Circular No. 14/2014/TT-NHNN dated May 20, 2014 of the State Bank of Vietnam amending, supplementing a number of Articles of the Regulations on classification of debts, appropriation, setting up and use of reserves for handling credit risks in banking activities of credit institutions promulgated together with the Decision No. 493/2005/QD-NHNN dated April 22, 2005 of the State Bank Governor

THE STATE BANK OF VIETNAM

Circular No. 14/2014/TT-NHNN dated May 20, 2014 of the State Bank of Vietnam amending, supplementing a number of Articles of the Regulations on classification of debts, appropriation, setting up and use of reserves for handling credit risks in banking activities of credit institutions promulgated together with the Decision No. 493/2005/QD-NHNN dated April 22, 2005 of the State Bank Governor

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

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

Pursuant to the Government’s Decree No. 156/2013/ND-CP dated November 11, 2013 defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Chief of banking Inspection and supervision,

The State Bank of Vietnam Governor promulgates the Circular amending, supplementing a number of Articles of the Regulations on classification of debts, appropriation, setting up and use of reserves for handling credit risks in banking activities of credit institutions promulgated together with the Decision No. 493/2005/QD-NHNN dated April 22, 2005 of the State Bank Governor (hereinafter referred to as the Decision No. 493).

Article 1. To amend Clause 3a Article 6 of the Decision No. 493 (being amended, supplemented according to the Decision No. 18/2007/QD-NHNN dated April 25, 2007 of the State Bank Governor) as follows:

“3a. Rescheduling debts and keeping in the same group of debt:

a) Co-operative Bank, People Credit Fund shall be considered to reschedule debts and keep in the same group of debt as classified before rescheduling debts when fully meeting the follow requirements:

(i) Debt granted credit that doesn’t violate regulations of the law.

(ii) Rescheduling debts is in accordance with the purpose of project loan in the credit contract;

(iii) Customers using the loan in accordance with the purposes as agreed in the credit contract;

(iv) Rescheduling debts and keeping in the same group of debt shall be only done when the customer is incapable of repaying debt principals and/or interests within the term as agreed in the credit contract, the plan for pay debt is feasible and in accordance with the production and business condition;

(v) When rescheduling debts and keeping in the same group of debt, Co-operative Bank, People Credit Fund must meet the requirements of the State Bank on limit, prudential ratios in operations of Co-operative Bank, People Credit Fund including the maximum ratio of short-term capital source used to medium and long-term loans in the case of restructuring short-term debts into medium and long-term debts.

b) Co-operative Bank, People Credit Fund rescheduling debts and keeping in the same group of debt as stipulated under Clause a of this Article must ensure the following requirements:

(i) Having promulgated the internal regulations on controlling and supervising debt rescheduling and classifying in the same debt groups to implement comprehensively in the whole system, forming the internal control mechanism for rescheduling debt and classifying in the same debt groups, ensuring the tight supervision, preventing credit quality from distortion;

(ii) Supervising the content, reason for rescheduling debt and keeping in the same group of debt for each debt. The State Bank requests Co-operative Bank, People Credit Fund to make a specific report on the content, reasons for rescheduling debt and classifying in the same debt groups for each debt when necessary;

(iii) Being active, self-decisive and responsible for rescheduling debt and keeping in the same group of debt in accordance with the law under this Circular;

(iv) For a debt, rescheduling debt and keeping in the same group of debt as stipulated under Point a of this Clause shall be only done 01 (one) time; 

(v)  Frequently reviewing, making judgment on debt capability of customer after the debt is rescheduled and kept in the same group of debt as stipulated under this Circular but the customer is incapable to pay the debt when it is due with the rescheduled term, Co-operative Bank, People Credit Fund shall classify that kind of debt into the corresponding group as specified under Article 6, Article 7 of this Regulation;

(vi) Within the first five days of the month or when being requested by the State Bank, Co-operative Bank, People Credit Fund must send the report to the State Bank ( Banking Inspection and supervision Agency) on the rescheduled debts and classifying in the same debt groups according to the Form No. 03 promulgated together with this Circular.”

Article 2. Effect

This Circular takes effect on May 22, 2014 and ceases its effect on April 01, 2015.

Article 3. Implementation responsibilities

The Chief of the Office, the Chief Banking Inspection and Supervision Inspector, heads of units within the State Bank, directors of State Bank branches in provinces and centrally run cities, and Chairmen of Boards of Management and Directors General (Directors) of Co-operative Bank, People Credit Fund shall implement this Circular.

For the Governor  of the State Bank of Vietnam

Deputy Governor

Dang Thanh Binh