Circular No. 36/2014/TT-NHNN dated November 20, 2014 of the State Bank of Vietnam prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches

CIRCULAR

Prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches

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

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

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

At the proposal of the Chief Inspector of the Banking Supervisory Agency;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

1. This Circular prescribes limits and prudential ratios which credit institutions and foreign bank branches must constantly maintain in their operations, including:

a/ Capital adequacy ratio;

b/ Credit extension limits;

c/ Solvency ratio;

d/ Maximum ratio of short-term capital sources used to provide medium- and long-term loans;

dd/ Limits on capital contribution and share purchase;

e/ Loan-to-deposit ratio.

2. Based on results of supervision, inspection and examination by the State Bank of Vietnam (below referred to as the State Bank) of credit institutions and foreign bank branches, in case of necessity to secure prudence in operations of these credit institutions and foreign bank branches and depending on the nature and extent of risks, the State Bank may request credit institutions and foreign bank branches to maintain one or several limits lower than or one or several prudential ratios higher than those prescribed in this Circular.

3. In case of necessity, the State Bank Governor may decide on specific limits and prudential ratios for each credit institution or foreign bank branch that is implementing an approved restructuring plan.

Article 2.Subjects of application

1. Credit institutions, including:

a/ Banks: State-run commercial banks, cooperative banks, joint-stock commercial banks, joint-venture banks and wholly foreign-owned banks;

b/ Non-bank credit institutions: Finance companies and financial leasing companies.

2. Foreign bank branches.

Article 3.Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Receivables include deposits at other credit institutions and foreign bank branches, deposits at foreign credit institutions; investments in valuable papers; loans; financial leases; factorings; discounts and re-discounts of negotiable instruments and valuable papers; credit facilities issued in the form of credit cards; amounts payable on others’ behalf according to off-balance sheet commitments.

2. Clients in the credit extension relationship with credit institutions and foreign bank branches (below referred to as clients) means institutions (including also credit institutions and foreign bank branches), individuals and other entities as defined by the civil law.

Client means an institution, an individual or another entity as defined by the civil law.

3. Real estate business means the use of capital for investing in, creating, purchasing, receiving the transfer of, leasing or hire-purchasing, real estate for sale, transfer, lease, sub-lease or hire-purchase for profits.

4. Interest rate derivative contracts include interest rate swap contracts, interest rate forward contracts, interest rate option contracts or other interest rate derivative contracts prescribed by the State Bank.

5. Foreign currency derivative contracts include foreign currency swap contracts, foreign currency forward contracts, foreign currency futures contracts, foreign currency option contracts and other foreign currency derivative contracts prescribed by the State Bank.

6. Retained earning of a credit institution or foreign bank branch means the undivided earning determined after its annual financial statement is independently audited and retained under a decision of the Shareholders’ General Meeting, Members’ Council, Members’ General Meeting, owner or foreign bank (parent bank) for the purpose of capital supplementation for such credit institution or foreign bank branch.

7. Goodwill means the positive difference between an amount paid for the purchase of a financial asset and the book value of such asset by a credit institution arising from a deal conducted by such credit institution for acquisition of an enterprise or another credit institution in accordance with law. Such a financial asset shall be fully reflected on the balance sheet of the credit institution.

8. OECD stands for the Organization for Economic Cooperation and Development.

9. International financial institutions include:

a/ The group of world banks, including the International Bank for Reconstruction and Development (IBRD), the International Financial Company (IFC), the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA);

b/ The Asian Development Bank (ADB);

c/ The Africa Development Bank (AfDB);

d/ The European Bank for Reconstruction and Development (EBRD);

dd/ The Inter-American Development Bank (IADB);

e/ The European Investment Bank (EIB);

g/ The European Investment Fund (EIF);

h/ The Nordic Investment Bank (NIB);

i/ The Caribbean Development Bank (CDB);

k/ The Islamic Development Bank (IDB);

l/ The Council of Europe Development Bank (CEDB);

m/ Other international financial institutions with charter capital contributed by governments.

10. Controlling company means:

a/ A company that directly or indirectly owns over 20% of the charter capital or voting equity or holds the right to control a commercial bank or finance company;

b/ A commercial bank or finance company that has subsidiary companies or associated companies.

11. Valuable paper means a deed proving the debt obligation of the issuer toward the holder for a given period under interest payment terms and other terms. Valuable papers include bonds, bills, public bonds, deposit certificates, promissory notes and the like.

12. Credit extension covers loan provision, guarantee, discount, rediscount, financial leasing, factoring, corporate bond investment, credit card issuance and other credit extension operations prescribed by the State Bank.

13. Total outstanding credit balance includes the total outstanding balance of loans, discounts, rediscounts, financial leasing, factoring, corporate bond investment, credit cards and other credit extension operations prescribed by the State Bank, guarantee balance and amounts entrusted to other credit institutions and foreign bank branches for credit extension.

14. Bond investment means the purchase of bonds or entrustment of the purchase of bonds to other institutions (including credit institutions and foreign bank branches).

15. Affiliated persons of an institution or individual include institutions and individuals that have a direct or an indirect relationship with that institution or individual.

a/ Affiliated persons of an institution (including credit institution) include:

(i) The parent company or a credit institution being the parent company (below referred to as parent credit institution) of such institution;

(ii) Subsidiary companies of such institution;

(iii) Companies that have the same parent company or parent credit institution of such institution;

(iv) Managers and members of the Control Board of the parent company or parent credit institution of such institution;

(v) Individuals and institutions competent to appoint managers and members of the Control Board of the parent company or parent credit institution of such institution;

(vi) Managers and members of the Control Board of such institution;

(vii) Companies and institutions competent to appoint managers and members of the Control Board of such institution;

(viii) Spouses, parents, children (including adoptive parents, adopted children, parents-in-law, children-in-law, step parents and own children, blood siblings (including half-siblings), siblings-in-law of managers, members of the Control Board, capital-contributing members or shareholders holding at least 5% of the charter capital or voting equity of such institution;

(ix) Institutions and individuals that own at least 5% of charter capital or voting equity of such institution;

(x) Individuals authorized to represent capital contribution portions or shares of such institution.

b/ Affiliated persons of an individual include:

(i) Spouse, parents, children (including adoptive parents, adopted children, parents-in-law, children-in-law, step parents and own children of such individual or his/her spouse, blood siblings (including half-siblings), siblings-in-law of such individual;

(ii) Companies or credit institutions of which such individual owns at least 5% of charter capital or voting equity;

(iii) Subsidiary companies of which such individual is a manager or a member of the Control Board of the parent company or parent credit institution;

(iv) Subsidiary companies of which such individual is competent to appoint managers and members of the Control Board of the parent company or parent credit institution;

(v) Companies or credit institutions of which such individual is a manager or a member of the Control Board;

(vi) Companies or credit institutions of which such individual is a spouse, parent, child (or adoptive parent, adopted child, parent-in-law, child-in-law, step parent, own child of a spouse), blood sibling (or half sibling) or sibling-in-law of a manager, member of the Control Board, a capital-contributing member or shareholder owning at least 5% of charter capital or voting equity;

(vii) Institutions or individuals that are authorized to represent capital contributions or shares of such individual;

(viii) Individuals who, together with such individual, are authorized by an institution to represent capital contributions or shares in another institution;

(ix) Individuals who are authorized by such individual to represent capital contributions or shares.

c/ To secure the control of risks caused by credit concentration in their banking operations, credit institutions and foreign bank branches may add affiliated persons other than those specified at Points a and b of this Clause to their internal regulations.

16. Capital contribution or share purchase means a credit institution’s contribution to charter capital or purchase of shares or other forms of capital contribution to become a shareholder or capital contributor of another enterprise or credit institution, including allocation of charter capital, contribution of capital to subsidiary companies or associated companies of another credit institution; contribution to investment funds or entrustment of capital to other institutions to contribute capital or purchase shares in the aforesaid forms.

17. Irrevocability means impossibility to revoke or alter in any form an established commitment, unless the revocation or alteration is required by law.

18. Credit extension for stock investment or trading include:

a/ Granting loans and discounts of valuable papers to securities companies for stock investment or trading;

b/ Granting loans for stock purchase;

c/ Granting loans as advance payments to clients that have sold securities to purchase stocks;

d/ Granting loans to clients for remargining (a deficit) when their stock purchase orders are matched;

dd/ Granting loans to employees for purchasing initially issued shares upon the transformation of state-run companies into joint-stock companies;

e/ Granting loans for contribution of capital to or purchase of shares from joint-stock companies;

g/ Granting discounts of valuable papers to clients for purchasing stocks;

h/ Granting loans and discounts of valuable papers in other forms to clients for purchasing stocks.

Article 4.Internal regulations

1. Credit institutions and foreign bank branches shall issue their internal regulations on credit extension and management of loans in order to ensure that these loans are used for proper purposes prescribed in this Circular and relevant legal documents. Such internal regulations must have at least the following:

a/ Criteria for identification of a client or a client and affiliated persons as defined in Clause 15, Article 3 of this Circular, credit policy toward a client or a client and affiliated persons, principles of power decentralization or authorization to decide or approve credit extension or reschedule loan repayment deadlines for a client or a client and affiliated persons;

b/ Risk diversification in credit extension; methods of monitoring and management and approval or decision on credit extension to a client or a client and affiliated persons at the rate of 1% or more of own capital of the credit institution or foreign bank branch, ensuring publicity and transparency of the stages of appraisal, credit extension and debt rescheduling, preventing conflicts of interest between appraisers, credit extension deciders and clients being affiliated persons of such appraisers or deciders;

c/ Principles and criteria for evaluation and identification of credit extension risks with regard to clients and fields for which the credit institution or foreign bank branch wishes to extend or limit credit facilities, for use as a basis for working out annual business plans or strategies;

d/ Consideration and approval of credit extension and consideration and approval of or decision on rescheduling loan repayment deadlines (including prolongation and adjustment of loan terms), which must adhere to the principle that the loan repayment deadline rescheduling decider is not the person having decided on the credit extension, unless the credit extension is approved by the Board of Directors, Members’ Council or General Director (for foreign bank branches);

dd/ Conditions and procedures for management of risks in credit extension for stock investment or trading.

2. Credit institutions and foreign bank branches shall issue their internal regulations on evaluation of quality of assets and assurance of the capital adequacy ratio, complying with the principle of risk management for assets, based on needs, characteristics and risks of their operations, and taking into account their business cycle, ability to adapt to risks and business strategies. These regulations must comply with this Circular and relevant legal documents, and regulate at least the following:

a/ Organizational structure, mechanism of power decentralization or authorization and functions and tasks of each management section with regard to the capital adequacy ratio;

b/ Principles, policies and processes of identification, measurement, monitoring, control of, reporting and exchange of information on, risks for the purpose of ensuring the capital adequacy ratio;

c/ Management of the structure of own capital and assets, which must help evaluate extent and trend of risks and impacts of risks on own capital needed to offset risks; size and quality of own capital and ability to bear risks from macro-elements, accessibility to sources to supplement own capital, including financial assistance from shareholders when necessary to ensure the capital adequacy ratio; the obligation to allocate capital to subsidiary companies and associated companies; short- and long-term own capital targets, estimated expenses for own capital supplementation and solutions to achieve own capital targets. Regulations on management of the structure of own capital and assets must specify:

(i) Procedures for and methods of monitoring and evaluation of size, components and quality of own capital and asset portfolio;

(ii) Capital adequacy management system;

(iii) Early warning system, clearly indicating signs for early identifying risks, risks leading to capital adequacy ratio decrease and the supervision and reporting regime;

(iv) Remedies to ensure individual and consolidated capital adequacy ratios, which must prescribe:

- Measures to manage and develop own capital and assets in response to decrease in, or violations of regulations on, capital adequacy ratio;

- Responsibilities, powers and obligations of, and coordination among, related sections and individuals in the elaboration of plans and remedies to respond to decrease in, or violations of regulations on, capital adequacy ratio.

3. Credit institutions and foreign bank branches shall issue internal regulations on liquidity management under this Circular and relevant legal documents, which must regulate at least the following:

a/ Power decentralization, authorization, functions and tasks of related sections in the management of assets and liabilities and the maintenance of solvency and liquidity ratios;

b/ Processes, procedures and limits of the management of liquidity and limits for the control of difference in the terms of assets and liabilities on the basis of cash inflow and outflow specified in Appendix 3 to this Circular;

c/ Principles, policies and processes of identification, measurement, monitoring and control of, reporting and exchange of information on, solvency and liquidity risks; criteria for early warning of the risk of solvency and liquidity shortage and remedies;

d/ Plans and measures to hold highly liquid valuable papers;

dd/ Guidance on, inspection, control and internal audit of, the maintenance of solvency and liquidity ratios;

e/ Models of evaluation and testing of solvency and liquidity, with analyses of possible solvency and liquidity scenarios. Scenario analysis must ensure the following requirements:

(i) Presenting at least two scenarios:

- Cash flow from business operations under normal operation conditions;

- Cash flow from business operations under conditions of solvency and liquidity difficulties.

(ii) Showing the following:

- Ability to perform daily obligations and commitments;

- Remedies to ensure the compliance with regulations on solvency.

4. Internal regulations mentioned in Clauses 1, 2 and 3 of this Article must be reviewed for amendment and supplementation at least once a year.

5. Within 10 days after the issuance, amendment, supplementation or replacement of internal regulations mentioned in Clauses 1, 2 and 3 of this Article, credit institutions and foreign bank branches shall submit directly or send by post to the State Bank (the Banking Supervisory Agency) their issued, amended, supplemented or replaced internal regulations.

Article 5.Information technology system

A credit institution or foreign bank branch must have a fully connected information technology system to implement the provisions of this Circular, meeting the following minimum requirements:

1. Storing, accessing and supplementing a database on clients and markets, ensuring risk management under the State Bank’s regulations and its internal regulations.

2. Making statistics on, monitoring and managing cash flow, and capital, asset and liability items; calculating, managing and supervising limits and prudential ratios in its operations.

3. Observing the statistical reporting regime under regulations and at the request of the State Bank.

Chapter II

SPECIFIC PROVISIONS

Section 1

REAL VALUE OF CHARTER CAPITAL OR ALLOCATED CAPITAL AND HANDLING IN CASE REAL VALUE OF CHARTER CAPITAL, ALLOCATED CAPITAL IS LOWER THAN LEGAL CAPITAL

Article 6.Real value of charter capital or allocated capital

1. Real value of charter capital or allocated capital of a credit institution or foreign bank branch means the residual value of its charter capital or allocated capital determined according to the principles prescribed in Clause 2 and the method prescribed in Clause 3 of this Article.

2. Principles for determination of real value of charter capital or allocated capital:

A credit institution or foreign bank branch shall calculate the residual value of its charter capital or allocated capital when having:

a/ Fully set aside the risk provision in accordance with law;

b/ Fully accounted incomes and expenses in accordance with law in determining business results.

3. Method of calculation of the real value of charter capital or allocated capital:

The real value of charter capital or allocated capital is determined to be paid-up charter capital or allocated capital plus (minus) undivided accumulated profits (unsettled accumulated losses) and funds set aside from after-tax profits (excluding reward fund, welfare fund, executive board bonus fund).

4. Credit institutions and foreign bank branches shall constantly monitor and evaluate the real value of their charter capital or allocated capital and regularly report it to the State Bank (the Banking Supervisory Agency) as follows:

a/ For credit institutions and foreign bank branches that have the annual financial statement period ending on December 31:

No later than July 15 and January 15 every year, credit institutions and foreign bank branches shall report on the real value of their charter capital or allocated capital by the end of June 30 and December 31;

b/ For credit institutions and foreign bank branches that have the annual financial statement period not ending on December 31 as approved by competent state agencies:

No later than the 15^thof the first month of the accounting period of the first quarter and that of the third quarter, credit institutions and foreign bank branches shall report on the real value of their charter capital or allocated capital by the last day of the accounting period of the preceding quarter;

c/ In case the real value of charter capital or allocated capital by the time of reporting prescribed at Points a and b of this Clause has not yet included adjustments to the entries made by independent auditors (if any), credit institutions and foreign bank branches shall add up such adjustments in the subsequent financial statement period.

Article 7.Handling in case the real value of charter capital or allocated capital is lower than legal capital

1. When the real value of its charter capital or allocated capital is lower than the legal capital, a credit institution or foreign bank branch shall:

a/ Work out and implement a handling plan to ensure that the real value of its charter capital or allocated capital is at least equal to the legal capital;

b/ Within 30 days after the real value of its charter capital or allocated capital is lower than the legal capital, send a report on the handling plan and commitment to implementing such plan to the State Bank (the Banking Supervisory Agency). Such a handling plan must have at least the following contents:

(i) The real value of the charter capital or allocated capital prescribed in Article 6 of this Circular;

(ii) The reason(s) for the decrease in the real value;

(iii) Measures to keep the real value of the charter capital or allocated capital not lower than the legal capital, and to maintain prudential ratios in its operation;

c/ Implement handling measures at the request of the State Bank (if any).

2. Measures to be applied by the State Bank to handle the case where the real value of charter capital or allocated capital of a credit institution or foreign bank branch is lower than the legal capital:

a/ Conducting evaluation, examination or inspection or requesting the credit institution or foreign bank branch to get independent audit to identify the real value of the charter capital or allocated capital under the handling plan reported by the credit institution or foreign bank branch under Clause 1 of this Article;

b/ Requesting modification, addition or improvement of handling measures to be taken by the credit institution or foreign bank branch under the plan prescribed in Clause 1 of this Article when necessary;

c/ Supervising and inspecting the implementation of measures stated in the handling plan, including handling measures requested by the State Bank;

d/ Depending on the deficiency of the real value of the charter capital or allocated capital compared to the legal capital, the State Bank shall decide on the following specific handling measures to be applied to each credit institution or foreign bank branch:

(i) Measures prescribed in Clause 2, Article 59 of the Law on the State Bank in case the real value of the charter capital or allocated capital falls below 80% of the legal capital;

(ii) Restructuring measures prescribed by law, revocation of the license of the credit institution or foreign bank branch if the real value of its charter capital or allocated capital falls below 50% of the legal capital or the real value of its charter capital or allocated capital has been lower than the legal capital for 6 consecutive months despite the implementation of the handling plan under Clause 1 of this Article.

Section 2

OWN CAPITAL AND CAPITAL ADEQUACY RATIOS

Article 8.Own capital

1. Own capital of a credit institution or foreign bank branch serves as a basis for determination of limits and prudential ratios in the operation of such credit institution or foreign bank branch prescribed in this Circular.

2. Own capital is the total of tier-1 capital and tier-2 capital minus reductions specified in Appendix 1 to this Circular.

3. Credit institutions and foreign bank branches shall base themselves on their own capital at the end of the last working day to calculate and maintain limits and prudential ratios prescribed in this Circular when conducting banking operations.

Article 9.Capital adequacy ratios

1. Capital adequacy ratios show the adequacy capital of a credit institution or foreign bank branch on the basis of its own capital value and operation risk level. Credit institutions and foreign bank branches shall constantly maintain the capital adequacy ratios prescribed in Clauses 2 and 3 of this Article.

2. Capital adequacy ratios of credit institutions:

a/ Capital adequacy ratios of credit institutions include individual capital adequacy ratio and consolidated capital adequacy ratio.

b/ Individual capital adequacy ratio: Each credit institution shall maintain an individual capital adequacy ratio of 9%.

The individual capital adequacy ratio shall be determined according to the following formula:

In which:

- Individual own capital shall be determined under Appendix 1 to this Circular.

- Total individual risk-weighted assets means the total of the value of on-balance-sheet assets determined according to the risk level and the value of corresponding on-balance-sheet assets of off-balance-sheet commitments determined according to the risk level under Appendix 2 to this Circular.

c/ Consolidated capital adequacy ratio: Credit institutions that have subsidiary companies shall, in addition to maintaining the individual capital adequacy ratio prescribed at Point b of this Clause, maintain a consolidated capital adequacy ratio of 9%.

The consolidated capital adequacy ratio shall be determined according to the following formula:

In which:

- Consolidated own capital shall be determined under Appendix 1 to this Circular.

- Total consolidated risk-weighted assets is determined under Appendix 2 to this Circular.

3. Capital adequacy ratio of foreign bank branches: Foreign bank branches shall maintain a capital adequacy ratio of 9%.

The capital adequacy ratio shall be determined according to the following formula:

In which:

- Own capital shall be determined under Appendix 1 to this Circular.

- Total risk-weighted assets means the total of the value of on-balance-sheet assets determined according to the risk level and the value of corresponding on-balance-sheet assets of off-balance-sheet commitments determined according to the risk level under Appendix 2 to this Circular.

Section 3

CREDIT EXTENSION LIMITS AND RESTRICTIONS

Article 10.Management of credit extension

1. Credit institutions and foreign bank branches shall manage their credit extension activities in accordance with law and their internal regulations on credit extension, and manage borrowed loans to ensure the use of these loans for proper purposes under Clause 1, Article 4 of this Circular.

2. Credit institutions and foreign bank branches shall make lists of founding shareholders, major shareholders, capital contributors, members of Boards of Directors, Members’ Councils and Control Boards, executive officers and other managerial titles in accordance with law, their organization and operation charters and affiliated persons of these persons, and update these lists when any change occurs. Such lists shall be publicized in the entire systems of credit institutions and foreign bank branches and submitted directly or sent by post to the State Bank (the Banking Supervisory Agency).

3. Credit institutions and foreign bank branches shall report to the Shareholders’ General Meeting and Members’ General Meeting on credit facilities extended to the subjects specified in Clause 1, Article 12 of this Circular by the time of gathering figures for meetings of Shareholders’ General Meeting and Members’ General Meeting; report to owners, capital contributors, managers, executive officers and the State Bank (the Banking Supervisory Agency) on new credit facilities extended to the subjects specified in Clause 1, Article 12 of this Circular.

4. Credit facilities extended to subsidiary companies, associated companies and subjects on the lists mentioned in Clause 2 of this Article (except cases where credit extension is not permitted prescribed in Article 11 of this Circular) shall be approved by Boards of Directors, Members’ Councils or General Directors (for foreign bank branches), except for credit facilities falling under the powers of the Shareholders’ General Meeting. The Control Boards shall supervise the approval of credit facilities to be extended to such subjects.

Article 11.Cases where credit extension is not permitted

1. Credit institutions and foreign bank branches may not extend credit facilities to the subjects specified in Article 126 of the Law on Credit Institutions.

2. Credit institutions and foreign bank branches may not extend credit facilities to clients for investment and trading in unlisted corporate bonds.

Article 12.Credit extension restrictions

1. Credit institutions and foreign bank branches may not extend credit facilities without security or on preferential conditions (with interest rates, dossiers, order and procedures for approval of credit extension, measures to secure the debt obligation and measures to settle and recover debts more preferential than those prescribed by law and internal regulations on credit extension and management of loans to ensure the use of loans for proper purposes applicable to clients and affiliated persons) to the following subjects:

a/ Audit firms, auditors that are auditing them; inspectors that are inspecting them;

b/ Their chief accountants;

c/ Their major shareholders and founding shareholders;

d/ Enterprises, of which any of the subjects specified in Clause 1, Article 126 of the Law on Credit Institutions holds over 10% of charter capital;

dd/ Persons who appraise and approve the credit extension;

e/ Subsidiary companies and associated companies of credit institutions, or enterprises, of which credit institutions hold the control.

2. The extension of credit facilities to the subjects specified in Clause 1 of this Article shall be approved by the Boards of Directors, Members’ Councils or General Directors (for foreign bank branches) and publicized within credit institutions and foreign bank branches under Clause 3, Article 10 of this Circular.

3. The total outstanding balance of credit facilities extended to the subjects specified at Points a, b, c, d and dd, Clause 1 of this Article must not exceed 5% of the own capital of a credit institution or foreign bank branch.

4. Total outstanding balance of credit facilities extended to a single subject or all subjects specified at Point e, Clause 1 of this Article must not exceed 10% or 20%, respectively, of the own capital of a credit institution.

Article 13.Credit extension limits

1. The total outstanding balance of credit facilities extended to a single client or a single client and his/her/its affiliated persons must not exceed 15% or 25%, respectively, of the own capital of a bank or foreign bank branch.

2. The total outstanding balance of credit facilities extended to a single client or a single client and his/her/its affiliated persons must not exceed 25% or 50%, respectively, of the own capital of a non-bank credit institution.

3. The outstanding balance of extended credit facilities mentioned in Clauses 1 and 2 of this Article is exclusive of:

a/ Loans provided under entrustment by the Government, organizations (including also other credit institutions and foreign bank branches in Vietnam) and individuals that bear risks related to such loans;

b/ Loans provided to other credit institutions and foreign bank branches;

c/ Loans fully secured by savings of individuals in terms of both term and value;

d/ Guarantees for guaranteed parties being other credit institutions and foreign bank branches;

dd/ Guarantees provided on a reciprocal basis for other credit institutions and foreign bank branches;

e/ Guarantees provided on the basis of standby letters of credit issued by other credit institutions and foreign bank branches;

g/ Guarantee confirmations as requested by guarantors being other credit institutions and foreign bank branches in case involved parties agree (in writing) that guarantee-confirming parties may debit, and request guarantors to refund, amounts which they have paid on behalf of guaranteed parties upon fulfilling the guarantee obligation;

h/ Guarantees and issuance commitments in the form of documentary credit with sufficient security assets being deposits in Vietnam dong, foreign currencies, gold or government bonds of guaranteed parties and/or third parties.

Credit institutions and foreign bank branches shall determine by themselves the deduction ratio of each security asset under this Point on the basis of evaluating the debt recoverability upon the handling of such security asset, provided such ratio does not exceed the maximum deduction ratio of security assets under the State Bank’s regulations on classification of assets, level and method of setting aside the risk provision and use of the risk provision to offset risks in the operation of credit institutions and foreign bank branches.

4. The limits prescribed in Clauses 1 and 2 of this Article also apply to cases where credit institutions and foreign bank branches that invest only in corporate bonds issued by enterprises and their affiliated persons.

5. In case the capital demand of a single client or a single client and its/his/her affiliated persons exceeds the credit extension limit prescribed in Clauses 1 and 2 of this Article, a credit institution or foreign bank branch may extend syndicated credit facilities under regulations of the State Bank.

6. In special cases where the borrowing demand of a client to perform a socio-economic task exceeds the loan syndication capacity of credit institutions and foreign bank branches, the Prime Minister shall decide on a maximum credit level exceeding the credit extension limits prescribed in Clauses 1 and 2 of this Article on a case-by-case basis.

7. Total credit facilities extended by a credit institution or foreign bank branch specified in Clause 6 of this Article must not exceed four times its own capital.

8. Based on results of the State Bank’s supervision, examination and inspection of a credit institution or foreign bank branch:

a/ When anticipating a risk due to credit concentration, the State Bank shall consider and request the credit institution or foreign bank branch to apply the prudence principles when considering and extending credit facilities or handling extended credit facilities to ensure safety for its operation;

b/ When finding that organizations or individuals that are not affiliated persons specified in Clause 15, Article 3 of this Circular have interests related to borrowing clients of, or pose potential risks to, the credit institution or foreign bank branch, the State Bank shall consider and request the credit institution or foreign bank branch to treat such organizations or individuals as affiliated persons of their clients and apply the prudence principles when considering and extending credit facilities or handling extended credit facilities to ensure safety for its operation on a case-by-case basis.

Article 14.Conditions and limits of credit extension for stock investment and trading

1. Commercial banks and foreign bank branches may only extend credit facilities in the form of loans or discounts of valuable papers to clients for stock investment and trading when meeting the following conditions:

a/ They extend credit facilities within the limits and other prudential ratios prescribed in this Circular;

b/ They have a non-performing loan ratio of under 3%;

c/ They fully comply with regulations on risk management and fully set aside the risk provision in accordance with law;

d/ These clients are not affiliated persons of the subjects specified in Article 126 of the Law on Credit Institutions;

dd/ These clients and their affiliated persons are not the subjects specified in Clause 1, Article 12 of this Circular.

2. Commercial banks and foreign bank branches may not extend credit facilities to clients for stock investment and trading with security in any form by other credit institutions and foreign bank branches or with security being stocks of other credit institutions; they also may not extend medium- and long-term credit facilities to clients for stock investment and trading.

3. The total outstanding balance of credit facilities extended by a commercial bank or foreign bank branch to all clients for stock investment and trading must not exceed 5% of its charter capital or allocated capital.

4. Commercial banks may neither extend credit facilities nor entrust their subsidiary companies or associated companies to:

a/ Invest or trade in stocks;

b/ Provide loans for stock investment or trading.

5. Credit facilities extended by commercial banks and foreign bank branches to clients for investment or trading in stocks must not be secured with such stocks.

6. Commercial banks may not extend credit facilities to their clients for investment or trading in their own stocks, except cases where state-run commercial banks provide loans to their employees to purchase their initially issued shares upon their transformation into joint-stock commercial banks.

Section 4

SOLVENCY RATIOS

Article 15.Solvency ratios

1. At the end of every working day, credit institutions and foreign bank branches shall base themselves on Appendix 3 to this Circular to make a cash inflow and outflow statement for monitoring and management of solvency ratios prescribed in Clauses 2 and 3 of this Article.

2. Liquidity reserve ratio:

a/ Credit institutions and foreign bank branches shall hold highly liquid assets as reserves to meet due and unexpected payment demands.

b/ Liquidity reserve ratio shall be determined according to the following formula:

In which:

(i) Highly liquid assets are specified in Appendix 3 to this Circular;

(ii) Total liabilities refers to the item of total liabilities on the balance sheet.

c/ Highly liquid assets and total liabilities prescribed at Point b of this Clause is denominated shall be Vietnam dong, either Vietnam dong or freely convertible foreign currencies converted into Vietnam dong (at the inter-bank average exchange rates daily announced by the State Bank or exchange rates accounted by credit institutions and foreign bank branches in case of no inter-bank average exchange rate announced by the State Bank).

d/ Credit institutions and foreign bank branches shall maintain a liquidity reserve ratio as follows:

(i) Commercial banks: 10%;

(ii) Foreign bank branches: 10%;

(iii) Non-bank credit institutions: 1%;

(iv) Cooperative banks: 10%.

3. Solvency ratios within 30 days:

a/ Credit institutions and foreign bank branches shall calculate and maintain solvency ratios for:

(i) Vietnam dong;

(ii) Foreign currencies (including U.S. dollar and other foreign currencies converted into U.S. dollar at the inter-bank average exchange rates daily announced by the State Bank or exchange rates accounted by credit institutions and foreign bank branches in case of no inter-bank average exchange rate announced by the State Bank).

b/ The solvency ratio within 30 days shall be determined according to the following formula:

In which:

(i) Highly liquid assets are specified in Appendix 3 to this Circular;

(ii) Net cash outflow in subsequent 30 days is a positive difference between the cash outflow of 30 consecutive days following the next day and the cash inflow of 30 consecutive days following the next day as prescribed in Appendix 3 to this Circular;

c/ Credit institutions shall maintain the solvency ratio within 30 days prescribed at Point b of this Clause for Vietnam dong as follows:

(i) Commercial banks: 50%;

(ii) Foreign bank branches: 50%;

(iii) Non-bank credit institutions: 20%;

(iv) Cooperative banks: 50%.

d/ Credit institutions shall maintain the solvency ratio within 30 days prescribed at Point b of this Clause for foreign currencies as follows:

(i) Commercial banks: 10%;

(ii) Foreign bank branches: 5%;

(iii) Non-bank credit institutions: 5%;

(iv) Cooperative banks: 5%.

Article 16.Management and handling of the failure to maintain solvency ratios

1. A credit institution or foreign banks branch shall organize a liability and asset management unit (of sectional or equivalent level) at its headquarters to monitor and manage its day-to-day solvency. Its General Director (Director) or authorized Deputy General Director (Deputy Director) must be in charge of such a unit.

2. In case the calculated solvency ratio within 30 days following the next day of a credit institution or foreign bank branch is below the prescribed ratio, the credit institution or foreign bank branch shall take remedies, including: borrowing from another credit institution or foreign bank branch or sign with other credit institutions and foreign bank branches irrevocable time deposit commitments, irrevocable borrowing commitments and other irrevocable remedies in order to ensure the prescribed solvency ratio.

3. Every day, a credit institution or foreign bank branch shall report to the State Bank on its solvency ratio under regulations on statistical reports applicable to credit institutions and foreign bank branches. Before 10 a.m. of the next day, a credit institution or foreign bank branch shall report to the State Bank (the Banking Inspection and Supervision Agency) its temporarily deficient solvency ratio (if any) and remedies it has taken to make up for the deficit.

4. A credit institution or foreign bank branch may provide loans or sign irrevocable time deposit commitments or irrevocable lending commitments with another credit institution or foreign bank branch to make up for its solvency ratio deficit only if it can ensure the solvency ratio within 30 days prescribed in Article 15 of this Circular after conducting such activities.

5. The State Bank shall strictly supervise and take measures prescribed by law to handle credit institutions and foreign bank branches that are required to take remedies prescribed in Clause 2 of this Article at 20% or more of their highly liquid assets to maintain their solvency ratio within 30 days.

6. After taking remedies prescribed in Clause 2 of this Article, credit institutions and foreign bank branches that continue facing solvency difficulties shall immediately report to the State Bank (the Banking Supervisory Agency and State Bank branches in provinces or centrally run cities where they are headquartered). In case of possible insolvency, credit institutions shall promptly report it to the State Bank under Article 145 of the Law on Credit Institutions.

Section 5

MAXIMUM RATIO OF SHORT-TERM CAPITAL SOURCES TO BE USED FOR PROVISION OF MEDIUM- AND LONG-TERM LOANS

Article 17.Maximum ratio of short-term capital sources to be used for provision of medium- and long-term loans

1. Credit institutions and foreign bank branches shall use their short-term capital sources for provision of medium- and long-term loans in Vietnam dong, including Vietnam dong and foreign currencies converted into Vietnam dong (at the average inter-bank exchange rate announced by the State Bank every day or at the exchange rate accounted by credit institutions and foreign bank branches if no average inter-bank exchange rate is announced by the State Bank), at a ratio calculated according to the following formula:

Of which:

- A: the ratio of short-term capital sources to be used for provision of medium- and long-term loans.

- B: the total outstanding balance of medium- and long-term loans prescribed in Clause 2 of this Article minus the total of medium- and long-term capital sources prescribed in Clause 3 of this Article.

- C: short-term capital sources prescribed in Clause 4 of this Article.

2. The total outstanding balance of medium- and long-term loans covers:

a/ The following amounts which have the remaining term of 12 months or more:

(i) Loans and financial leases (including those provided to other credit institutions and foreign bank branches in Vietnam), except the outstanding balance of loans and financial leases provided from sources entrusted by the Government, individuals and other organizations (including other credit institutions and foreign bank branches in Vietnam; and parent banks and their overseas branches), risks related to which are borne by the Government and these individuals and organizations;

(ii) Amounts entrusted to other credit institutions and foreign bank branches for loan provision or financial lease, the risks related to which are borne by entrusting credit institutions and foreign bank branches;

(iii) Amounts purchased or invested in valuable papers, except valuable papers used in the State Bank’s transactions;

b/ The outstanding balance of loans, outstanding balance of financial leases and balance from purchase of or investment in overdue medium- and long-term valuable papers;

c/ The outstanding balance of loans, and balance from purchase of or investment in overdue short-term valuable papers while the lending term or term of investment in valuable papers plus the overdue period is 12 months or more.

3. Medium- and long-term capital sources include the following amounts which have the remaining term of 12 months or more:

a/ Deposits of organizations (except deposits of other credit institutions and foreign bank branches in Vietnam, and the State Treasury’s deposits of all kinds, if any) and individuals;

b/ Deposits and loans of overseas parent credit institutions and their overseas branches;

c/ Amounts raised through issuance of promissory notes, bills, deposit certificates and bonds;

d/ Loans of domestic financial institutions (except loans of other credit institutions and foreign bank branches in Vietnam) and loans of overseas financial institutions, except loans specified at Point b of this Clause;

dd/ Charter capital, allocated capital and residual reserve funds after subtracting amounts purchased or invested in fixed assets or used for capital contribution or share purchase in accordance with law;

e/ Surplus of equityorresidual undivided profitsafter purchase of treasury stocks.

4. Short-term capital sources include the following amounts which have the remaining term of less than 12 months:

a/ Deposits of organizations (except demand and time deposits of other credit institutions and foreign bank branches in Vietnam, and the State Treasury’s deposits of all kinds, if any) and individuals;

b/ Deposits and loans of overseas parent credit institutions and their overseas branches;

c/ Amounts raised through issuance of promissory notes, bills, deposit certificates and bonds;

d/ Loans of domestic financial institutions (except loans of credit institutions and foreign bank branches in Vietnam) and loans of overseas financial institutions, except the loans specified at Point b of this Clause.

5. Credit institutions and foreign bank branches may use their short-term capital sources for provision of medium- and long-term loans at the maximum ratio specified below:

a/ Commercial banks: 60%;

b/ Foreign bank branches: 60%;

c/ Non-bank credit institutions: 200%;

d/ Cooperative banks: 60%.

6. Credit institutions and foreign bank branches may purchase or invest in government bonds (including amounts entrusted to other organizations for purchase of or investment in government bonds but excluding amounts used for purchase of or investment in government bonds with entrusted capital sources from other organizations) at the maximum ratio to short-term capital sources as specified below:

a/ State commercial banks: 15%;

b/ Joint-stock commercial banks, joint-venture banks and wholly foreign-owned banks: 35%;

c/ Foreign bank branches: 15%;

d/ Non-bank credit institutions: 5%;

dd/ Cooperative banks: 40%.

Section 6

LIMITS OF CAPITAL CONTRIBUTION AND SHARE PURCHASE

Article 18.Limits of capital contribution or share purchase by commercial banks and finance companies

1. The limit of capital contribution or share purchase by a commercial bank and its subsidiary and affiliated companies (except cases where subsidiary and affiliated companies are fund management companies that contribute capital or purchase shares with capital sources of their managed funds) to/from an enterprise engaged in the field specified in Clause 4, Article 103 of the Law on Credit Institutions must not exceed 11% of the charter capital of such enterprise.

2. The total limit of capital contribution or share purchase by a commercial bank to/from enterprises, including the limit of allocated capital or contributed capital to its subsidiary companies and affiliated companies, must not exceed 40% of its charter capital and reserve fund.

3. The limit of capital contribution or share purchase by a finance company and its subsidiary and affiliated companies to/from an enterprise must not exceed 11% of the charter capital of such enterprise.

4. The total limit of capital contribution or share purchase by a finance company to/from enterprises, including the limit of allocated capital or contributed capital to its subsidiary and affiliated companies, must not exceed 60% of its charter capital and reserve fund.

5. A commercial bank or finance company may neither contribute capital to nor purchase shares from other enterprises or credit institutions being its shareholders or capital contributors or being affiliated persons of its major shareholders or managers.

Article 19.Capital contribution and share purchase among subsidiary companies, affiliated companies and controlling companies of commercial banks or finance companies

1. Subsidiary companies and affiliated companies of a commercial bank or finance company may neither contribute capital to nor purchase shares from one another. A commercial bank may neither contribute capital to nor purchase shares from subsidiary companies or affiliated companies of its controlling company. A finance company may neither contribute capital to nor purchase shares from subsidiary companies or affiliated companies of its controlling company.

2. Subsidiary companies and affiliated companies of a commercial bank or finance company may neither contribute capital to nor purchase shares from such commercial bank or finance company.

3. A commercial bank or finance company being a subsidiary or affiliated company of a controlling company may neither contribute capital to nor purchase shares from such controlling company.

Article 20.Commercial banks’ purchase or holding of stocks of other credit institutions

1. A commercial bank that wishes to purchase or hold stocks (including amounts entrusted to other organizations or individuals and its shareholders) of another credit institution shall satisfy the conditions specified in Clause 2 and the limits specified in Clause 3, of this Article.

2. A commercial bank that wishes to purchase or hold stocks of another credit institution shall fully satisfy the following conditions at the time of stock purchase or holding:

a/ Keeping the real value of the charter capital not lower than the registered charter capital;

b/ Ensuring the limits and prudential ratios prescribed in this Circular;

c/ Having a rate of non-performing loans of under 3%;

d/ Having a process of approval, appraisal and risk assessment for the purchase or holding of stocks of another credit institution;

dd/ Each amount of purchased or held stocks of another credit institution is approved by the Board or Directors or Members’ Council;

e/ Not being administratively sanctioned in banking activities within 1 year before the date of stock purchase or holding;

g/ The chairperson and other members of the Board of Directors or the chairperson and other members of the Members’ Council, the director general (director), the head and other members of the Control Board, and major shareholders of the commercial bank and its subsidiary companies and their affiliated persons do neither purchase nor hold voting shares of such credit institution;

h/ The chairperson and other members of the Board of Directors or the chairperson and other members of the Members’ Council, the director general (director), the head and other members of the Control Board, and major shareholders of the commercial bank and its subsidiary companies and their affiliated persons do not entrust another organization to purchase or hold the voting equity of such credit institution.

3. Limits:

a/ A commercial bank may only purchase or hold stocks of no more than two (2) other credit institutions, except cases where other credit institutions are its subsidiary companies;

b/ A commercial bank may only purchase or hold stocks of another credit institution at a ratio of under 5% of the voting equity of such credit institution;

c/ A commercial bank may not appoint its staff members to the Board of Directors at a credit institution where it has purchased or held stocks, except cases where such credit institution is a subsidiary company of the commercial bank or when the commercial bank is involved in the restructuring or handling of poor-performing credit institutions as designated by the State Bank;

d/ A commercial bank may purchase or hold stocks of another credit institution in excess of the limits specified at Points a and b of this Clause or it may do so even when it fails to fully satisfy the conditions specified in Clause 2 of this Article in the following cases:

(i) Such purchase or holding aims to restructure, or provide financial supports for, the credit institution that faces financial difficulties or is in danger of insolvency, thus affecting the safety of the system of credit institutions, and such purchase or holding is approved by the State Bank;

(ii) The commercial bank is designated by the State Bank in accordance with law.

Section 7

LOAN-TO-DEPOSIT RATIOS

Article 21.Loan-to-deposit ratios

1. A commercial bank, cooperative bank or foreign bank branch shall comply with the maximum loan-to-deposit ratio (LDR) calculated in Vietnam dong, including Vietnam dong and foreign currencies converted into Vietnam dong (at the average inter-bank exchange rate announced by the State Bank every day or at the exchange rate accounted by the credit institution or foreign bank branch if no average inter-bank exchange rate is announced by the State Bank), which is determined by the following formula:

Of which:

- LDR is the loan-to-deposit ratio.

- L is the total outstanding balance of loans specified in Clauses 2 and 3 of this Article.

- D is the total deposits specified in Clause 4 of this Article.

2. The total outstanding balance of loans covers:

a/ Outstanding balance of loans for individuals and organizations (except the outstanding balance of loans of other credit institutions or foreign bank branches in Vietnam);

b/ Amounts entrusted to other credit institutions or foreign bank branches for provision of loans.

3. The following amounts will be subtracted from the total outstanding balance of loans:

a/ The outstanding balance of loans with sources entrusted by the Government and other individuals and organizations (including other credit institutions and foreign bank branches in Vietnam; and parent banks and their overseas branches);

b/ Overseas loans of credit institutions and foreign bank branches. For foreign bank branches, overseas loans include loans of parent banks and their overseas branches.

4. Total deposits include:

a/ Deposits of organizations (except the State Treasury’s deposits of all kinds, if any) and deposits of individuals, except collaterals and special-use capital deposits of clients;

b/ Deposits of overseas parent banks and their overseas branches;

c/ Amounts raised through issuance of promissory notes, bills, deposit certificates and bonds.

5. A credit institution or foreign bank branch (except finance companies and financial leasing companies) shall maintain an LDR specified below:

a/ State commercial banks: 90%;

b/ Cooperative banks: 80%;

c/ Joint-stock commercial banks, joint-venture banks and wholly foreign-owned banks: 80%;

d/ Foreign bank branches: 90%;

For credit institutions and foreign bank branches established just for 3 (three) years, the State Bank Governor shall prescribe a specific ratio other than the above ratios for each of them.

6. A commercial bank, cooperative bank or foreign bank branch is not required to comply with the LDR specified in Clause 5 of this Article if its charter capital or residual allocated capital after investment in or procurement of fixed assets and its capital contributions or purchased shares are larger than the outstanding balance of loans.

Chapter III

TRANSITIONAL PROVISIONS

Article 22.General provisions

1. Except the case specified in Clause 2 of this Article, for contracts signed before the effective date of this Circular and compliant with law at the time of signing, credit institutions, foreign bank branches and clients may continue to perform them until their expiration. The modification, supplementation or extension of such contracts shall be made only if it complies with this Circular and relevant regulations.

2. Transitional provisions for credit institutions and foreign bank branches that violate regulations on credit extension, capital contribution or share purchase must comply with Articles 25 and 26 of this Circular.

Article 23.Responsibilities of credit institutions and foreign bank branches

1. From the effective date of this Circular, credit institutions and foreign bank branches that fail to comply with the limits and ratios prescribed in this Circular shall work out handling plans and immediately take handling measures to ensure such limits and ratios.

2. Within 30 days from the effective date of this Circular, credit institutions and foreign bank branches shall submit directly or send by post handling plans specified in Articles 24, 25 and 26 of this Circular to the State Bank (the Banking Supervision Agency).

Credit institutions and foreign bank branches shall comply with the State Bank’s requests (if any) for modification, supplementation or adjustment of handling measures or implementation schedule or time limit.

3. Credit institutions and foreign bank branches shall add handling measures specified in Clauses 1 and 2 of this Article and implementation schedule to their restructuring plans for comprehensive implementation at the request of the State Bank.

Article 24.Transitional provisions on minimumcapital adequacy ratios, maximum ratios of short-term capital sources to be used for provision of medium- and long-term loans, and loan-to-deposit ratios

1. From the effective date of this Circular, a credit institution or foreign bank branch that has the capitaladequacyratio and LDR not satisfying the conditions specified in Articles 9 and 21 of this Circular shall work out a handling plan which must have at least the following contents:

a/ The specific ratios which are unsatisfactory;

b/ Handling measures and schedule to ensure that within 6 months after the effective date of this Circular, such ratios satisfy the specified conditions.

2. From the effective date of this Circular, a credit institution or foreign bank branch that has the maximum ratio of short-term capital sources to be used for provision of medium- and long-term loans and the ratio of investment in government bonds to short-term capital sources not satisfying the conditions specified in Clauses 5 and 6, Article 17 of this Circular:

a/ May not extend any more medium- and long-term credit amounts until it ensures the ratio specified in Clause 5, Article 17 of this Circular;

b/ May neither purchase nor invest in more government bonds until it ensures the ratio specified in Clause 6, Article 17 of this Circular;

c/ Shall work out a handling plan which must have at least the following contents:

(i) The specific ratio which is unsatisfactory;

(ii) Handling measures and schedule to ensure that within 1 year after the effective date of this Circular, such ratio satisfies the specified conditions.

Article 25.Transitional provisions on credit extension

1. From the effective date of this Circular, a credit institution or foreign bank branch that has credit amounts extended to its clients for stock investment or trading not fully satisfying the conditions specified in Clause 1, Article 14 of this Circular:

a/ May not extend any more credit amounts for stock investment or trading until it fully satisfies the conditions specified in Clause 1, Article 14 of this Circular;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of clients and the credit amount extended to each client for stock investment or trading;

(ii) Measures and schedule to ensure full satisfaction of the conditions specified in Clause 1, Article 14 of this Circular and measures to recover the extended credit amounts.

2. From the effective date of this Circular, a credit institution or foreign bank branch that has credit amounts extended to its clients for stock investment or trading exceeding the ratio specified in Clause 3, Article 14 of this Circular:

a/ May not sign any more credit contracts for stock investment or trading until it ensures the ratio specified in Clause 3, Article 14 of this Circular;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of clients and the outstanding balance of credit amount extended to each client for stock investment or trading; total outstanding balance of credit amounts extended to all clients for stock investment or trading; charter capital of the commercial bank or allocated capital of the foreign bank branch; ratio of credit amounts extended to all clients for stock investment or trading to such charter capital or allocated capital;

(ii) Handling measures and schedule, including recovery of debts and increase of charter capital or allocated capital.

Article 26.Transitional provisions for capital contributions and purchased shares

From the effective date of this Circular, if a credit institution that has capital contributions or purchased shares not satisfying the conditions specified in Articles 103, 110, 115, 129 and 135 of the Law on Credit Institutions and Articles 18, 19 and 20 of this Circular:

1.Acommercial bank that is directly conducting the business activities specified in Clause 2, Article 103 of the Law on Credit Institutions shall work out a handling plan which must have at least the following contents:

a/ Business activities it is directly conducting; number and total value of contracts for each business activity;

b/ Handling measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

2. A finance company that has capital contributions or purchased shares at other credit institutions shall work out a handling plan which must have at least the following contents:

a/ List of credit institutions where it has capital contributions or purchased shares (names, addresses, tax identification numbers and business registration numbers); ratio of its capital contributions or purchased shares at each credit institution to the charter capital of such credit institution;

b/ Capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

3. A finance company that has subsidiary companies or affiliated companies engaged in the fields other than insurance, securities or security asset management as prescribed in Clause 3, Article 110 of the Law on Credit Institutions shall work out a handling plan which must have at least the following contents:

a/ List of subsidiary companies or affiliated companies engaged in the fields other than insurance, securities or security asset management (names, addresses, tax identification numbers, business registration numbers and registered business lines); charter capital of each subsidiary or affiliated company; level of the finance company’s capital contributions or purchased shares at each subsidiary or affiliated company (amount of capital contributions or purchased shares and their ratio to the charter capital of such subsidiary or affiliated company);

b/ Capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

4. A financial leasing company that has established subsidiary companies or affiliated companies or has capital contributions and purchased shares at enterprises shall work out a handling plan which must have at least the following contents:

a/ List of enterprises where it has capital contributions or purchased shares (names, addresses, tax identification numbers, business registration numbers and business lines); and ratio of the financial leasing company’s capital contributions or purchased shares at each enterprise to the charter capital of such enterprise;

b/ List of subsidiary companies or affiliated companies established by the financial leasing company (names, addresses, tax identification numbers, business registration numbers and business lines); charter capital of each subsidiary or affiliated company and ratio of the financial leasing company’s capital contributions or purchased shares to the charter capital of such subsidiary or affiliated company;

c/ Capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

5. A commercial bank or finance company that has capital contributions or purchased shares exceeding the limits specified in Article 129 of the Law on Credit Institutions and Clause 5, Article 18 of this Circular:

a/ May no longer make any capital contributions or share purchase until it complies with Article 129 of the Law on Credit Institutions and Clause 5, Article 18 of this Circular;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of enterprises and other credit institutions that are its shareholders or capital contributors or affiliated persons of its major shareholders or managers (names, addresses, tax identification numbers, business registration numbers and business lines; and charter capital) and the amount of capital contributions or purchased shares of each of them, total amount of capital contributions or purchased shares, and ratio of capital contributions or purchased shares to the charter capital of such enterprises and credit institutions;

(ii) List of enterprises and other credit institutions that are its shareholders or capital contributors or affiliated persons of its major shareholders or managers, where it has capital contributions or purchased shares (names, addresses, tax identification numbers, business registration numbers and business lines; and charter capital), total amount of capital contributions or purchased shares, and ratio of capital contributions or purchased shares to the charter capital of such enterprises and credit institutions;

(iii) Capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

6. A commercial bank that has purchased or held stocks of another credit institution exceeding the limits specified at Points a and b, Clause 3, Article 20 of this Circular:

a/ May neither purchase nor hold stocks of such credit institution until it complies with Points a and b, Clause 3, Article 20 of this Circular, except cases where it receives dividends in stocks of such credit institution;

b/ The authorized representative of the commercial bank’s capital contributions who is a member of the Board of Directors of such credit institution shall submit a letter of resignation as member of the Board of Directors so that the Shareholders’ General Meeting decides on his/her relief from duty or removal from office at its nearest meeting counting from the effective date of this Circular;

c/ Shall work out a handling plan which must have at least the following contents:

(i) List of credit institutions in which it currently holds shares and amounts of purchased or held stocks at each credit institution, and share/stock holding rate at each credit institution;

(ii) Capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

7. A commercial bank or finance company with subsidiary companies or affiliated companies contributing capital to or purchasing shares from one another shall work out a handling plan which must have at least the following contents:

a/ List of subsidiary companies or affiliated companies (names, addresses, tax identification numbers, business registration numbers and business lines) that have contributed capital to or purchased shares from one another; and levels of their capital contributions or purchased shares;

b/ Handling measures and schedule to ensure that, through its rights of the shareholder or capital contributor at subsidiary companies or affiliated companies, such subsidiary companies or affiliated companies no longer make any capital contributions or share purchases at one another, and that within 12 months after the effective date of this Circular, its capital contributions or share purchases satisfy the specified conditions.

8. A commercial bank or finance company that has capital contributions or purchased shares at subsidiary companies or affiliated companies of its controlling company:

a/ May no longer make any capital contributions or share purchases at such subsidiary companies or affiliated companies;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of subsidiary companies or affiliated companies of its controlling company where it has capital contributions or purchased shares (names, addresses, tax identification numbers, business registration numbers and business lines); ratio of its capital contributions or purchased shares at each subsidiary or affiliated company to the charter capital of such subsidiary or affiliated company;

(ii) The subsidiary company’s or affiliated company’s capital withdrawal measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

9. A commercial bank or finance company that receives capital contributions or purchased shares from its subsidiary companies or affiliated companies:

a/ May no longer receive any capital contributions or purchased shares from its subsidiary companies or affiliated companies, while such subsidiary companies or affiliated companies may not additionally contribute capital to or purchase shares from the commercial bank or finance company;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of subsidiary companies or affiliated companies from which it has received capital contributions or purchased shares (names, addresses, tax identification numbers, business registration numbers and business lines); ratio of capital contributions or purchased shares of each subsidiary or affiliated company at the commercial bank or finance company to the charter capital of such commercial bank or finance company;

(ii) Handling measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

10. A commercial bank or finance company that is a subsidiary or an affiliated company of a controlling company and has contributed capital to or purchased shares from such controlling company:

a/ May no longer make any capital contributions or share purchases at such controlling companywhile the controlling company may no longer make any capital contributions or share purchases at the commercial bank or finance company;

b/ Shall work out a handling plan which must have at least the following contents:

(i) List of controlling companies where it has capital contributions or purchased shares (names, addresses, tax identification numbers, business registration numbers and business lines); and ratio of its capital contributions or purchased shares to the charter capital of each of the controlling companies;

(ii) Handling measures and schedule to ensure that within 12 months after the effective date of this Circular, its capital contributions or purchased shares satisfy the specified conditions.

Article 27.Handling after transition

After the maximum transition period specified in the handling plan mentioned in Article 23, 24, 25 or 26 of this Circular or the maximum period requested by the State Bank, if credit institutions and foreign bank branches fail to remedy their violations, the State Bank shall, depending on the risk level and characteristics, take necessary handling measures, including the restructuring of credit institutions and foreign bank branches in accordance with law, or revoke their licenses.

Article 28.Responsibilities of the State Bank

The State Bank shall consider handling plans and request credit institutions and foreign bank branches to modify and supplement these plans, including the implementation time (if seeing such plans are unsatisfactory or infeasible) and to take measures stated in these plans according to schedule; and inspect, examine and supervise credit institutions and foreign bank branches in implementing the handling plans specified in Articles 24, 25 and 26 of this Circular.

Chapter IV

RESPONSIBILITIES OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES AND UNITS UNDER THE STATE BANK

Article 29.Responsibilities of units under the State Bank

1. The Banking Supervisory Agency shall:

a/ Assume the prime responsibility for, and coordinate with related departments in, submitting handling plans of credit institutions and foreign bank branches to the State Bank Governor for consideration, and request modification and supplementation of these handling plans (if seeing such plans are unsatisfactory or infeasible) under Articles 7, 24, 25 and 26 of this Circular;

b/ Assume the prime responsibility for, and coordinate with related departments in, submitting to the State Bank Governor for consideration the limits and ratios specified in Clauses 2 and 3, Article 1, and the requirements specified in Clause 8, Article 13, of this Circular;

c/ Supervise, examine and inspect credit institutions and foreign bank branches in complying the provisions of this Circular;

d/ Coordinate with the Monetary Policy Department, the Credit Department, the Forecasting and Statistics Department and the Finance and Accounting Department in implementing the provisions of Clauses 2, 3 and 4 of this Article.

2. The Monetary Policy Department and the Credit Department shall coordinate with the Banking Supervisory Agency in handling solvency-related ratios of credit institutions and foreign bank branches as specified in Articles 15 and 16 of this Circular.

3. The Forecasting and Statistics Department shall, pursuant to this Circular, formulate and submit to the State Bank Governor for promulgation regulations on the reporting regime applicable to credit institutions and foreign bank branches in their compliance with the limits and prudential ratios specified in this Circular.

4. The Finance and Accounting Department shall coordinate with the Banking Supervisory Agency in guiding credit institutions and foreign bank branches to implement cost-accounting regulations related to the limits and prudential ratios specified in this Circular.

5. The State Bank’s provincial-level branches without a Banking Supervisory Division shall examine, inspect and supervise credit institutions and foreign bank branches in localities in observing the provisions of this Circular.

Article 30.Responsibilities of credit institutions and foreign bank branches

1. To regularly and continuously maintain the limits and prudential ratios in banking activities in accordance with this Circular.

2. If failing to ensure or are in danger of failing to ensure the limits and prudential ratios in banking activities as prescribed in this Circular, to report to the State Bank their handling plans to ensure their compliance with such limits and ratios.

3. To strictly, fully and promptly abide by handling solutions at the request of the State Bank if they fail to ensure limits and prudential ratios in banking activities.

4. To fully, promptly and accurately report on limits and prudential ratios in banking activities according to the State Bank’s regulations and at the request of the Banking Supervisory Agency.

Chapter V

IMPLEMENTATION PROVISIONS

Article 31.Effect

1. This Circular takes effect on February 1, 2015.

2. The following documents cease to be effective:

- The State Bank Governor’s Decision No. 03/2008/QD-NHNN of February 1, 2008, on provision of loans and discount of valuable papers for securities investment and trading;

- The State Bank Governor’s Circular No. 15/2009/TT-NHNN of August 10, 2009, promulgating the Regulation on maximum ratios of short-term capital sources to be used for provision of medium- and long-term loans;

- The State Bank Governor’s Circular No. 13/2010/TT-NHNN of May 20, 2010, promulgating the Regulation on prudential ratios in the operation of credit institutions;

- The State Bank Governor’s Circular No. 19/2010/TT-NHNN of September 27, 2010, amending and supplementing a number of articles of the State Bank Governor’s Circular No. 13/2010/TT-NHNN of May 20, 2010, promulgating the Regulation on prudential ratios in the operation of credit institutions;

- The State Bank Governor’s Circular No. 22/2011/TT-NHNN of August 30, 2011, amending and supplementing a number of articles of the State Bank Governor’s Circular No. 13/2010/TT-NHNN of May 20, 2010, promulgating the Regulation on prudential ratios in the operation of credit institutions;

- Article 1 of the State Bank Governor’s Circular No. 33/2011/TT-NHNN of October 8, 2011, amending and supplementing a number of articles of the State Bank Governor’s Circular No. 13/2010/TT-NHNN of May 20, 2010, promulgating the Regulation on prudential ratios in the operation of credit institutions, and the Regulation on provision of loans by credit institutions for their clients promulgated together with the State Bank Governor’s Decision No. 1627/2001/QD-NHNN of December 31, 2001;

- Clause 2, Article 6 of the State Bank Governor’s Circular No. 28/2012/TT-NHNN of October 3, 2012, on bank guarantee.

Article 32.Organization of implementation

The Chief of the Office, the Chief of the Banking Supervisory Agency and heads of units under the State Bank, directors of the State Bank’s provincial-level branches, and chairpersons of Boards of Directors or chairpersons of Members’ Councils, and directors general (directors) of credit institutions and foreign bank branches shall organize the implementation of this Circular.-

For the State Bank Governor
Deputy Governor
NGUYEN PHUOC THANH