Decision No. 171/2002/QD-NHNN dated March 8, 2002 of the State Bank of Vietnam promulgating the Regulation on setting up, management and use of the risk reserve of the State Bank

DECISION

PROMULGATING THE REGULATION ON SETTING UP, MANAGEMENT AND USE OF THE RISK RESERVE OF THE STATE BANK

THE STATE BANK GOVERNOR

Pursuant to Vietnam State Bank Law No.01/1997/QH10 of December 12, 1997;

Pursuant to the Government’s Decree No.15/CP of March 2, 1993 stipulating the tasks, powers and State management responsibilities of the ministries and ministerial-level agencies;

Pursuant to the Government’s Decree No.100/1998/ND-CP of December 10, 1998 on the financial regime of the State Bank;

At the proposal of the director of the Accountancy and Finance Department,

DECIDES:

Article 1.-To promulgate together with this Decision the Regulation on setting up, management and use of the risk reserve of the State Bank.

Article 2.-This Decision takes effect 15 days after its signing.

Article 3.-The director of the Office, the director of the Accountancy and Finance Department, the heads of the units attached to the State Bank, the directors of the State Bank branches in the provinces and centrally-run cities shall have to implement this Decision.

REGULATION

ON SETTING UP, MANAGEMENT AND USE OF THE RISK RESERVE OF THE STATE BANK
(Promulgated together with the State Bank Governor’s Decision No.171/2002/QD-NHNN of March 8, 2002)

I. GENERAL PROVISIONS

Article 1.-This Regulation prescribes the setting up, management and use of the risk reserve of the State Bank to offset losses due to objective causes in credit, payment service and treasure activities of the State Bank and loss difference amounts after compensations therefor are made by collectives or individuals in strict compliance with the provisions of law.

Debt amounts in freezing or rescheduling periods under the Prime Minister’s decisions shall not be subject to the handling with this risk reserve.

Article 2.-Annually, the State Bank shall set up and account into its expenditure a risk reserve equal to 10% of the total income minus various expenses, excluding the risk reserve expense.

Article 3.-The State Bank’s risk reserve is set up, accounted and managed concentratedly at the State Bank (the Accountancy and Finance Department).

Article 4.-The State Bank’s risk reserve, if not used up in a year, shall be carried forward to the following year for further use.

In cases where the risk reserve is not enough to offset losses according to the provisions of this Regulation, the State Bank and the Ministry of Finance shall jointly submit to the Prime Minister for handling the deficit.

Article 5.-The competence for handling losses with the risk reserve:

The State Bank Governor shall decide on the handling of losses of the State Bank.

Article 6.-The principle of loss handling with the risk reserve:

1. The State Bank Governor shall consider and handle losses with enough lawful evidences at the handling time.

2. For losses handled with the State Bank’s risk reserve, units that let such losses occur must devise measures for continued recovery thereof as for ordinary collectible amounts, which are not yet handled with the risk reserve, except for debts written off for credit institutions under the Prime Minister’s decisions.

3. All money amounts recovered from losses, which have already been handled with the risk reserve, must be remitted to the State Bank (the Accountancy and Finance Department) for being accounted into the State Bank’s income.

II. SPECIFIC PROVISIONS

Article 7.-Annually, the Accountancy and Finance Department shall calculate, set up and account the risk reserve into the account "Expense for setting up the risk reserve" to create sources for handling losses as prescribed.

Article 8.-The risk reserve shall be used to offset losses in the following cases:

1. Losses incurred before the State Bank Law took effect, including:

- Debts written off for enterprises which have borrowed loans from the State Bank, and already been dissolved, bankrupt or insolvent.

- Foreign loans repaid under guarantees or re-guarantees on behalf of the borrowing credit institutions and enterprises, which have been dissolved, bankrupt or insolvent.

- Collectible amounts from clients (organizations and individuals) which have been embezzled, appropriated and cannot be recovered as shown by evidences.

2. Debt amounts written off under the Prime Minister’s decisions without source from the Government as compensations to the State Bank.

3. Debts written off for credit institutions which have borrowed loans from the State Bank and have already been bankrupt, dissolved or insolvent.

4. Losses incurred due to objective causes in performance of the payment operation.

5. Losses due to objective reasons in the management of foreign exchange reserve fund, gold reserve, foreign-currency deposits at foreign banks due to such force majeure circumstances as:

- The country where the State Bank makes deposits is in a war, terrorized, bankrupt or hit by natural disasters.

6. Losses due to the following objective causes in the cash check and treasure operation:

- Transportation of special goods which encounters en-route incidents such as natural disasters or enemy sabotage.

- Money store is sabotaged or hit by natural disasters.

7. Other irrecoverable losses, such as: amounts to be compensated by individuals and organizations under conclusions of the legal agencies or the State Bank Governor, but unlikely to be fully recovered even after the compensations are made by such individuals and organizations.

8. Other cases under the State Bank Governor’s decisions.

Article 9.-The Loss Handling Council of the State Bank shall be composed of the following persons:

- One Deputy Governor of the State Bank - the Council Chairman

The Council’s members:

- The director of the Accountancy and Finance Department - standing member;

- The director of the Credit Department;

- The director of the General Control Department;

- The chief inspector of the State Bank;

- The director of the Department for Issuance and Treasure Operations;

- The director of the Legal Department;

- The director of the Department for Organization, Personnel and Training;

- The heads of the units where losses are incurred.

Article 10.-Tasks of the Loss Handling Council

Right after the occurrence of losses which need to be handled with the risk reserve, on the basis of reports and proposals of the heads of the units where such losses are incurred, the Loss Handling Council shall devise a plan for analyzing and assessing debts and losses.

- It shall submit cases involving debts left unsettled for a long time as specified in Clauses 1, 2 and 3, Article 8 of this Regulation to the Governor for consideration before sending them to the Ministry of Finance for the latter’s opinions and submitting to the Prime Minister;

- It shall submit cases specified in Clauses 4, 5, 6, 7 and 8, Article 8 of this Regulation to the Governor for handling;

- It shall inspect the handling of losses after handling decisions are issued by the competent authorities.

Article 11.-Legal dossiers to serve as basis for the loss handling

Legal dossiers to serve as basis for the loss handling at the State Bank must ensure their legality and consist of:

1. Dossiers for cases specified in Clauses 1, 2 and 3, Article 8 of this Regulation must consist of:

- The Prime Minister’s decision on debt write-off for each specific debt and debtor;

- Copies of documents on handling of debts and plan for division of assets of bankrupt or dissolved credit institutions;

- Copies of the bankruptcy-declaration or dissolution decision of the competent authority according to the provisions of law;

- Summary of written-off debts, enclosed with dossiers thereof and the competent functional agency’s certification of objective causes for failure to repay debts;

- Written report and record of the Loss Handling Council.

2. Dossiers for cases specified in Clauses 4, 5, 6, 7 and 8, Article 8 of this Regulation must consist of:

- Report and proposal(s) of the unit where losses are incurred;

- Dossiers and documents related to the losses due to objective causes;

- The competent authority’s decision claiming compensation liabilities to individuals and/or collectives, enclosed with the list of such individuals and/or collectives and compensation amount to be made by each of them;

- Written report and record of the Loss Handling Council.

Article 12.-Loss handling order

All loss-handling cases shall be carried out at the State Bank (the headquarters) according to the following order:

- The heads of the units where losses are incurred shall coordinate with the Trade Union organizations’ chairmen and direct their attached sections such as: heads of accountancy and settlement sections, chief controller or controllers (where there is no chief controller), heads of administrative organization sections, heads of sections or sections where losses are incurred, to explain, examine, clarify and make written records on reported losses together with their dossiers, and propose the Council to handle losses.

- The Loss Handling Council shall consider, make proposals and submit the cases to the Governor for decision.

III. ORGANIZATION OF IMPLEMENTATION

Article 13.-Members of the Loss Handling Council of the State Bank shall be responsible before the State Bank Governor for organization of the loss handling in strict compliance with the provisions of this Regulation.

Article 14.-The accounting of the loss handling shall be carried out under guidance of the director of the Accountancy and Finance Department and the risk reserve shall be used to handle losses under decisions of the State Bank Governor.

Article 15.-The amendments and supplements to the provisions of this Regulation shall be decided by the State Bank Governor.