the debt were taken but the debt was not recovered;

b) It must be approved in writing by the State Bank after obtaining the opinion of the Ministry of Finance;

c) It must be approved by the Shareholders' Meeting or the Board of Members.

3. For credit institutions that are joint-stock companies, excluding those specified in Clause 2 of this Article, the write-off of debt from the off-balance sheet as stipulated in Clause 1 of this Article can only be implemented when the following conditions are met:

a) There must be documentation proving that all measures to recover the debt were taken but the debt was not recovered;

b) It must be approved by the Shareholders' Meeting.

4. For credit institutions that are limited liability companies, excluding those specified in Clause 2 of this Article, the write-off of debt from the off-balance sheet as stipulated in Clause 1 of this Article can only be implemented when the following conditions are met:

a) There must be documentation proving that all measures to recover the debt were taken but the debt was not recovered;

b) It must be approved by the Board of Members.

5. For foreign bank branches, the write-off of debt from the off-balance sheet as stipulated in Clause 1 of this Article can only be implemented when the following conditions are met:

a) There must be documentation proving that all measures to recover the debt were taken but the debt was not recovered;

b) It must be approved by the foreign bank.

6. For credit institutions that are cooperatives, the write-off of debt from the off-balance sheet as stipulated in Clause 1 of this Article can only be implemented when the following conditions are met:

a) There must be documentation proving that all measures to recover the debt were taken but the debt was not recovered;

b) It must be approved by the General Assembly of Members.

7. The documents for writing off debt from the off-balance sheet as stipulated in Clause 1 of this Article include:

a) Documents for risk handling as prescribed in Clause 5 of Article 11 of this Decree;

b) Decision or approval of the credit institution or foreign bank branch regarding the write-off of debt utilized for risk provisioning from the off-balance sheet; the approval document of the foreign bank as prescribed in point b of Clause 5 of this Article; the approval document of the State Bank as prescribed in point b of Clause 2 of this Article for commercial banks in which the State owns more than 50% of the charter capital or total voting shares;

c) Decision or approval of measures to recover the debt that has been utilized for risk provisioning;

d) Documentation proving that all measures to recover the debt were taken but the debt was not recovered, consistent with reality and relevant laws.

The documents for writing off risk-provisioned debt from the off-balance sheet must be retained by the credit institution or foreign bank branch in accordance with the law.

Article 13. Handling of recovered funds from debts for which provisions have been made to address risks

1. The recovered funds from debts for which provisions have been made to address risks, including funds recovered from the disposal of collateral assets, shall be considered as other income in the accounting period of credit organizations and foreign bank branches, except as provided in Clause 2 of this Article.

2. The recovered funds from debts for which provisions have been made to address risks concerning the residual off-balance-sheet debt excluded from the enterprise value when implementing shareholding of state-owned commercial banks shall be handled according to the Decision of the Prime Minister on the ratio of fees that shareholding credit organizations can enjoy when recovering off-balance-sheet debts and the guidance of the Ministry of Finance.

Article 14. Principles for handling asset losses related to debts

In cases where there are asset losses related to debts, credit organizations and foreign bank branches shall handle them according to the following principles:

1. Dispose of collateral assets (if any) in accordance with the agreement of the parties and the provisions of the law.

2. Identify the cause, responsibility, and handle asset losses related to debts in accordance with the Government's regulations on financial systems for credit organizations and foreign bank branches.

Article 15. Accounting and Reporting

1. Credit organizations and foreign bank branches shall implement accounting for specific and general provisions established, used, supplemented, and reinstated in accordance with the legal provisions on accounting systems for credit organizations and foreign bank branches.

2. Credit organizations and foreign bank branches shall report on the establishment and use of provisions to address risks as follows:

a) Credit organizations and foreign bank branches shall report on the establishment and use of provisions to address risks in accordance with the reporting and statistical system applicable to credit organizations and foreign bank branches issued by the State Bank of Vietnam.

b) Credit organizations and foreign bank branches shall report on the establishment and use of provisions to address risks to the General Department of Taxation and the provincial or municipal tax office where the main office of the credit organization or foreign bank branch is located, in accordance with the legal provisions on tax reporting.

c) Annually, credit organizations and foreign bank branches shall report to the Shareholders' Meeting (for joint-stock credit organizations), the Members' Assembly (for credit cooperatives), the owner (for single-member limited liability credit organizations), the capital contributors (for limited liability credit organizations with two or more members), and the parent bank (for foreign bank branches) on the establishment and use of provisions to address risks.

Article 16. Foreign bank branches applying risk provision policies of foreign banks

1. Foreign bank branches approved by the State Bank of Vietnam to apply the risk provision policy of foreign banks to classify debts, establish and use provisions to address risks must meet the condition that over the three most recent fiscal years prior to the time of requesting approval from the State Bank of Vietnam, the total amount of specific provisions established annually under the proposed risk provision policy of the foreign bank is not less than the total amount of specific risk provisions established annually in accordance with this Decree.

2. Application Approval Documents

a) A document requesting the State Bank of Vietnam to approve the application of the risk provision policy of the foreign bank;

b) A copy of the risk provision policy of the foreign bank;

c) A confirmation document from the foreign bank branch and supporting documents proving compliance with the conditions stipulated in Clause 1 of this Article.

3. Approval Procedures

a) The foreign bank branch shall prepare one set of documents in accordance with Clause 2 of this Article and submit it directly to the One-Stop Service Center or through postal services to the State Bank of Vietnam. If the documents are incomplete or invalid, within five working days from the date of receipt of the documents, the State Bank of Vietnam shall issue a document requesting the foreign bank branch to supplement the documents;

b) Within thirty days from the date of receiving complete and valid documents as stipulated in Clause 2 of this Article, the State Bank of Vietnam shall issue a document approving or not approving the foreign bank branch to apply the risk provision policy of the foreign bank. In case of non-approval, the State Bank of Vietnam shall issue a document stating the reasons.

4. For foreign bank branches already approved by the State Bank of Vietnam to apply the risk provision policy of the foreign bank, if there is a modification or supplementation to the risk provision policy already approved by the State Bank of Vietnam, the foreign bank branch must report to the State Bank of Vietnam on the modification or supplementation of the risk provision policy, including an assessment of whether the total amount of specific provisions determined according to the modified risk provision policy of the foreign bank does not fall below the total amount of specific provisions established in accordance with this Decree for the fiscal year starting the application of the modified risk provision policy. If the foreign bank branch assesses that it does not meet this principle, the foreign bank branch must classify assets, determine the level of provisioning, the method of establishing risk provisions, and the use of provisions to address risks in accordance with Vietnamese law.

5. For foreign bank branches already approved by the State Bank of Vietnam to apply the risk provision policy of the foreign bank, based on the results of inspections, audits, and supervision, if the State Bank of Vietnam assesses that the risk provision policy of the foreign bank does not adequately reflect the actual credit risk in banking operations in Vietnam, the State Bank of Vietnam has the right to require the foreign bank branch to establish and use provisions to address risks in accordance with this Decree.

Chapter III

DISTRIBUTION OF PROFITS TO BE WITHDRAWN

Article 17. Cases where approval for the allocation period of receivables to be recovered exceeding five years but not more than ten years is granted

1. The State Bank shall examine and approve the allocation period of receivables to be recovered exceeding five years but not more than ten years for credit institutions that have been intervened early during the implementation of remediation plans based on the proposals and reports of credit institutions regarding the reasons and inability to fully allocate receivables to be recovered within five years, the necessity to allocate receivables to be recovered over a period exceeding five years but not more than ten years, and the recovery capability according to the remediation plan established in accordance with the Law on Credit Institutions, when the credit institution falls under any of the following cases:

a) A credit institution that has been intervened early and to which the State Bank has applied the support measures prescribed in point b, Clause 2, Article 159 of the Law on Credit Institutions with a maximum allocation period of receivables to be recovered of five years from the date of approval by the State Bank, and the credit institution has implemented the principles stipulated in this Clause 2, and at the end of the five-year period, the credit institution has not fully allocated receivables to be recovered according to the approved document of the State Bank, then the State Bank shall consider approving additional allocation periods, ensuring that the total maximum allocation period does not exceed ten years;

b) A credit institution that has been intervened early and has accumulated losses of 100% or more of the value of the charter capital and reserves recorded in the most recent audited financial report or according to the conclusions of the audit by the competent state agency.

2. Credit institutions shall allocate receivables to be recovered based on their financial capacity, on the principle that the total amount of receivables to be recovered allocated and the amount of risk provisions set aside shall equal the difference between income and expenses from annual business results, and shall only apply to receivables arising before the date when the State Bank issues the document stipulated in Clause 2, Article 156 of the Law on Credit Institutions.

Chapter IV

RESPONSIBILITIES OF STATE MANAGEMENT AUTHORITIES

Article 18. Responsibilities of the State Bank

1. Inspect, audit, and supervise credit institutions and foreign bank branches in implementing the establishment of provisions and the use of provisions to address risks as prescribed in this Decree; handle violations in the establishment and use of provisions to address risks within its authority and in accordance with the law.

2. Process applications from foreign bank branches for the application of risk provision policies of foreign banks.

3. Take the lead and coordinate with the Ministry of Finance and relevant ministries and sectors to report to the Government on the summary and evaluation of the implementation of this Decree to submit to the Government for amendment, supplementation, or replacement of this Decree if necessary.

Article 19. Responsibilities of the Ministry of Finance and Relevant Ministries and Sectors

Coordinate with the State Bank to report to the Government on the summary and evaluation of the implementation of this Decree to submit to the Government for amendment, supplementation, or replacement of this Decree if necessary.

Chapter V

IMPLEMENTING PROVISIONS

Article 20. Transitional Provisions

1. Credit institutions that have been decided by the Prime Minister or the Governor of the State Bank on specific measures concerning the establishment and use of provisions to address risks before the effective date of this Decree shall implement according to those decisions of the Prime Minister or the Governor of the State Bank.

2. Foreign bank branches that have been approved by the State Bank to apply the risk provision policy of foreign banks before the effective date of this Decree may continue to establish and use provisions to address risks according to the risk provision policy of foreign banks approved by the State Bank, except as provided in Clause 4 and Clause 5, Article 16 of this Decree.

3. The establishment and use of provisions to address risks for promissory notes and bills issued by credit institutions and foreign bank branches before the effective date of this Decree shall be carried out in accordance with the establishment and use of provisions to address risks for deposit certificates as prescribed in this Decree.

4. For debts that remain in the same loan classification group in cases of restructuring repayment terms according to regulations issued by the State Bank before the effective date of this Decree, credit institutions and foreign bank branches may continue to establish provisions according to the regulations of the Governor of the State Bank.

Article 21. Implementation clause

This Decree takes effect from July 11, 2024.

Article 22. Implementation organization

Ministers, Heads of ministerial-level agencies, Heads of government agencies; credit institutions, foreign bank branches, and related organizations and individuals are responsible for implementing this Decree.