THE STATE BANK OF VIETNAM ________ No. 23/2021/TT-NHNN | THE SOCIALIST REPUBLIC OF VIETNAM Independent - Freedom - Happiness _________________________ Hanoi, December 31, 2021 |
CIRCULAR
Amending and supplementing a number of articles of the Circular No. 52/2018/TT-NHNN dated December 31, 2018 of the Governor of the State Bank of Vietnam on rating of credit institutions and foreign bank branches
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Pursuant to the Law No. 46/2010/QH12 on the State Bank of Vietnam dated June 16, 2010;
Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law on Amending and Supplementing a Number of Articles of the Law on Credit Institutions dated November 20, 2017;
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;
At the proposal of the Chief of the Banking Supervision Agency;
The Governor of the State Bank of Vietnam hereby promulgates the Circular amending and supplementing a number of articles of the Circular No. 52/2018/TT-NHNN dated December 31, 2018 of the Governor of the State Bank of Vietnam on rating of credit institutions and foreign bank branches.
Article 1. Amending and supplementing a number of articles of the Circular No. 52/2018/TT-NHNN
1. To amend and supplement Article 3 as follows:
a) To amend and supplement Clauses 1, 2, 3, 4, 5 Article 3 as follows:
“1. Capital adequacy ratio means the criterion defined according to the State Bank's regulations on limits and prudential ratios in operations of credit institutions and foreign bank branches.
2. Tier-1 capital adequacy ratio means the criterion which is specified as follows:
a) In case credit institutions and foreign bank branches comply with the capital adequacy ratio under the State Bank's regulations on limits and prudential ratios in operations of credit institutions and foreign bank branches (excluding the Circular No. 41/2016/TT-NHNN dated December 30, 2016 of the Governor of the State Bank, prescribing capital adequacy ratios for banks and foreign bank branches and amending, supplementing or replacing documents (if any), tier-1 capital adequacy ratio shall be determined according to the following formula:
Tier-1 capital adequacy ratio (%) | = | Individual tier-1 capital | x | 100% |
Total individual risk-weighted assets |
The determination of individual tier-1 capital and total individual risk-weighted assets shall comply with the State Bank's regulations on limits and prudential ratios in operations of credit institutions and foreign bank branches;
b) In case credit institutions and foreign bank branches comply with the capital adequacy ratio under the Circular No. 41/2016/TT-NHNN, the tier-1 capital adequacy ratio shall be determined according to the following formula:
Tier-1 capital adequacy ratio (%) | = | Tier-1 capital | x | 100% |
RWA + 12,5 x (KOR + KMR) |
In which:
- RWA: Total credit risk-weighted assets
- KOR : Regulatory capital for operational risk
- KMR : Regulatory capital for market risk
The determination of tier-1 capital, RWA, KMR, KMR shall comply with the Circular No. 41/2016/TT-NHNN.
3. Restructured loan showing the latent risk of becoming nonperforming loan means the debit balance which has not yet been re-classified as non-performing loan due to the debt rescheduling, exemption or reduction of interests and maintenance of classified loan groups by credit institutions and foreign bank branches.
4. Non-performing loans sold to the VAMC but not yet handled are non-performing loans which have been sold to the Vietnam Asset Management Company (VAMC) and for payment by special bonds but have not yet been handled or recovered.
5. Customers with large credit balances are customers (excluding credit institutions, foreign bank branches) whose credit balance accounts for 5% or more of equity of credit institutions, foreign bank branches. For cooperative banks, customers with large credit balances include member people's credit funds.”
b) To amend and supplement the second dash of Clause 10 Article 3 as follows:
“- Average earning assets is the total items of Deposits with the State Bank, Deposits at other credit institutions and loans granted to other credit institutions (excluding risk provisions), Loans to customers (excluding risk provisions), Debt purchase (excluding risk provisions), Investment securities (excluding risk provisions, provisions for devaluation and VAMC bonds), which are recorded on the Accounting balance sheet according to the law on financial reporting regime applicable to credit institutions, foreign bank branches, and averaged over quarters of a year.”.
b) To amend and supplement the second dash of Clause 15 Article 3 as follows:
“- Interest sensitive liabilities refer to total on-balance sheet liabilities sensitive to interest rates (excluding non-interest-bearing liabilities) which are recorded in the explanatory notes on financial statement according to the law on the financial reporting regime applicable to credit institutions and foreign bank branches.”.
d) To amend and supplement Clause 16 Article 3 as follows:
“16. Average fine for a violation refers to the average value of the maximum fine and the minimum fine in the fine frames applicable to violations committed by organizations provided in the Decree on sanctioning administrative violations related to monetary and banking which is currently applied at the time of December 31 of the rating year (for periodic rating) or the last day of the quarter preceding the rating time (in case of rating under Clause 3 Article 21 of this Circular).”.
2. To amend and supplement Article 5 as follows:
a) To add Point a1 to Clause 1 of Article 5 as follows:
“a1) Information and data in the financial statements of credit institutions and foreign bank branches which have been independently audited in accordance with law provisions;”.
b) To amend and supplement Point c Clause 2 Article 5 as follows:
“c) In case of rating in accordance with Clause 3 Article 21 herein, the State Bank's Governor shall make a decision on the scope of materials, data or information for rating of credit institutions and foreign bank branches.”.
3. To amend and supplement Article 8 as follows:
a) To amend and supplement Point g Clause 1 as follows:
“g) Ratio of credit balance for investment or real estate business in comparison to total credit balance (excluding credit balance for other credit institutions and foreign bank branches);”.
a) To amend and supplement Point a Clause 2 as follows:
“a) Compliance with the law on credit extension;”.
4. To add the Point dd into Clause 1 Article 13 as follows:
“dd) In case the gross operating income shows negative value when determining quantitative indicators specified in Clause 1, Article 9, pre-tax profit and average owner’s equity have negative value when determining quantitative indicators specified at Point a Clause 1 Article 10, the score of each quantitative indicator is 1.”.
5. To amend and supplement Article 14 as follows:
a) To amend the serial numbers 1.1, 1.2 and add the serial numbers 1.1a and 1.2a to Article 14 as follows:
No. | Criteria/indicators | Unit | Benchmark |
Benchmark 1 | Benchmark 2 | Benchmark 3 | Benchmark 4 |
1 | CAPITAL (C) | | | | | |
1.1 | Capital adequacy ratio (except the cases of complying with the Circular No. 41/2016/TT-NHNN) | % | The higher the value of a quantitative indicator, the lower the risk level |
| Large-scale commercial banks | | 15.00 | 12.00 | 8.00 | 5.00 |
| Small-scale commercial banks | | 15.00 | 12.00 | 8.00 | 5.00 |
| Foreign bank branches | | 15.00 | 12.00 | 8.00 | 5.00 |
| Finance companies | | 20.00 | 16.00 | 9.00 | 6.00 |
| Financial leasing companies | | 20.00 | 16.00 | 9.00 | 6.00 |
| Cooperative banks | | 15.00 | 12.00 | 9.00 | 5.00 |
1.1.a | Capital adequacy ratio (in accordance with the Circular No. 41/2016/TT-NHNN) | % | The higher the value of a quantitative indicator, the lower the risk level |
| Large-scale commercial banks | | 11.00 | 9.00 | 7.00 | 5.00 |
| Small-scale commercial banks | | 11.00 | 9.00 | 7.00 | 5.00 |
| Foreign bank branches | | 15.00 | 12.00 | 8.00 | 5.00 |
1.2 | Tier-1 capital adequacy ratio (except the cases of complying with the Circular No. 41/2016/TT-NHNN) | % | The higher the value of a quantitative indicator, the lower the risk level |
| Large-scale commercial banks | | 12.00 | 10.00 | 7.00 | 4.00 |
| Small-scale commercial banks | | 12.00 | 10.00 | 7.00 | 4.00 |
| Foreign bank branches | | 12.00 | 10.00 | 7.00 | 4.00 |
| Finance companies | | 19.00 | 15.00 | 8.00 | 5.00 |
| Financial leasing companies | | 19.00 | 15.00 | 8.00 | 5.00 |
| Cooperative banks | | 12.00 | 10.00 | 7.00 | 4.00 |
1.2.a | Tier-1 capital adequacy ratio (in accordance with the Circular No. 41/2016/TT-NHNN) | % | The higher the value of a quantitative indicator, the lower the risk level |
| Large-scale commercial banks | | 8.50 | 7.00 | 5.50 | 4.00 |
| Small-scale commercial banks | | 8.50 | 7.00 | 5.50 | 4.00 |
| Foreign bank branches | | 12.00 | 10.00 | 7.00 | 4.00 |
b) To amend and supplement serial numbers 2.1 and 2.2 as follows:
No. | Criteria/indicators | Unit | Benchmark |
Benchmark 1 | Benchmark 2 | Benchmark 3 | Benchmark 4 |
2.1 | The ratio of non-performing loans, non-performing loans sold to the VAMC but not yet handled and restructured loans showing the latent risk of becoming nonperforming loans to liabilities plus non-performing loans sold to the VAMC but not yet handled | % | The higher the value of a quantitative indicator, the higher the risk level |
| Large-scale commercial banks | | 2.00 | 3.00 | 5.00 | 7.00 |
| Small-scale commercial banks | | 2.00 | 3.00 | 5.00 | 7.00 |
| Foreign bank branches | | 2.00 | 3.00 | 5.00 | 7.00 |
| Finance companies | | 2.00 | 4.00 | 6.00 | 8.00 |
| Financial leasing companies | | 2.00 | 3.00 | 5.00 | 7.00 |
| Cooperative banks | | 2.00 | 3.00 | 5.00 | 7.00 |
2.2 | Ratio of group-2 debts to total liabilities | % | The higher the value of a quantitative indicator, the higher the risk level |
| Large-scale commercial banks | | 2.50 | 4.00 | 5.50 | 7.00 |
| Small-scale commercial banks | | 2.50 | 4.00 | 5.50 | 7.00 |
| Foreign bank branches | | 2.50 | 4.00 | 5.50 | 7.00 |
| Finance companies | | 2.50 | 5.00 | 6.00 | 8.00 |
| Financial leasing companies | | 2.50 | 4.00 | 5.50 | 7.00 |
| Cooperative banks | | 2.50 | 4.00 | 5.50 | 7.00 |
b) To amend and supplement serial number 2.7 as follows:
No. | Criteria/indicators | Unit | Benchmark |
Benchmark 1 | Benchmark 2 | Benchmark 3 | Benchmark 4 |
2.7 | Ratio of credit balance for investment or real estate business in comparison to total credit balance (excluding credit balance for other credit institutions and foreign bank branches) | % | The higher the value of a quantitative indicator, the higher the risk level |
| Large-scale commercial banks | | 5.00 | 10.00 | 15.00 | 20.00 |
| Small-scale commercial banks | | 5.00 | 10.00 | 15.00 | 20.00 |
| Foreign bank branches | | 4.00 | 8.00 | 12.00 | 16.00 |
| Cooperative banks | | 2.00 | 4.00 | 7.00 | 10.00 |
6. To amend and supplement Article 15 as follows:
a) To amend and supplement serial number 2.1 as follows:
No. | Criteria/indicators | Weighting factors (%) |
2.1 | The ratio of non-performing loans, non-performing loans sold to the VAMC but not yet handled and restructured loans showing the latent risk of becoming nonperforming loans to liabilities plus non-performing loans sold to the VAMC but not yet handled | |
| | Large-scale commercial banks | 40.00 |
| Small-scale commercial banks | 40.00 |
| Foreign bank branches | 40.00 |
| Finance companies | 50.00 |
| Financial leasing companies | 50.00 |
| Cooperative banks | 40.00 |
b) To amend and supplement serial number 2.3 as follows:
No. | Criteria/indicators | Weighting factors (%) |
2.3 | Ratio of credit balances of customers with large credit balances to credit balances owed to economic institutions and individuals | |
| Large-scale commercial banks | 25.00 |
| Small-scale commercial banks | 25.00 |
| Foreign bank branches | 20.00 |
| | Finance companies | 0.00 |
| Financial leasing companies | 0.00 |
| Cooperative banks | 10.00 |
c) To amend and supplement serial number 2.4 as follows:
No. | Criteria/indicators | Weighting factors (%) |
|---|
2.4 | Ratio of loans and off-balance sheet commitments and commitments of groups 3 thru 5 to total liabilities and off-balance sheet commitments of groups 1 thru 5 | |
| | Large-scale commercial banks | 5.00 |
| | Small-scale commercial banks | 5.00 |
| | Foreign bank branches | 5.00 |
| | Finance companies | 15.00 |
| | Financial leasing companies | 10.00 |
| | Cooperative banks | 15.00 |
d) To amend and supplement serial number 2.7 as follows:
No. | Criteria/indicators | Weighting factors (%) |
2.7 | Ratio of credit balance for investment or real estate business in comparison to total credit balance (excluding credit balance for other credit institutions and foreign bank branches) | |
| Large-scale commercial banks | 10.00 |
| Small-scale commercial banks | 10.00 |
| Foreign bank branches | 5.00 |
| | Finance companies | 0.00 |
| Financial leasing companies | 0.00 |
| Cooperative banks | 10.00 |
7. To amend and supplement Article 16 as follows:
“Article 16. Scoring of groups of qualitative indicators
1. The score given to a group of qualitative indicators in each rating criterion shall be determined on the basis of evaluating the compliance with legal provisions by a credit institution or foreign bank branch, according to the score 1, 2, 3, 4 or 5; in which the smaller the score, the lower the level of legal compliance.
2. Violations committed by credit institutions and foreign bank branches that are used for scoring groups of qualitative indicators of each rating criterion specified in Articles 7, 8, 9, 10, 11, and 12 of this Circular shall be determined according to 2 (two) following criteria:
a) Time for determining violations:
(i) Violations are detected within 4 (four) years preceding the rating year but have not yet been remedied yet;
(ii) Violations are detected in the rating year;
b) Forms of determining violations:
(i) Supervision, examination, inspection and audit results of competent agencies and organizations in accordance with law provisions (including the State Bank, other state management agencies and independent audit firms) or decisions on sanctioning administrative violations of competent authorities;
(ii) Violations that have been detected and reported by credit institutions and foreign bank branches themselves, but have not been completely remedied.
3. Score of the group of qualitative indicators according to each rating criterion shall be determined as follows:
a) For violations specified in the decisions on sanctioning administrative violations of competent authorities and/or violations specified in the Decision on sanctioning administrative violations related to monetary and banking, the score of the group of qualitative indicators shall be determined on the basis of comparing value of the group of qualitative indicators specified in Clause 4 of this Article with benchmarks of the group of qualitative indicators specified in Article 16 of this Circular. To be specific:
(i) The score will stand at 5 if the value of the qualitative indicator group is either less than or equal to the benchmark of 1;
(ii) The score will stand at 4 if the value of the qualitative indicator group is either less than or equal to the benchmark of 2, and is greater than the benchmark of 1;
(iii) The score will stand at 3 if the value of the qualitative indicator group is either less than or equal to the benchmark of 3, and is greater than the benchmark of 2;
(iv) The score will stand at 2 if the value of the qualitative indicator group is either less than or equal to the benchmark of 4, and is greater than the benchmark of 3;
(i) The score will stand at 1 if the value of the qualitative indicator group is greater than the benchmark of 4;
b) For violations other than those specified at Point a of this Clause, the score of 4 shall be given to credit institutions and foreign bank branches;
c) In case a credit institution or foreign bank branch has two scores at the same time determined according to the provisions of Point a of this Clause and determined according to the provisions of Point b of this Clause, the score of the group of qualitative indicators of the credit institution or foreign bank branch shall be the lowest one between these two scores.
4. The value of the qualitative indicator group is the value reflecting the extent of violations of the monetary and banking regulations by a credit institution or foreign bank branch, taking into account the size of the credit institution or foreign bank branch in each ranking criterion. The value of the qualitative indicator shall be determined as follows:
Value of the qualitative indicator group | = | Total fine (VND) | x | 100,000 |
Individual own capital (VND) |
In which:
- Total fine is the total fine of acts of violating the criteria of a group of qualitative indicators at a ranking criterion. The total fine is equal to the total fine specified in the decision on sanctioning administrative violations of the competent authorities and the average fine of the violations committed by the credit institution or foreign bank branch specified in the Decree on sanctioning administrative violations related to monetary and banking. For violations subject to warning, the fine for determining the total fine is 0.
- Individual own capital shall be determined according to the State Bank's regulations on limits and prudential ratios in operations of credit institutions and foreign bank branches.
5. After determining the score of a qualitative indicator group at each ranking criterion as prescribed in Clause 3 of this Article, credit institutions and foreign bank branches will continue to be deducted points provided that the maximum score deducted is 0.9 points according to the following principles:
a) At the same group of qualitative indicators in each ranking criterion, in case a credit institution or foreign bank branch has more than 2 (two) violations, the score of the qualitative indicator group will be deducted 0.1 points for each violation (applicable from the second violation or more), except for the case specified at Point b of this Clause;
b) For violations detected and reported by credit institutions or foreign bank branches themselves but have not been completely remedied, 0.05 points will be deducted from the score of the group of qualitative indicators for each violation (applicable from the second violation or more).
6. In case the credit institution or foreign bank branch fails to fully implement the plan to overcome the recommendations and warnings of the State Bank related to the organization, administration and operation, except due to the impact of force majeure events, scores of the group of qualitative indicators specified in Clause 2, Article 9 of this Circular, after being determined according to the provisions of Clauses 3 and 5 of this Article, will continue to be deducted according to the following principles:
a) In case the score of the group of qualitative indicators is greater than 1, the score of the group of qualitative indicators of the credit institution or foreign bank branch will be deducted 1 point;
b) In case the score of the group of qualitative indicators is less than 1, the score of the group of qualitative indicators of the credit institution or foreign bank branch will be deducted and equal to 0.1 points.
7. Credit institutions and foreign bank branches that fail to comply or are not required to comply with one criterion or more in the qualitative indicator group as prescribed by the law on monetary and baking shall not be scored for that criterion or criteria”.
8. To add Article 16a as follows:
“Article 16a. Benchmarks for scoring each qualitative indicator group
The greater the value of benchmarks of 1, 2, 3 and 4 of each qualitative indicator group, the lower the legal compliance of the credit institutions and foreign bank branches. These benchmarks are specified as follows:
No. | Criteria | Benchmark |
Benchmark 1 | Benchmark 2 | Benchmark 3 | Benchmark 4 |
1 | CAPITAL (C) | 0.50 | 1.00 | 1.50 | 2.00 |
2 | ASSET QUALITY (A) | 0.50 | 1.00 | 1.75 | 2.75 |
3 | MANAGEMENT AND ADMINISTRATION (M) | 0.50 | 0.75 | 1.00 | 1.50 |
4 | BUSINESS EFFICIENCY (E) | 1.00 | 2.00 | 5.00 | 8.00 |
5 | LIQUIDITY (L) | 1.50 | 3.00 | 6.00 | 9.00 |
6 | SENSITIVITY TO MARKET RISK (S) | 3.00 | 4.00 | 5.00 | 6.00 |
9. To amend and supplement Clause 7 Article 20; add Clause 8 to Article 20 as follows:
“7. Notwithstanding provisions laid down in Clause 5 of Article 20 herein, a credit institution or foreign bank branch shall be ranked E if it falls into one of the following cases:
a) It becomes or is likely to become insolvent under regulations of the State Bank;
b) It has a cumulative loss exceeding 50% of the value of its charter capital and reserve funds;
c) It fails to maintain the capital adequacy ratio prescribed at Point b Clause 1 Article 130 of the Law on Credit Institutions for 12 consecutive months or has this ratio falling below 4% for 6 consecutive months.
8. The total rating points are rounded to the second decimal according to the following rules:
a) The second decimal is incremented by 0.01 points if the third decimal has a value between 6 and 9;
b) Leave the second decimal as it is if the third decimal has a value between 0 and 5”.
10. To amend and supplement Clause 3 Article 21 as follows:
“3. In case a credit institution or foreign bank branch is submitting to the competent authority for approval of the plan for restructuring, consolidation or merger under the Scheme on restructuring the system of credit institutions associated with the handling of non-performing loans approved by the Prime Minister, the Governor of the State Bank shall, based on the requirements of state management for each specific case, decide on another time as specified in Clauses 1 and 2 of this Article.”.
11. To amend and supplement Clause 2 Article 22 as follows:
“2. Contents of a notice of rating results:
a) For credit institutions and foreign bank branches: The notice must specify the rating results (including the ranks, total rating scores and point of each indicator group specified in Articles 7, 8, 9, 10, 11 and 12 of this Circular);
b) For State Bank branches of provinces or cities: The notice must specify the rating results (including the ranks, total rating scores and point of each indicator group specified in Articles 7, 8, 9, 10, 11 and 12 of this Circular) of credit institutions and foreign bank branches whose head offices are located in provinces or cities”.
12. To amend and supplement Clause 1 Article 23 as follows:
“1. Credit institutions and foreign bank branches are not allowed to provide the rating results for any third party (except for the case foreign bank branches provides rating results to the parent banks after obtaining the parent banks’ written commitments not to provide such results to any third party) in any form”.
Article 2. Annulling some points, clauses and articles of the Circular No. 52/2018/TT-NHNN
To annul Point dd Clause 1 Article 8, Clause 3 Article 13, serial number 2.5 Article 14 and serial number 2.5 Article 15.
Article 3. Responsibility for implementation organization
Chief of Office, the Chief Inspector of the Banking Supervision Agency, Directors of State Bank branches in provinces and centrally-run cities, heads of relevant units affiliated to the State Bank, credit institutions and foreign bank branches shall implement this Circular.
Article 4. Effect
This Circular takes effect on February 15, 2022 and is used for ranking credit institutions and foreign bank branches from 2021./.
| FOR THE GOVERNOR THE DEPUTY GOVERNOR Doan Thai Son |
Vietnamese
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