Circular 08/2022/TT-NHNN order and procedures for banking supervision

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Circular No. 08/2022/TT-NHNN dated June 30, 2022 of the State Bank of Vietnam prescribing the order and procedures for banking supervision
Issuing body: State Bank of VietnamEffective date:
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Official number:08/2022/TT-NHNNSigner:Doan Thai Son
Type:CircularExpiry date:Updating
Issuing date:30/06/2022Effect status:
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Fields:Finance - Banking

SUMMARY

Order and procedures for banking supervision

The order and procedures for banking supervision is provided in the State Bank of Vietnam’s Circular No. 08/2022/TT-NHNN on June 30, 2022.

Accordingly, the order and procedures for banking supervision comprise 3 steps as follows: Step 1: Collecting, synthesizing, and processing documents, information, and data; Step 2: Performing compliance supervision and/or risk supervision; Step 3: Making a supervision report, proposing handling measures. The monitoring, urging and examination of the implementation of inspection conclusions by credit institutions and foreign bank branches shall comply with the Government’s regulations on the implementation of inspection conclusions and provisions of this Circular.

Besides, documents, information, and data, after being synthesized and processed, shall be stored, and managed to serve banking inspection and supervision activities following the principles below: Adequate documents, information and data shall be preserved in a scientific manner by dossier of object of banking supervision and the entire system; Collected documents, information and data must be archived in accordance with current regulations on archiving; The management, storage and use of documents, information, and data on the list of State secrets shall comply with the law provisions on protection of State secrets; The confidentiality of information and data of credit institutions and customers shall comply with the law provisions.

This Circular takes effect from September 01, 2022.

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THE STATE BANK OF
VIETNAM

_________

No. 08/2022/TT-NHNN

THE SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness

________________________

Hanoi, June 30, 2022

 

CIRCULAR

Prescribing the order and procedures for banking supervision

____________

 

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law dated November 20, 2017 Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

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

Pursuant to the Government’s Decree No. 26/2014/ND-CP dated April 7, 2014, on the organization and operation of the banking supervision units and the Government’s Decree No. 43/2019/ND-CP dated May 17, 2019, amending and supplementing a number of articles of the Government’s Decree No. 26/2014/ND-CP dated April 7, 2014, on the organization and operation of the banking supervision units;

Pursuant to the Prime Minister’s Decision No. 20/2019/QD-TTg dated June 12, 2019, defining the functions, tasks, powers, and organizational structure of the Banking Supervision Agency under the State Bank of Viet Nam;

At the proposal of the Chief of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing the order and procedures for banking supervision.

 

Chapter I

GENERAL PROVISIONS

 

Article 1. Scope of regulation

1. This Circular prescribes the order and procedures for banking supervision of credit institutions and foreign bank branches.

2. The supervision of the payment system and the safety supervision of the information system of the credit institutions and foreign bank branches shall comply with related laws.

3. The supervision of money laundering prevention and combat activities in credit institutions and foreign bank branches shall comply with the law on prevention and combat of money laundering.

4. The supervision of the compliance with the law on investment, management, and use of State capital in credit institutions shall comply with the law on investment, management, and use of State capital in enterprises.

5. The banking supervision of credit institutions under special control shall comply with the law pon special control of credit institutions and this Circular.

Article 2. Subjects of application

1. Banking supervision units, including:

a) Microprudential supervision units;

b) Macroprudential supervision units.

2. Objects of banking supervision, including:

a) The objects of microprudential supervision;

b) The objects of macroprudential supervision.

3. Other agencies, organizations and individuals related to the order and procedures for banking supervision.

Article 3. Interpretation of terms

The terms used in this Circular are construed as follows:

1. Banking supervision includes microprudential supervision and macroprudential supervision.

2. Microprudential supervision means a form of prudential supervision of each micro-object.

3. Macroprudential supervision means a form of prudential supervision of the system of credit institutions and foreign bank branches.

4. Objects of banking supervision include:

a) Objects of microprudential supervision, which are:

(i) Credit institutions, other than policy banks which shall comply with the law provisions;

(ii) Foreign bank branches;

(iii) Branches of credit institutions. Transaction offices of a people’s credit fund shall be supervised via such people’s credit fund. Transaction offices of other credit institutions shall be collectively supervised via the branch managing such transaction offices;

(iv) Other objects decided by the Governor of the State Bank.

b) The object of macroprudential supervision, which is the system of credit institutions and foreign bank branches, includes the group of systemically important credit institutions and foreign bank branches and the group of credit institutions and foreign bank branches classified by type of operation or ownership.

5. Microprudential supervision unit means a unit under the Banking Supervision Agency or a State Bank’s branch, which is assigned the task of microprudential supervision under a decision of the Governor of the State Bank and the law provisions.

6. Macroprudential supervision unit means a unit under the Banking Supervision Agency, assigned the task of macroprudential supervision under a decision of the Governor of the State Bank and the law provisions.

7. Compliance supervision means the review, monitoring, analysis, and assessment (hereinafter referred to as analysis and assessment for short) on the compliance with the law on banking safety and other laws on currency and banking; the implementation of instructions and requests of competent State agencies towards the objects of banking supervision as prescribed in Clause 9 of this Article.

8. Enhanced supervision means the microprudential supervision applied to objects of microprudential supervision by adding a number of supervision contents and increasing the reporting frequency under a decision of the Governor of the State Bank or the Director of a State Bank’s branch in each specific case.

9. Directions and requests of a competent State agency to an object of banking supervision mean the directions of the State Bank (or at the request of another competent State agency) requesting the object of banking supervision to perform a number of contents and tasks in the following documents:

a) Inspection conclusions, audit conclusions, inspection results, inspection handling decisions;

b) Written recommendations and warnings in banking supervision;

c) Other documents of the State Bank that require specific contents and tasks.

10. Risk supervision means the analysis and assessment of risks (including systematic risks) to warn and offer recommendations to the objects of banking supervision.

11. Risk means the possible occurrence of loss (financial or non-financial loss) resulting in a decrease in a credit institution’s or foreign bank branch’s own capital or income, thus reducing its capital adequacy ratio or restricting its ability to attain business objectives.

12. Systemic risk means the possible occurrence of loss spreading from the operational interruption or failure of an individual credit institution or foreign bank branch to a system or group of credit institutions and foreign bank branches, thus interrupting the operation of such credit institutions and foreign bank branches.

13. Systemic banking crisis is a systemic banking failure, occurring when credit institutions and foreign bank branches lose their solvency or go bankrupt. Systemic banking crisis is often associated with a sudden withdrawal of money by depositors spreading throughout the entire system of credit institutions and foreign bank branches.

14. Contact with an object of banking supervision means a banking supervision unit working with an object of banking supervision in order to examine and verify the truthfulness, accuracy and completeness of documents, information and reports and clarify matters related to risks as well as the compliance of law provisions on monetary and banking operations to serve banking supervision activities.

15. Systemically important credit institution or foreign bank branch means a credit institution or foreign bank branch that is likely to cause negative impacts on the entire system of credit institutions and foreign bank branches and/or systemic risks, thus interrupting the operation of the system of credit institutions and foreign bank branches and the entire economy in the cases where it loses its solvency or goes bankrupt.

16. Database management means developing, updating, and maintaining a database to meet the needs for access to and use of documents, information, and data to serve banking supervision activities.

17. Banking supervision manual means a detailed guidebook for banking supervision published by the Governor of the State Bank, including at least the following contents:

a) Collection, synthesis and processing of documents, information, and data;

b) Guidance on supervision activities;

c) Supervision support tools;

d) Handling measures in banking supervision;

dd) Bank supervision dossiers.

18. State Bank branches mean State Bank branches in provinces and centrally-run cities.

Article 4. Principles of banking supervision

The banking supervision shall comply with the following principles:

1. The principles prescribed in Article 51 of the Law on the State Bank of Vietnam, Article 4 of the Government’s Decree No. 26/2014/ND-CP dated April 7, 2014, (amended and supplemented) on the organization and operation of the banking supervision units.

2. The principle of combining compliance supervision with risk supervision, microprudential supervision with macro-prudential supervision.

Article 5. Order and procedures for bank supervision

1. The order and procedures for banking supervision are prescribed as follows:

a) Step 1: Collecting, synthesizing, and processing documents, information, and data;

b) Step 2: Performing compliance supervision and/or risk supervision;

c) Step 3: Making a supervision report, proposing handling measures.

2. The monitoring, urging and examination of the implementation of inspection conclusions by credit institutions and foreign bank branches shall comply with the Government’s regulations on the implementation of inspection conclusions and provisions of this Circular.

Article 6. Management and storage of documents, information, and data

Documents, information, and data, after being synthesized and processed, shall be stored, and managed to serve banking inspection and supervision activities following the principles below:

1. Adequate documents, information and data shall be preserved in a scientific manner by dossier of object of banking supervision and the entire system.

2. Collected documents, information and data must be archived in accordance with current regulations on archiving.

3. The management, storage and use of documents, information, and data on the list of State secrets shall comply with the law provisions on protection of State secrets.

4. The confidentiality of information and data of credit institutions and customers shall comply with the law provisions.

 

Chapter II

MICROPRUDENTIAL SUPERVISION

 

Section 1

COLLECTION, SYNTHESIS, AND PROCESSING OF DOCUMENTS, INFORMATION, AND DATA

 

Article 7. Collection of documents, information, and data

1. Sources of documents, information and data serving banking supervision include:

a) Data and reports in accordance with current regulations on statistical reporting regime of the State Bank;

b) Data on customers of the objects of banking supervision obtained from the Vietnam National Credit Information Center (hereinafter referred to as CIC), information and documents serving supervision obtained from the Cooperative Bank of Vietnam and the Deposit Insurance of Vietnam;

c) Information obtained from inspection, examination, and post-inspection activities;

d) Information obtained from licensing activities by the State Bank;

dd) Independent audit results;

e) Information obtained from ranking and rating results of State management agencies;

g) Reports on micro- and macro-prudential supervision, handling measures in micro- and macro-prudential supervision;

h) Reports at the request of the State Bank and other competent authorities;

i) Requests of competent State agencies to objects of banking supervision, including written instructions and requests of units affiliated to the State Bank;

k) Working minutes, explanatory documents, dossiers, and data provided by the objects of banking supervision;

l) Documents, information, and data collected from units of the State Bank and other sources (if any).

2. The microprudential supervision units shall collect documents, information, and data from the sources prescribed at Points a, b, c, d, dd, e, g, Clause 1 of this Article via the electronic statistical reporting system of the State Bank and the information system supporting remote supervision activities.

3. The microprudential supervision units shall collect documents, information, and data from the sources prescribed at Points h, i, k, l, Clause 1 of this Article.

4. Based on the requirements of banking supervision, the microprudential supervision unit shall, by their own or via the Chief of the Banking Supervision Agency or the Director of the State Bank’s branch, request the objects of banking supervision to provide additional documents, information, and data other than those prescribed in Clause 1 of this Article.

Article 8. Processing, updating and synthesis of documents, information, and data

Based on the sources of documents, information, and data prescribed in Article 7 of this Circular, the microprudential supervision units shall process and synthesize as follows:

1. The microprudential supervision units shall process documents, information and data that are automatically updated from the electronic statistical reporting system of the State Bank or the CIC into the information system supporting remote supervision in accordance with regulations on statistical reporting regime of the State Bank and the Regulation on administration, operation and use of information system and software to support remote supervision activities.

2. For other documents, information and data not prescribed in Clause 1 of this Article, the microprudential supervision units shall:

a) Review the logic and reasonableness of information by comparing and contrasting collected documents, information, and data with historical data to detect unusual or illogical problems;

b) Update necessary documents, information, and data into the information system supporting remote supervision as prescribed in the Regulation on administration, operation and use of information system and software to support remote supervision activities issued by the Governor of the State Bank.

3. When detecting documents, information or data that are missing or untruthful, encounter errors, or need clarification to meet the requirements of the microprudential supervision, the microprudential supervision unit shall, by their own or via a competent authority, request the objects of banking supervision to make reports and explanations, using the methods of contacting the objects of banking supervision prescribed in Chapter IV of this Circular.

4. Based on the collected and processed information, the microprudential supervision units shall implement the contents prescribed in Sections 2 and 3 of this Chapter.

 

Section 2

CONTENTS OF MICROPRUDENTIAL SUPERVISION

 

Article 9. Contents of microprudential supervision of credit institutions and foreign bank branches

1. The microprudential supervision units shall determine the scope and content of information related to the operation of the objects of microprudential supervision in order to monitor their compliance with the law provisions on safety of banking activities as well as other law provisions on monetary and banking laws, of which the focus shall be on one, some or all of the following content(s):

a) Supervision of their compliance with the statistical reporting regime and the information reporting regime prescribed by the Law on Credit Institutions (amended and supplemented) and related guiding documents within the scope of the powers, rights, and responsibilities of the microprudential supervision units;

b) Supervision of the compliance with restrictions, limits and prudential ratios as prescribed in Articles 126, 127, 128, 129, 130 of the Law on Credit Institutions (amended and supplemented) by credit institutions; the classification of debts and making of risk provisions by credit institutions or foreign bank branches based on the results of processing information obtained from the information system supporting remote supervision and the electronic statistical reporting system of State Bank;

c) Supervision of the satisfaction of conditions and standards in terms of managers and executives prescribed in Articles 50 and Clause 4, Article 89 of the Law on Credit Institutions (amended and supplemented); and the compliance of governance, administration, and control structure of the objects of supervision as prescribed in Chapter III of the Law on Credit Institutions (amended and supplemented);

d) Supervision of the compliance with the law provisions on capital contribution, lending, deposit, and investment by credit institutions in subsidiaries, affiliates, and overseas branches;

dd) Review of the intramural regulations promulgated by the objects of microprudential supervision in accordance with Article 93 of the Law on Credit Institutions (amended and supplemented): Every year, the microprudential supervision units shall choose a number of intramural regulations for review.

2. The microprudential supervision units shall supervise the compliance of the instructions and requests of the competent State agencies with respect to the objects of microprudential supervision (if any).

3. The microprudential supervision units shall perform risk supervision by using the risk analysis models and methods issued by the Governor of the State Bank in each period and/or analyzing and assessing risks of the objects of banking supervision in terms of one, some or all of the following content(s):

a) Analyzing and assessing material changes and unusual fluctuations by using the thresholds for changes in assets, liabilities, equity, revenue and accrued interest, costs, business results, and limitations, restrictions, and safety ratios based on the results of processing information obtained from the State Bank’s electronic statistical reporting system and the information system supporting remote supervision. The Chief of the Banking Supervision Agency shall decide the thresholds for changes in the above items.

b) Consider material impacts on the governance and operation of the objects of microprudential supervision by assessing at least the following contents:

(i) Changes in managers and executives as prescribed in Articles 50 and 89 of the Law on Credit Institutions (amended and supplemented) of the objects of microprudential supervision;

(ii) Changes in the situation of shareholders, share ownership, shares of managers, executives, major shareholders and related persons of these individuals and organizations (including investments in the form of capital contribution or share purchase with the aim of holding control over a credit institution that is a joint-stock company);

(iii) Changes in the situation of capital contribution, capital contributors and owners, for credit institutions being limited liability companies or cooperatives.

c) Based on the obtained adverse information that may materially affect the objects of microprudential supervision, the microprudential supervision units shall consider and assess the risks facing such objects of microprudential supervision;

d) Supervising the situation of credit granting and the quality of credits granted to high-risk sectors, customers, and transactions in the operation of the objects of microprudential supervision in order to analyze and assess the level of material impacts on the operation of such objects.

The microprudential supervision units shall identify the high-risk sectors, customers, and transactions in each period.

4. For joint-stock commercial banks, in case of necessity, the microprudential supervision unit shall review and assess the compliance of law provisions, credit quality and risks of high value transactions (including credits, investments, capital contribution, share purchase, other receivables). The microprudential supervision units shall consider and decide specifically on which is the high value for the above transactions.

5. The microprudential supervision units shall decide by their own or request competent authorities to decide on other supervision contents for the objects of microprudential supervision within the scope of the supervision tasks assigned to such units in line with their needs and resources.

Article 10. Contents of microprudential supervision of branches of credit institutions

1. Compliance supervision, including:

a) Supervision of the compliance with the law provisions on:

(i) Statistical reporting regime of the branches in accordance with regulations on statistical reporting regime;

(ii) Other law provisions on monetary and banking applicable to the branches.

b) The microprudential supervision units shall supervise the compliance with the instructions and requests of the competent State agency for the objects of microprudential supervision (if any).

2. Risk supervision, which shall focus on at least the following contents:

a) Items of assets, liabilities, incomes, expenses, and income-expenditure differences;

b) The situation of credit extension, and the quality of credits granted by the objects of microprudential supervision. In case of necessity, the microprudential supervision units shall consider and assess the high value credits and other receivables of the objects of microprudential supervision. The director of the State Bank’s branches shall decide specifically on which is the high value for such transactions.

c) The making and updating of the list of personnel information, including at least the branch directors of the credit institution;

d) Information that adversely affects the activities of the monitored object.

3. For large-scale transaction offices in the locality as decided by the Director of the State Bank’s branch, or for transaction offices that generate information adversely affecting the operation of such transaction offices, the microprudential supervision unit shall perform the supervision in accordance with Clauses 1 and 2 of this Article via the branch managing such transaction offices.

Article 11. Enhanced supervision

1. Based on the current situation and actual operation of the objects of microprudential supervision, the microprudential supervision units shall consider and request the Governor of the State Bank and the Director of the State Bank’s branch to decide on applying enhanced supervision to the objects of microprudential supervision when they fall into one of the following cases:

a) The objects of microprudential supervision classified as C or D for people’s credit funds; or D or E for other credit institutions or foreign bank branches in accordance with the State Bank’s regulations on ranking of credit institutions and foreign bank branches;

b) The objects of microprudential supervision may apply early intervention measures as prescribed by the law provisions and this Circular;

c) Other objects under the directions of competent State agencies.

2. Based on the situation and actual operation of the objects of microprudential supervision, the microprudential supervision unit shall consider and request the Governor of the State Bank and the Director of the State Bank’s branch to decide on the enhanced supervision which covers at least:

a) The scope of supervision;

b) The objects of supervision;

c) Supervision contents, including at least the supervision of liquidity situation; credits, receivables and investments, capital contributions, share purchases or investments in the form of capital contributions and share purchases in order to take control of an enterprise;

d) Reporting frequency of the objects of microprudential supervision;

dd) The coordination among related units and individuals in performing the enhanced supervision (if any).

 

Section 3

MAKING SUPERVISION REPORTS AND DOCUMENTS,
 PROPOSING AND IMPLEMENTING HANDLING MEASURES

 

Article 12. Making reports on microprudential supervision, proposing and implementing remedial measures

1. Based on the results of compliance supervision and risk supervision as prescribed in Section 2 of this Chapter and the current law provisions, the microprudential supervision units shall:

a) Make ad hoc or periodic microprudential supervision reports as prescribed in Clauses 2 and 3 of this Article;

b) Propose and implement handling measures prescribed in Chapter V of this Circular (if necessary).

 2. Principles of making, approving, and submitting ad hoc microprudential supervision reports:

a) An ad hoc microprudential supervision report must be made when the microprudential supervision unit detects violations, risks of law violations, or risks affecting the operational safety of the objects of banking supervision, or at the request of a competent authority;

b) The approval and submission of an ad hoc microprudential supervision report are prescribed as follows:

(i) The ad hoc microprudential supervision report must be approved by the leadership of the microprudential supervision unit;

(ii) Based on the recommendations in the ad hoc microprudential supervision report and the powers to handle such recommendations as prescribed by the law provisions, the ad hoc microprudential supervision report must be sent to the competent authority for consideration and handling;

(iii) The ad hoc microprudential supervision report which is made at the request of any competent authority must be sent to such competent authority for consideration and handling.

3. Principles of making, approving, and submitting periodic microprudential supervision reports:

a) The microprudential supervision report for the first 6 months of the year must be completed before August 31 of the year. The annual microprudential supervision report must be completed before April 15 of the following year;

b) The microprudential supervision report shall be made in accordance with Appendix II issued with this Circular for the objects of banking supervision being credit institutions or foreign bank branches, or in accordance with Appendix III issued together with this Circular for the objects of banking supervision being branches of the same credit institution in a locality;

c) Periodic microprudential supervision reports shall be approved and submitted as follows:

(i) For the microprudential supervision unit under a State Bank’s branch, the 6-monthly and annual microprudential supervision report must be approved by the leadership of the microprudential supervision unit and must be submitted to the leadership of the State Bank’s branch;

(ii) For the microprudential supervision unit under the Banking Supervision of the State Bank’s branch in Hanoi or Ho Chi Minh city, the 6-monthly and annual microprudential supervision report must be approved by the leadership of the microprudential supervision unit and must be submitted to the leadership of the branch’s Banking Supervision as well as the leadership of the branch;

(iii) For the microprudential supervision unit under the organizational structure of the Banking Supervision Agency, the 6-monthly and annual microprudential supervision report must be approved by the leadership of the microprudential supervision unit and must be submitted to the leadership of the Banking Supervision Agency and the State Bank;

(iv) If in the microprudential supervision report, there are handling measures proposed to any competent authority as prescribed by the law provisions, the microprudential supervision report must be submitted to such competent authority for consideration and decision.

Article 13. Microprudential supervision dossiers

1. A microprudential supervision dossier consists of (periodic and ad hoc) microprudential supervision reports, documents about the contact with the objects of banking supervision, and dossiers of handling measures in microprudential supervision.

2. In the cases where the objects of banking supervision are subject to early intervention, the microprudential supervision dossier shall additionally consist of the Decision on application of early intervention and the remediation plan.

3. In the cases where the objects of banking supervision are subject to enhanced supervision, the microprudential supervision dossier shall additionally consist of the Decision on application of enhanced supervision as well as information, documents, data, and handling measures in enhanced supervision.

 

Chapter III

ORDER AND PROCEDURES FOR MACROPRUDENTIAL SUPERVISION

 

Section 1

COLLECTION, SYNTHESIS, PROCESSING OF DOCUMENTS, INFORMATION, DATA

 

Article 14. Collection, synthesis and processing of documents, information, and data

1. The macroprudential supervision units shall collect documents, information, and data about the objects of banking supervision from the following sources:

a) The sources prescribed in Clause 1, Article 7 of this Circular;

b) Microprudential supervision reports, dossiers on handling measures in microprudential supervision (except for people’s credit funds);

c) Based on the requirements of banking supervision, the macroprudential supervision unit shall, by their own or via a competent authority, request the objects of banking supervision to provide additional documents, information, and data other than those prescribed at Points a and b, Clause 1 of this Article.

2. The macroprudential supervision units shall synthesize and process documents, information and data collected from the sources prescribed in Clause 1 of this Article and organize a database to serve the macroprudential supervision activities.

3. When detecting documents, information or data that are missing or untruthful, encounter errors, or need clarification to meet the requirements of the macroprudential supervision, the macroprudential supervision units shall, in coordination with the microprudential supervision units, request the objects of banking supervision to make reports and explanations.

 

Section 2

MACROPRUDENTIAL SUPERVISION CONTENT

 

Article 15. Contents of macroprudential supervision of the system of credit institutions and foreign bank branches

The macroprudential supervision units shall supervise risks in terms of one, some or all of the following content(s):

1. Analyzing and assessing the financial soundness in order to detect risks that may affect the system’s safety, including:

a) Analyzing and assessing the situation of equity, capital adequacy, capital mobilization and use;

b) Analyzing and assessing the liquidity situation;

c) Analyzing and assessing bad debts and asset quality;

d) Analyzing and assessing interbank activities;

dd) Analyzing and assessing business results; accrued interests.

The macroprudential supervision units shall use the thresholds for changes suitable to the characteristics of the macroprudential supervision objects to assess the risks that may affect the system’s safety. The Chief of the Banking Supervision Agency shall decide the thresholds for changes of the above items.

2. Analyzing and assessing macroeconomic developments, impacts of other sectors in the economy that are likely to affect the stability of the system of credit institutions and foreign bank branches.

3. Examining their endurability on annual or ad hoc basis and at the request of the Governor of the State Bank in terms of at least the following contents:

a) Examining their endurability against credit risks by analyzing and forecasting bad debt movements in macroeconomic scenarios, the impact of assumptions about changes in debt grouping and assumptions about major customers that lose their solvency;

b) Examining their endurability against market risks by analyzing the impact of exchange rate and interest rate fluctuations on the safety and soundness of the system or group of credit institutions and foreign bank branches;

c) Examining their endurability against interbank contagion risks;

d) Examining their endurability against liquidity risks by analyzing their liquidity in case of mass withdrawal.

4. In cases of necessity or at the request of the Governor of the State Bank, the macroprudential supervision units shall analyze and assess the possibility of a systemic banking crisis and take preventive measures.

5. For the group of systemically important credit institutions and foreign bank branches, the macroprudential supervision units shall perform the supervision in terms of at least the contents prescribed in Clause 1 of this Article and examine their endurability every 6 months or ad hoc at the request of the Governor of the State Bank when there is a judgment on systemic risk.

The macroprudential supervision units shall base themselves on the criteria of the scale, interdependence, and interchangeability thereof to make a list of systemically important credit institutions and foreign bank branches and submit it to the Governor of the State Bank for promulgation before March 31 every year.

6. For the group of people’s credit funds and microfinance institutions, the macroprudential supervision units shall perform the supervision in terms of at least the contents prescribed in Clause 1 of this Article.

7. The macroprudential supervision units shall decide by their own or request competent authorities to decide on other supervision contents in line with their needs and resources.

 

Section 3

MAKING SUPERVISION REPORTS AND DOCUMENTS,
 PROPOSING AND IMPLEMENTING HANDLING MEASURES

 

Article 16. Making macroprudential supervision reports, proposing and implementing remedial measures

1. Based on the results of compliance supervision and risk supervision as prescribed in Section 2 of this Chapter and the current law provisions, the macroprudential supervision units shall:

a) Make ad hoc or periodic macroprudential supervision reports as prescribed in Clauses 2 and 3 of this Article in accordance with Appendix IV issued together with this Circular;

b) Request the microprudential supervisions units to consider the application of handling measures prescribed in Chapter V of this Circular to the objects of banking supervision (if necessary).

 2. Principles of making and submitting ad hoc macroprudential supervision reports:

a) An ad hoc macroprudential supervision report must be made when the macroprudential supervision unit detects risks that may affect the operational safety of the objects of banking supervision or are likely to cause banking crisis in the system or group of credit institutions and foreign bank branches, or at the request of the Governor of the State Bank;

b) An ad hoc macroprudential supervision report shall be approved and submitted to a competent authority following the below principles:

(i) The ad hoc macroprudential supervision report must be approved by the leadership of the macroprudential supervision unit;

(ii) The ad hoc macroprudential supervision report which is made at the request of the Governor of the State Bank must be sent to the Governor for consideration and handling;

(iii) Based on the recommendations in the ad hoc macroprudential supervision report and the powers to handle such recommendations as prescribed by the law provisions, the ad hoc macroprudential supervision report must be sent to the competent authority for consideration and handling.

3. Principles of making and submitting periodic macroprudential supervision reports:

a) The macroprudential supervision report for the first 6 months of the year must be completed before August 31 of the year. The annual macroprudential supervision report must be completed before April 15 of the following year;

b) A periodic macroprudential supervision report shall be approved and submitted by a competent authority following the below principles:

(i) The macroprudential supervision report shall be approved by the leadership of the macroprudential supervision unit and submitted to the leadership of the Banking Supervision Agency and the State Bank;

(ii) If in the macroprudential supervision report, there are handling measures proposed to any competent authority as prescribed by the law provisions, the macroprudential supervision report must be submitted to such competent authority for consideration and decision.

Article 17. Macroprudential supervision dossiers

A macroprudential supervision dossier consists of (periodic and ad hoc) macroprudential supervision reports and dossiers of handling measures in macroprudential supervision.

 

Chapter IV

CONTACT WITH OBJECTS OF BANK SUPERVISION

 

Article 18. Methods of contacting objects of banking supervision

An object of banking supervision shall be contacted using the following forms:

1. Requesting the object to send a written explanation.

2. Directly working with the object.

Article 19. Requesting the object to send a written explanation

1. In the cases where documents, information and data are missing or untruthful, encounter errors, or need clarification to meet the requirements of the microprudential supervision or there are problems related to inadequate compliance with regulations, directions, or requests of competent State agencies or related to the risks of an object of banking supervision, the banking supervision unit shall, by their own or via the Chief of the Banking Supervision Agency (for a macroprudential supervision unit), request such object of banking supervision to send a written explanation.

2. Within the time limit prescribed in the written request for explanations, the object of banking supervision must send a written explanation which covers at least the following contents:

a) Explanations for each specific request, including analysis of the current situation and the causes of problems;

b) Proposals of corrective and remedial measures (including the implementation roadmap thereof) in the cases where the banking supervision unit requests.

Article 20. Directly working with the object

1. In case of necessity, when detecting documents, information and data that are missing or untruthful, encounter errors, or need clarification to meet the requirements of the microprudential supervision, or problems related to inadequate compliance with regulations, directions, or requests of competent State agencies or related to the risks of an object of banking supervision, the banking supervision unit shall, by their own or via the Chief of the Banking Supervision Agency (for a macroprudential supervision unit), decide to establish a working group to work directly with the object of banking supervision.

2. The banking supervision unit must send written notification to the object in at least 03 working days before working directly with such object; the written notification must clearly state the composition of the working group, the contents, time, and place of the working session.

3. The results of the direct working session with the object of banking supervision must be recorded in writing in accordance with Appendix I issued with this Circular and signed for certification by representatives of the working group and the object of banking supervision.

 

Chapter V

HANDLING MEASURES IN BANK SUPERVISION

 

Article 21. Handling measures in banking supervision

1. Based on the results of banking supervision, the banking supervision units shall issue warnings and recommendations to the objects of banking supervision; and, depending on the level of safety, soundness and law violations of the objects of banking supervision, impose penalties for administrative violations in accordance with the law provisions (if any); then request the Governor of the State Bank or the Director of the State Bank’s branch, within the scope of his/her powers, to:

a) Apply the handling measures prescribed in Article 25 of the Government’s Decree No. 26/2014/ND-CP dated April 7, 2014 (amended and supplemented) on the organization and operation of banking supervision units;

b) Apply the enhanced supervision measure to the objects of banking supervision;

c) Propose inspection and examination of the objects of banking supervision when signs of law violations, risks or operational unsafety are detected;

d) Amend, supplement, or replace legal documents on currency and banking (if any).

2. In case of necessity, in order to fully assess the actual operation of the objects of banking supervision, the banking supervision units shall, via the Chief of the Banking Supervision Agency, request the objects of banking supervision (excluding branches of credit institutions) to hire independent auditing organizations to audit one, some or all of their operations in accordance with the law provisions.

Article 22. Recommendations and warnings for objects of banking supervision

1. Based on the results of supervision, the banking supervision units shall decide by their own or request the Chief of the Banking Supervision Agency or the Director of the State Bank’s branch to consider and approve the recommendations and warnings for the objects of banking supervision.

2. Recommendations and warnings for objects of banking supervision shall be based on one or a combination of the following contents:

a) When the supervision results of the objects of banking supervision, which are shown in the form of quantitative indicators, exceed the warning thresholds;

b) On the basis of applying the expert method when assessing and analyzing the qualitative information, which is obtained from the supervision results and reflects the potential risks and the possibility of law violations by the objects of banking supervision, as well as the inspection conclusions, independent audit conclusions, internal audit conclusions, and the information obtained from other State management agencies;

c) At the request of the Governor of the State Bank, stemming from the practice of State management over monetary and banking activities.

3. When receiving recommendations and warnings, the objects of banking supervision must promptly make reports and explanations about the recommendations and warnings at the request of the banking supervision units, which shall mention at least the actual situation, causes and remediation plan. The time limit for the objects of banking supervision to submit such reports and explanations shall be stated in the written recommendations and warnings sent to the objects. The banking supervision unit shall be responsible for supervising and urging the implementation of the recommendations and warnings by the objects of banking supervision.

4. If, after implementing their remediation plans, the objects of banking supervision still face latent risks or are likely to commit violations against the law provisions on monetary and banking, the banking supervision unit shall request competent authorities to apply handling measures in banking supervision prescribed in Article 21 of this Circular.

Article 23. Application of early intervention to objects of banking supervision

1. The powers to decide on early intervention is prescribed in Article 130a of the Law on Credit Institutions (amended and supplemented):

a) The Governor of the State Bank shall consider and decide to intervene early on the objects of banking supervision under the supervision responsibility of the Banking Supervision Agency;

b) The director of the State Bank’s branch shall consider and decide to intervene early on the objects of banking supervision (excluding branches of credit institutions) under the supervision responsibility of the banking supervision unit of such branch.

2. Based on the results of banking supervision and the provisions of Clauses 1 and 2, Article 130a of the Law on Credit Institutions (amended and supplemented), the microprudential supervision unit shall:

a) Request the Chief of Banking Supervision Agency to submit the document on application of early intervention as prescribed at Point a, Clause 1 of this Article to the Governor of the State Bank for consideration and promulgation;

b) Submit the document on application of early intervention as prescribed at Point b, Clause 1 of this Article to the Director of the State Bank’s branch for consideration and promulgation.

3. Within 30 days from the date the document on application of early intervention is received, the object of banking supervision shall report in writing to the State Bank (the Banking Supervision Agency and State Bank’s branch) on the current situation, causes, remediation plan and implementation organization thereof. The State Bank shall make a written request to credit institutions and foreign bank branches to adjust the remediation plan if it deems it necessary.

The formulation and adjustment of the remediation plan of the object of banking supervision must be based on the actual operation of such objects and must comply with the provisions of Clauses 3 and 4, Article 130a of the Law on Credit Institutions (amended and supplemented).

4. Within 30 days from the date the written request for adjustment and supplementation of the remediation plan is received, the object of banking supervision shall send the (adjusted or supplemented) remediation plan it to the Banking Supervision Agency and the State Bank’s branch and then organize the implementation thereof.

5. In the cases where the object of banking supervision fails to develop a remediation plan in accordance with the provisions of Clause 3, Article 130a of the Law on Credit Institutions (amended and supplemented) or the time limit for implementation of such plan expires but the situation prescribed in Clause 1, Article 130a of the Law on Credit Institutions (amended and supplemented) has not been overcome, the microprudential supervision unit shall:

a) Request the Chief of the Banking Supervision Agency to submit to the Governor of the State Bank for consideration and promulgation a written request to the object of banking supervision under the supervision responsibility of the Banking Supervision Agency to take the measure(s) prescribed in Clause 4, Article 130a of the Law on Credit Institutions (amended and supplemented);

b) Submit to the director of the State bank’s branch for consideration and promulgation a written request to the object of banking supervision under the supervision responsibility of the banking supervision unit of such branch to take the measure(s) prescribed in Clause 4, Article 130a of the Law on Credit Institutions (amended and supplemented).

6. After the object of banking supervision overcomes the situation prescribed in Clause 1, Article 130a of the Law on Credit Institutions (amended and supplemented) or when such object is placed under special control, the microprudential supervision unit shall:

a) Request the Chief of the Banking Supervision Agency to submit to the Governor of the State Bank for consideration and promulgation a document to terminate the application of early intervention to the object of banking supervision under the supervision responsibility of the Banking Supervision Agency;

b) Submit to the director of the State bank’s branch for consideration and promulgation a document to terminate the application of early intervention to the object of banking supervision under the supervision responsibility of the banking supervision unit of such branch.

7. In the process of formulating and applying early intervention and remediation plans, when it’s found necessary to clarify the shortcomings and limitations and to take appropriate remedial solutions, the banking supervision unit shall, via the Governor of the State Bank (via the Banking Supervision Agency) or the Director of the State Bank’s branch, request the object of banking supervision (excluding branches of credit institutions) to hire an independent auditing organization that audits one, some or all of the contents as prescribed by the law provisions.

8. Reporting and banking supervision of the remediation plan:

a) On a monthly or ad hoc basis and at the request of the microprudential supervision unit, the object of banking supervision shall report the progress and results of implementing the remediation plan to the State Bank (the Banking Supervision Agency) or the State Bank’s branch before the 10th day of the following month in order to perform banking supervision as prescribed in this Circular;

b) The microprudential supervision report prescribed in Article 12 of this Circular must cover the banking supervision of the remediation plan for the Banking Supervision Agency and the State Bank’s branch;

c) Based on the results of implementing the remediation plan by the object of banking supervision, if detecting any delay or inefficiency in the implementation process, the microprudential supervision unit shall request the Chief of the Banking Supervision Agency or the Director of the State Bank’s branch to send a written request to the object of banking supervision to report the cause thereof and take remedial measures.

 

Chapter VI

RESPONSIBILITIES OF RELATED ORGANIZATIONS AND INDIVIDUAL IN BANKING SUPERVISION ACTIVITIES

 

Article 24. Responsibilities of the Banking Supervision Agency

1. To perform State management responsibilities on banking supervision activities in the entire banking supervision system.

2. To assume the prime responsibility for, and coordinate with the State Bank’s branches and other units under the State Bank, and related organizations in performing banking supervision.

3. To assume the prime responsibility for, and coordinate with the State Bank’s branches in, performing enhanced supervision in accordance this Circular and the Decisions of the Governor of the State Bank to the objects of banking supervision within the scope of the supervision tasks assigned to the Banking Supervision Agency.

4. Pursuant to the provisions of this Circular, assume the prime responsibility for, and coordinate with related units in, formulating a banking supervision manual to provide professional guidance on banking supervision in accordance with this Circular and the list of credit institutions and foreign bank branches of systematic importance, and then submit them to the Governor of the State Bank for decision on promulgation.

5. To assume the prime responsibility for, and coordinate with the Information Technology Department and related units of the State Bank in, studying, investing in and building; and applying, managing, and developing an information technology system in support of banking supervision activities for uniform application in the banking sector in accordance with the law provisions.

6. In case of necessity, to propose the Governor of the State Bank to conduct the ad hoc macroprudential supervision as prescribed in Clauses 3, 4, 5, Article 15 of this Circular.

7. To decide on the thresholds for changes of microprudential supervision and macroprudential supervision in each period.

8. To submit models and methods of risk analysis in each period to the Governor of the State Bank for promulgation.

9. To perform other responsibilities prescribed by the law provisions.

Article 25. Responsibilities of State Bank’s branches

1. To assume the prime responsibility for, and coordinate with the Banking Supervision Agency, units under the State Bank and related organizations in microprudential supervision activities within the scope of the tasks assigned to them.

2. To conduct enhanced supervision over the objects of banking supervision in accordance with this Circular and the Decisions of the Governor of the State Bank or the Director of the State Bank’s branch in each specific case.

3. To perform other responsibilities as prescribed by the law provisions.

Article 26. Responsibilities of the microprudential supervision units

1. To perform the tasks prescribed in this Circular, advise and give proposals to the Chief of the Banking Supervision Agency or the Directors of the State Bank’s branches in performing the tasks.

2. To assign civil servants to perform microprudential supervision tasks in accordance with this Circular.

3. The microprudential supervision units may consider and decide on the mechanisms applicable to specialized officers regarding each object of banking supervision following the below principles:

a) Specialized officers have the right to access general information about the objects under their supervision, including information in banking inspection activities and licensing activities;

b) Specialized officers are considered to join inspection teams whose objects of inspection are supervised by such specialized officers.

4. To conduct enhanced supervision over the objects of banking supervision under the Decisions of the Governor of the State Bank or the Director of the State Bank’s branch in each specific case.

5. To provide results of microprudential supervision (including microprudential supervision reports but excluding microprudential supervision reports for objects of banking supervision being branches of a credit institution or people’s credit fund) for the macroprudential supervision units on a periodic and ad hoc basis.

6. To coordinate with the macroprudential supervision units in determining the microprudential supervision thresholds for each type of credit institutions.

Article 27. Responsibilities of macroprudential supervision units

1. To perform the tasks prescribed in this Circular, advise and give proposals to the Chief of the Banking Supervision Agency in performing the tasks.

2. To assign civil servants to perform macroprudential supervision tasks in accordance with this Circular.

3. To provide results of macroprudential supervision (including macroprudential supervision reports) for the microprudential supervision units on a periodic and ad hoc basis.

4. To assume the prime responsibility and coordinate with the microprudential supervision units to determine the microprudential supervision thresholds for each type of credit institutions and submit them to the Chief of the Banking Supervision Agency for decision.

5. To determine the macroprudential supervision thresholds and submit them to the Chief of the Banking Supervision Agency for decision.

6. To make a list of systematically important credit institutions and foreign bank branches of and submit it to the Chief of the Banking Supervision Agency.

 Article 28. Responsibilities of other related units under the State Bank

1. To provide information, documents, and data at the request of the Banking Supervision Agency or the State Bank’s branches in accordance with the provisions of this Circular and the law provisions.

2. To coordinate with the Banking Supervision Agency or the State Bank’s branches in prudential banking supervision.

3. To coordinate with the Banking Supervision Agency or the State Bank’s branches in reviewing intramural regulations promulgated by the objects of supervision in accordance with legal documents, which are formulated and submitted by the related units to competent authorities for promulgation.

Article 29. Responsibilities of objects of banking supervision

1. To provide documents, information and data prescribed in Article 7, Article 14 of this Circular and take full responsibility for the accuracy and truthfulness of the provided documents, information, and data.

2. To comply with the requests of the banking supervision units when receiving the written requests for explanations or at the request of the working groups when such groups work directly with the objects as prescribed in Chapter IV of this Circular.

3. To fully comply with handling measures in banking supervision activities as prescribed in Chapter V of this Circular.

4. Other responsibilities as prescribed by the law provisions.

 

Chapter VII

IMPLEMENTATION PROVISIONS

 

Article 30. Effect

1. This Circular takes effect from September 1, 2022, except for the provisions in Clause 2 of this Article.

2. The automatic processing and updating of documents, information and data into the information system supporting remote supervision of the objects of microprudential supervision being people’s credit funds or micro-financial institutions as prescribed in Clause 1 and Point b, Clause 2, Article 8 of this Circular shall be conducted when there is such an information system. During the absence of such information system, the microprudential supervision units shall:

a) Collect information from the documents, information and data sources prescribed in Clauses 1 and 4, Article 7 of this Circular, then review the logic and reasonableness thereof by comparing the collected documents and information with the historical data in order to detect unusual, illogical or unreasonable problems.

b) Process and synthesize the documents, information and data as prescribed in Clauses 3 and 4, Article 8 of this Circular.

3. This Circular replaces Circular No. 08/2017/TT-NHNN dated August 1, 2017, prescribing the order and procedures for banking supervision and Circular No. 04/2018/TT-NHNN dated March 12, 2018, of the Governor of the State Bank amending and supplementing a number of articles of Circular No. 08/2017/TT-NHNN dated August 1, 2017.

Article 31. Organization of implementation

The Chief of the Ministry’s Office, the Chief of the Banking Supervision Agency, heads of units under the State Bank of Vietnam, credit institutions, and foreign bank branches shall be responsible for implementing this Circular./.

 

 

FOR THE GOVERNOR

THE DEPUTY GOVERNOR

 

 

 

Doan Thai Son

 

 

* All Appendices are not translated herein.

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