Circular 17/2022/TT-NHNN environmental risk management in credit extension activities

CIRCULAR

Guiding the management of environmental risks in credit extension of credit institutions and foreign bank branches^[1]

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

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

Pursuant to the November 17, 2020 Law on Environmental Protection;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Department of Credit for Economic Sectors;

The Governor of the State Bank of Vietnam promulgates the Circular guiding the management of environmental risks in credit extension of credit institutions and foreign bank branches.

Article 1. Scope of regulation

The Circular guides the management of environmental risks in credit extension of credit institutions and foreign bank branches in Vietnam for investment projects subject to management of environmental risks in credit extension specified Clause 1, Article 3 of this Circular.

Article 2. Subjects of application

1. Credit institutions and foreign bank branches in Vietnam (below collectively referred to as credit institutions) that are established and operate in accordance with the Law on Credit Institutions, except microfinance institutions, people’s credit funds, and the Vietnam Bank for Social Policies.

2. Organizations and individuals that are customers of credit institutions.

Article 3. Interpretation of terms

1. Investment project subject to management of environmental risks in credit extension means an investment project specified in Appendices III, IV and V to the Government’s Decree No. 08/2022/ND-CP of January 10, 2022, detailing a number of articles of the Law on Environmental Protection (below referred to as investment project).

2. Environmental risk of an investment project (below referred to as environmental risk) means a possibility of exertion of an adverse environmental impact during the implementation of such investment project, leading to the occurrence of cost overrun, reduction of income or causing of a capital or asset loss for the customer being the investment project owner.

3. Environmental risk in credit extension means a credit risk of a credit institution that arises when a customer entitled to credit extension encounters an environmental risk specified in Clause 2 of this Article.

4. Assessment of environmental risks in credit extension means the determination of level of such environmental risks in the credit extension for investment projects.

5. Management of environmental risks in credit extension means the identification and assessment of such environmental risks in credit extension; the monitoring, control and implementation of measures to mitigate environmental risks in credit extension.

Article 4. Principles of management of environmental risks in credit extension

1. Credit institutions shall manage environmental risks in credit extension in comformity with regulations on credit extension and management of credit risks in banking activities.

2. Credit institutions shall carry out the assessment of environmental risks in credit extension for investment projects in order to identify credit risks, conditions for credit extension and management of credit risks for credit loans extended to customers.

3. Credit institutions shall organize the assessment of environmental risks of investment projects or use results of the assessment of environmental risks of investment projects from environmental risk assessment service providers or from other credit institutions as agreed upon in service provision contracts.

4. When assessing environmental risks of investment projects in credit extension, credit institutions shall reach agreements with customers on addition to credit extension agreements measures to be implemented as committed by customers to limit environmental risks in credit extension.

5. Customers shall provide information for use in management of environmental risks in credit extension at the request of credit institutions and take responsibility for the accuracy of provided information.

Article 5. Information for use in management of environmental risks in credit extension

Information for use in management of environmental risks in credit extension includes:

1. Information on the environment of investment projects of customers.

2. Decisions on approval of results of the appraisal of preliminary environmental impact assessment reports and environmental impact assessment reports in accordance with the law, environmental licenses and environmental registrations (if any).

3. Results of the inspection and examination of environmental protection for investment projects by competent agencies in charge of environmental protection (if any).

4. Information on field surveys, information from functional agencies, social organizations, residential communities and individuals directly affected by activities of customers’ investment projects related to the implementation of regulations on environmental protection (if any).

5. Reports on environmental protection sent by customers to competent state agencies in accordance with the law on environmental protection.

6. Reports on the implementation of commitments to limit environmental risks in credit extension as agreed upon in credit extension agreements sent by customers to credit institutions.

7. Reports of agencies and organizations that are subject to reporting on environmental protection in accordance with the law on environmental protection (if any).

8. Other information related to environmental protection activities.

Article 6. Internal regulations on management of environmental risks in credit extension

1. Credit institutions shall independently develop internal regulations on management of environmental risks in credit extension or incorporate such regulations in internal regulations on credit extension and internal regulations on internal control of credit institutions in accordance with the law on credit extension and management of credit risks.

2. Internal regulations on management of environmental risks in credit extension of a credit institution must have at least the following contents:

a/ Identification and classification of requests for credit extension subject to assessment of environmental risks in credit extension;

b/ Information to be collected for use in the management of environmental risks in credit extension;

c/ Assessment of environmental risks in credit extension under this Circular;

d/ Management of environmental risks in credit extension in the course of consideration, appraisal, approval and management of credit extension;

dd/ Internal reports on management of environmental risks in credit extension.

Article 7. Effect

1. This Circular takes effect on June 1, 2023.

2. For agreements on credit extension signed before the effective date of this Circular, credit institutions shall reach agreements with customers to manage environmental risks in credit extension in accordance with this Circular.

Article 8. Organization of implementation

The Chief of the Office of the State Bank of Vietnam, the Director of the Department of Credit for Economic Sectors, heads of units of the State Bank of Vietnam, credit institutions and foreign bank branches, and related organizations and individuals shall implement this Circular.-

For the State Bank Governor
Deputy Governor
DAO MINH TU