Decision No. 254/QD-TTg dated March 01, 2012 of the Prime Minister on approving the Scheme on "Restructuring the credit institutions system in the 2011-2015 period"

DECISION

ON APPROVING THE SCHEME ON "RESTRUCTURING THE CREDIT INSTITUTIONS SYSTEM IN THE 2011-2015 PERIOD"

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PRIME MINISTER

- Pursuant to the Law on Government organization dated in 25 December 2001;

- Pursuant to the Law on State Bank dated 16 June 2010;

- Pursuant to the Law on Credit Institutions dated 16 June 2010;

- Pursuant to the Conclusion No. 10-KL/TW dated 18 October 2011 at the third Conference of the 11^thCentral Committee on the socio-economic situation, finance - state budget in the 2006-2010 period and in 2011; plan on the development of socio-economy, finance-state budget in the period 2011-2015 and in 2012;

- Pursuant to the Resolution No.01/NQ-CP dated 03 January 2012 of the Government on key solutions for implementation of the plan on socio-economic development and state budget estimates in 2012;

Upon the proposal of the Governor of the State Bank of Vietnam,

DECIDES:

Article 1.To approve the Scheme of "Restructuring the credit institutions system in the 2011-2015 period" issued in conjunction with this Decision.

Article 2.Implementation organization

1. Responsibilities of the State Bank of Vietnam

a. To preside over, coordinate with concerned Ministries, authorities, agencies and People s Committee of provinces, cities under the central Government s management in organizing the implementation of this Scheme;

b. To assess and determine the real situation of operation, asset quality and bad debts of credit institutions;

c. To preside over, coordinate with concerned Ministries, authorities and agencies in drawing up and submitting a Scheme on "Strategy for banking development to 2020", a Scheme on "Anti-dollarization in the economy";

d. To preside over, coordinate with concerned Ministries, authorities and agencies in setting up a Decision providing for the capital contribution, share purchase by the State Bank of Vietnam at credit institutions in accordance with provisions in Paragraph 3 Article 149 of the Law on Credit institutions for submission to the Prime Minister for issuance before 01 July 2012;

dd. To provide direction, guidance, supervision to credit institutions in setting up and implementing a Plan on the restructuring of each credit institution in line with solutions mentioned in the Scheme attached to this Decision;

e. To intensify the state management activity and inspection, supervision to the monetary market and operation of credit institutions;

g. To preside over, coordinate with the Ministry of Information and Communication, authorities, agencies, People s Committee of provinces, cities under the central Government s management and communication agencies shall disseminate and propagandise guidelines, policies on monetary and banking activities and restructure credit institutions so as to stabilize the mind, to create a consensus in the society and avoid adverse impact on the banking system and financial market;

h. To provide guidance and speed of Ministries, authorities, agencies in the implementation of the Scheme; on a periodical basis, to report to the Prime Minister before 01 July and 31 December of every year on the progress, results, difficulties and to recommend solutions as to the implementation of the Scheme; to timely report to the Prime Minister for settlement of any arising problem that is beyond the scope of authority.

2. Responsibilities of the Ministry of Finance

a. To coordinate with the State Bank of Vietnam in drawing up and submission of a Plan on the settlement of bad debts of credit institutions and increase of state-owned commercial banks’ charter capital until 2015 to the Prime Minister for approval;

b. To preside over and coordinate with the State Bank of Vietnam in drawing up and submission to competent agencies for issuing policies, regulations on reduction and exemption of taxes and charges relating to the sale and purchase of bad debts and loan collaterals of the restructured credit institutions; reduction and exemption of corporate income tax for credit institutions after their acquisition, merger, integration; reasonable reduction, exemption of taxes, charges to People’s credit funds and micro-financial institutions.

3. Responsibilities of related Ministries, agencies, organizations and localities

a. To implement the Scheme within the scope of functions, duties in accordance with provisions of applicable laws;

b. The Ministry of Information and Communication, related Ministries, agencies, organizations and People’s Committee of provinces, cities under the central Government’s management are responsible for closely coordinating with the State Bank of Vietnam in informing, disseminating guidelines, policies on monetary and banking activities and restructuring the credit institutions system;

c. The Ministry of Public Security, related Ministries, agencies, organizations and People’s Committee of provinces, cities under the central Government’s management shall closely coordinate with the State Bank of Vietnam in detecting and dealing with acts of violation in monetary and banking sector;

d. To provide support to credit institutions in completing legal profiles in respect of loan collaterals so that the credit institutions are able to sell and promptly recover their capital;

dd. Economic groups, state-owned corporations owning credit institutions shall be responsible for restructuring and handling any related consequence of the credit institutions, at the same time, proceeding with appropriate schedule for withdrawing capital from credit institutions.

4. Responsibilities of credit institutions:

a. To prepare and implement the plan on restructuring of the credit institutions;

b. To ensure the stable operation and security of assets of the State, legal rights and interests of the people during the restructuring process;

c. To seriously observe provisions of laws and direction of the Government, State Bank of Vietnam on the restructuring of credit institutions;

d. To fully, timely and accurately report to the State Bank of Vietnam on the results, any difficulty and recommendation (if any) on the performance of restructuring by the credit institutions.

Article 3.This Decision shall come into effect from its signing date.

Article 4. Governor of the State Bank of Vietnam, Ministers, Head of Ministerial level agencies, Head of Governmental agencies, Chairman of People’s Committee of provinces, cities under the central Government’s management and Chairman of Board of Directors, General Director of credit institutions shall be responsible for the implementation of this Decision.

SCHEME

On the restructuring of credit institutions in the 2011-2015¹period

(Issued in conjunction with the Decision No. 254/QD-TTg dated 01 March 2012

of the Prime Minister)

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A. OBJECTIVE OF, OPINIONS ON THE RESTRUCTURING OF CREDIT INSTITUTIONS

I. OBJECTIVE OF THE RESTRUCTURING OF CREDIT INSTITUTIONS

Objective of the basic, absolute and comprehensive restructuring of the credit institutions system is that by 2020, the system of credit institutions are developed for multi-purpose towards the modernity, prudence, efficiency and sustainability with a diversified structure in terms of ownership, scale, type with better competitiveness and to be based on the advanced banking administration technology in conformity with international practices and standards on banking activity for the purpose of better satisfying the demand for financial and banking services of the economy.

In the 2011-2015 period, focus shall be given to making the financial condition healthy and fortifying the operation capacity of the credit institutions; improving prudential level and operation efficiency of the credit institutions; improving the order, rules and principles of market in banking activity. It is targeted that by late 2015, there shall be at least one or two commercial banks whose scale and level are equivalent to those of regional banks.

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(1): Vietnam Bank for Social Policies and Bank for Investment and Development of Vietnam are excluded

II. OPINIONS ON THE RESTRUCTURING OF CREDIT INSTITUTIONS

Firstly, restructuring the system of credit institutions and each credit institution is a regular and permanent process in order to make good difficulties, shortcomings and to be proactive in coping with challenges so that the credit institutions shall continuously develop on a prudent, efficient, firm manner and better satisfy the requirement of socio-economic development in the new period.

Secondly, the system of credit institutions shall be strengthened and developed for being diversified in terms of ownership, scale and be conformable to the features and development level of Vietnam’s economy in the current period. The system of credit institutions shall include big banks, which have healthy operation, function as backbones in the whole system and are competitive in the regional scale. At the same time, the system of credit institutions shall also include small and medium banks, non-banking credit institutions so as to better meet the demand for banking services of every class in the society. The regulating leading role of Vietnamese credit institutions in the market shall be heightened, especially it should be ensured that 100% State-owned banks and banks where the State holds controlling share (hereinafter collectively referred to as state-owned commercial banks) shall be actually the key force of the credit institutions system, and be competitive in both local and international markets.

Thirdly, the credit institutions are encouraged to perform the merger, integration and acquisition on a voluntary basis, providing that benefits of the depositors and rights, obligations of involved parties are secured in accordance with provisions of applicable laws. For the safety and stability of the system, some credit institutions with high risk level shall be imposed with special actions in accordance with provisions of applicable laws.

Fourthly, financial conditions, operation and management of credit institutions shall be comprehensively restructured with appropriate forms, measures and schedules. Forms and measures of restructuring credit institutions shall be applied in conformity with specific features of each credit institution.

Fifthly, it is required to avoid any collapse and insecure circumstance in banking activity that is out of control of the State. The reorganization, reinforcement and restructuring of credit institutions shall be performed in principle of minimizing losses and costs for the state budget in handling problems incurred by the credit institutions system.

B. ORIENTATIONS AND SOLUTIONS FOR RESTRUCTURING CREDIT INSTITUTIONS

I. ORIENTATIONS AND SOLUTIONS FOR RESTRUCTURING STATE-OWNED COMMERCIAL BANKS

1. Orientations

The governing role and position of the state-owned commercial banks shall be heightened; ensuring that the state-owned commercial banks shall be the key force of the credit institutions system with large scale, safe and efficient operation, advanced management capacity and good competitiveness in both local and international level. It is targeted that by late 2015, there shall be at least one or two state-owned commercial banks to reach regional level in terms of scale, management, technology and competitiveness.

2. Solutions

State-owned commercial banks play an important role in the restructuring of credit institutions. The restructuring shall be performed on a comprehensive basis through the solutions as mentioned in Paragraph 5 Section II Part B and following specific solutions:

a. Continuing to strengthen the equitization of state-owned commercial banks, in which, Vietnam Bank for Agriculture and Rural Development shall be equitized at a reasonable time and ensuring that the State shall hold a controlling share at state-owned commercial banks after their equitization.

b. Quickly increasing financial scale and capacity by:

- Increasing capital to ensure the adequate level of owner capital in accordance with capital adequacy standard of Basel II up to 2015 from issuing additional shares and from Government fund;

- Acquisition, merger of credit institutions;

- Expanding sources of mobilized funds.

c) Improving assets quality, controlling credit quality and reducing bad debts. Focus shall be given to settlement of bad debts of state-owned commercial banks to promptly make clear the balance sheet of the state-owned commercial banks; it is targeted that the ratio of bad debts of state-owned commercial banks to be less than 3% in accordance with debt classification standards and accounting standards of Vietnam.

d) Renovating the bank management system in accordance with the international practices, standards, especially enhancing the modernization of risk management system, improving the efficiency of internal control, audit system so that the state-owned commercial banks can effectively control by themselves different types of risks in activity, first of which are credit quality and liquidity

dd) Modernizing technology systems of state-owned commercial banks to facilitate development of new banking services and improving banking services, meanwhile effectively supporting bank management.

e) Continuing to widen the network of branches, points of sale across the country, in which priority should be given to the rural area; Being active in opening branches, joining the international and regional financial market; strongly developing electronic distribution channels to increase the customers’ access to services.

g) Reviewing, reinforcing major business activities of state-owned commercial banks, decreasing business activities that are ineffective and highly risky; Absolutely restructuring subsidiaries of state-owned commercial banks; Gradually withdrawing investment capital in non-financial or highly risky industries or sectors. New business plans shall be made, under which state-owned commercial banks must take the lead in the investment in key industries, sectors of the economy, such as developing economic

infrastructure, promotion of export, agriculture, rural area, manufacture industry, small and medium enterprises in order to contribute to the restructuring of the economy.

h) Diversifying modes of capital mobilization; controlling credit growth in conformity with the capital sources in terms of scale and term structure; gradually reducing the ratio of outstanding credits over the mobilized capital to 90% or lower until 2015.

i) Quickly developing the management, executive and operational staff force with high quality, meanwhile having appropriate policy to attract, use and efficiently manage staffs; enhancing the training and fostering of staffs in leadership, professional level and improving the sense of responsibility, professional ethics of the staff.

II. ORIENTATIONS AND SOLUTIONS FOR RESTRUCTURING JOINT STOCK COMMERCIAL BANKS, FINANCE COMPANIES, FINANCE LEASING COMPANIES OF VIETNAM

1. Orientations

Joint stock commercial banks, finance companies, finance leasing companies of Vietnam (herein after collectively referred to as credit institutions section II Part B) shall be reorganized and re-arranged to ensure the operation to be safe, healthy, effective, lawful and together with the state-owned commercial banks to keep credit institutions stable and firmly developed. The credit institutions shall be required to compete healthily and operate on a public and transparent basis, meanwhile meeting all standards on management and banking operation security according to regulations of applicable laws. Healthy credit institutions shall be facilitated to develop, meanwhile weak ones shall be resolutely handled. Control scale and growth rate and scope of business operation of CIs in correspondence with financial condition and management capacity.

Based on the assessment of the real financial condition, operation and management, especially assets quality, liabilities, owner capital and prudential level of CIs, they shall be classified into 3 groups (healthy CIs, temporarily illiquid ICs, weak CIs) for appropriate settlement.

CIs need to have restructuring plan in line with their risk level, weakness and specific condition. Contents of restructuring weak CIs shall consist of:

(1) Making the financial condition healthy;

(2) Restructuring the operation;

(3) Restructuring the management system;

(4) Restructuring the legal entity and ownership.

2. Resolutions for restructuring the healthy CIs

- Cis shall prepare and implement a plan on reinforcing, correcting their operation by themselves and improving their competitive capacity according to the resolutions mentioned in paragraph 5, Section II, Part B to quickly develop their scale, operation, finance and to have advanced management level and technology.

- Encouraging and facilitating CIs to merge, integrate, acquire on a voluntary basis to increase the operation scale and competitive capacity.

- Expanding the operation scale and scope; to be active in joining regional and international financial markets.

- Taking part in dealing with weak and illiquid CIs: giving loans to support the liquidity of weak and temporary illiquid CIs; acquiring, merging weak CIs.

3. Resolutions to restructure the CIs in temporary lack of liquidity

- The State Bank shall refinance the CIs that are in temporary lack of liquidity to ensure liquidity of CIs and possibility to recover their normal operation.

- Cis shall make and implement a plan to recover their liquidity; they should limit their credit growth, be active in mobilizing for payment of debt to the State Bank of Vietnam and improvement of liquidity.

- The State Bank of Vietnam shall closely supervise the financial situation and operation of the refinanced CIs.

- The CIs are recommended to reorganize, reinforce their financial condition, operation and management according to the resolutions as specified in paragraph 5, Section II, Part B to ensure the business security and efficiency, including settlement of bad debts, improvement of solvency, decrease of liabilities and capital use ratio.

- CIs of this group are encouraged and facilitated to merge, integrate with each other and merge, integrate with the healthy ones.

- Depending on nature and level of risk, the State Bank of Vietnam shall apply the following measures:

+ Restricting the CIs to expand the scope, scale and area of operation.

+ Forcing the CIs to perform one or several prudential ratios higher than the general ones stipulated.

4. Resolutions for restructuring weak CIs

- Ensuring the solvency of weak CIs

Focusing on giving support to liquidity to ensure the solvency of the weak CIs through the following measures:

+ The State Bank of Vietnam shall refinance to the CIs that are in lack of liquidity based on the fair credit profile with the maximum level to be equal to charter capital of the refinanced CIs.

+ The weak CIs shall be subject to a special control, on a close and comprehensive basis, of the State Bank of Vietnam in terms of management, finance and operation.

+ The healthy state-owned commercial banks and joint stock commercial banks shall acquired assets and debts with good quality from the CIs lacking of liquidity for settlement of the mature debt obligations.

+ CIs shall be put under special control when necessary

+ Restricting CIs to distribute dividend, profit; Closely monitoring the transfer of shares, contributed capital and assets of the CIs; reducing outstanding credits and restricting the expansion of operation scale.

+ Suspending, temporarily suspending, discharge personnel in position of managers, executive officers of the CIs.

+ The State Bank of Vietnam and other credit institutions shall give special loans to the weak CIs in accordance with applicable laws.

- Merger, integration, acquisition of weak CIs

After being imposed with measures for ensuring the solvency, weak CIs shall be dealt with as follows:

+ Weak CIs shall be merged, integrated, acquired on a voluntary basis. If it cannot be settled voluntarily, the State Bank of Vietnam shall apply measures to merge, integrate and acquire the weak CIs on a compulsory basis.

+ The State Bank of Vietnam shall ask the weak CIs to assign their charter capital or share capital; major shareholders, controlling shareholders of the weak CIs shall also be required to assign their shares.

+ The State Bank of Vietnam shall directly acquire the charter capital or shares of the weak CIs to reorganize, reinforce and gradually make the CIs healthy, after that to merge, integrate them with other credit institutions or resell to the qualified investors.

+ Considering and allowing foreign credit institutions to acquire, merge the weak CIs of Vietnam and increase the limit of share ownership of foreign credit institutions at the restructured joint stock commercial banks.

5. Restructuring the financial condition, operation and management of CIs

The weak CIs and other CIs must implement some or all of the following measures to make their financial condition healthy, to restructure their operation and management system.

a. Restructuring the financial condition

- Settling bad debts with following measures:

+ Re-evaluating the assets quality, recoverability and value of bad debts.

+ Selling bad debt secured by the assets to the Debt and Assets Trading Corporation (DATC) of the Ministry of Finance.

+ Selling bad debts to the enterprises which are not credit institutions, private debt trading companies and debt trading companies of commercial banks;

+ Writing off debts by source of provisioning against risk; disposing secured assets for debt collection;

+ Transferring debts to contributed capital, shares of the borrowing enterprise;

+ Bad debts that arise without secured assets and are irrecoverable due to providing loans in accordance with guidelines or policy of the Government shall be written off by state budget;

+ For some types of construction works, real estates used as mortgage for bank loan are being finished or have already been finished but have not been sold yet, the Government shall consider to acquire those real estates for the purpose of social security and activities of state agencies.

- Increasing scale and quality of owner capital of CIs: Ensuring level of owner capital not to be lower than the level required by law and fully satisfying the minimum capital adequacy ratios in accordance with provisions of applicable laws by:

+ Increasing the charter capital: (i) issuing additional shares, increasing contributed capital from the current shareholders, capital contributors and local and foreign investors; (ii) transforming debts to contributed capital, shares of the restructured CIs;

+ CIs shall be required to have sufficient owner capital for making up credit, market and operational risks in line with principles of Basel II up to the end of 2015.

b. Restructuring the operation

Together with making clear and restructuring the balance sheet in a healthy direction, the CIs shall implement measures of reorganizing, reinforcing their operation:

- Focus on reinforcing, developing major business activities and removing risky, less effective business areas.

- Concentrating bank credits on industries, sectors of three breakthrough phases in the socio-economic development strategy for period 2011-2020 and giving credit capital to production, agriculture, rural development, export, auxiliary industries, manufacture, small and medium enterprises as a priority.

- Gradually shifting the business model of commercial banks towards reducing the dependence on credit activities and raising income sources from non-credit activities.

- Diversifying banking services, in which focus should be given to improvement of traditional banking services and speeding up development of modern banking services (payment service, foreign exchanges, investments, assets management, risk management for customers etc.,).

- Safely, effectively speeding up development of payment services, especially payment card products, services basing on promotion of technology, payment system modernization and increasing the utilities of payment cards, points of sales.

- Extending the scope and scale of banking operation in rural areas; developing branch network, points of sales in rural, highland and remote areas; removing ineffective branches, points of sales;

- Improving the stable and sustainable solvency of credit institutions: Increasing the stability of funds towards increasing proportion of long-term capital sources; improving the balance and reasonability in terms of term and currency between funds and use of funds; Gradually reducing the ratio of outstanding credits as against the mobilized funds and the average rate of all system shall be 85% or lower by the end of 2015.

c) Restructuring the management system

The banking management system shall be reinforced and renovated to be more compatible to the international standards, practices, including following solutions:

- Improving the transparency of banking operations through applying new mechanisms on information announcement by credit institutions.

- Posting shares of joint stock commercial banks in the securities market.

- Improving publicity of the joint stock commercial banks and raising the number of investors, shareholders during the courses of charter capital increase.

- The economic groups, state-owned corporations that are shareholders or contribute capital in credit institutions should have an appropriate plan on withdrawing investment capital and terminating business in banking sector.

- Restricting the influence and controlling of major shareholders at joint stock commercial banks; Resolutely dealing with major shareholders, related person who commits violation of laws on limit of share holding at joint stock commercial banks and credit institutions with cross capital holding. Shareholders, investors, credit institutions violating regulations on capital contribution, purchase and holding of shares must be dealt with according to provisions of applicable laws. In the event that the credit institutions acquire shares, contributed capital from the credit institutions restructured under nomination of the State Bank of Vietnam, which results in the excess of the provided limit, the credit institutions shall be handled within a maximum period of 5 years from the occurrence.

- Heightening conditions, standards on management capacity, working experience and qualifications for the titles of leaders, key managers of credit institutions (Chairman of Board of Directors, Chairman of Board of Members, General Director/Director, Member of the Board of Directors/Board of Members etc.,)

- Making new business plans, strategies.

- Implementing the healthy internal business processes, policies; effectively applying advanced controlling, management modes in conformity with the international practices, standards and regulations of applicable laws.

- Developing risk management systems in line with principles, standards of Basel Committee, in which focus should be given to management systems of liquidity risk, credit risk, market risk (price, interest rate, exchange rate) and operational risk; developing internal credit rating systems; classifying debts, making provision against risks in compliance with international practices and level of credit risk; improving the credit assessment, appraisal capacity and credit risk management and supervision capacity of credit institutions.

- Renovating and improving the effectiveness of internal control, audit systems.

- Restructuring, rearranging divisions functioning in business, administration, management; reasonably arranging personnel and developing bank management and business staffs with high qualification, good sense of responsibility and professional ethics.

- Modernizing the technology system; developing internal management information, IT infrastructure and internal payment system of the commercial banks; upgrade core bank system in compliance with the scale, degree of operation flexibility and management requirement of credit institution.

- Finance companies, finance leasing companies which loss for a long time, in danger of out of security, seriously violate regulations on banking security or unable to recover normal operation after applying recovery, correction measures, shall be dissolved or acquired, merged compulsorily as regulated by law.

+ For finance companies, finance leasing companies under the direct management of economic groups, state-owned corporations and non-banking enterprises, their owner shall be responsible for restructuring including dissolving, withdrawing operation license upon plan accepted by the State Bank of Vietnam.

+ For finance companies, finance leasing companies under the direct management commercial banks shall be restructured together with the parent bank, including being dissolved, merged (when necessary) to ensure the safe, effective development of the parent bank.

III. ORIENTATIONS AND SOLUTIONS FOR REINFORCING AND DEVELOPING PEOPLE’S CREDIT FUNDS AND MICRO FINANCIAL INSTITUTIONS

1. Orientations

- Continuing to complete the existing model of 2-level People’s credit fund together with reinforcing regulations on operation security and facilitating the development of the People’s credit funds. The reorganization, reinforcement and improvement of security level, efficiency of the existing People’s credit funds in parallel with continuing to firmly expand new People’s credit funds in rural areas; Ensuring the People’s credit funds to comply with provisions of Law on Credit institutions and Law on Cooperative; Respecting the voluntary, self-control, self-responsible, mutual benefit principles, cooperating and developing community towards the major objective of mutual assistance among members of the People’s credit funds for the purpose of hunger elimination and poverty reduction, agricultural, rural development and restriction of usury.

- Building and developing a safe and sustainable micro financial system, aiming at serving poor and low income people, super small enterprises, small enterprises, making contribution to implementation of guidelines of the Party and State on ensuring social security and sustainable poverty reduction.

2. Resolutions:

a) For the central People’s credit fund:

- Transforming the central People’s credit funds into operating under the model of cooperative banks; Developing central People’s credit funds with strong scale, financial capacity, management and technology level to actually play the role of as a head in harmonizing, balancing capital in the system of People’s credit funds and to be able to effectively take care of, give support to the local People’s credit fund in professional knowledge, capital and finance.

- Continuing to expand the branch network of central People’s credit funds to the regions where area are many local People’s credit funds to improve the access, to support and take care of local People’s credit funds.

- Renovating and completing the model of capital harmonization in the system of People’s credit funds.

- Central People’s credit funds shall concentrate their capital sources for providing loans to local People’s credit funds.

b) For local People’s credit fund:

- To research the restructuring of local People’s credit funds under the model that includes: public People’s credit funds and professional People’s credit funds to enhance the systematic link, self-control, self-responsibility in doing business in compliance with laws.

- For the existing local People’s credit funds that are in normal operation: It is necessary to continue developing in scale and improving quality and efficiency of operation, in which more attention should be paid to credit quality, management capacity, liquidity and compliance with laws.

- For the weak local People’s credit funds: to take following actions for reinforcement, reorganization and settlement:

+ The State Bank of Vietnam, Central People’s credit funds, Fund for ensuring the system security shall provide loans to local People’s credit funds to deal with difficulties in liquidity:

+ Settling bad debts;

+ Absolutely dealing with weaknesses, violations of laws;

+ Any weak local People’s credit funds facing with loss, insolvency in a long time and being unable to operate safely, effectively after application of measures for reorganization, reinforcement shall be imposed with such measures as withdrawal of license, dissolution, assets liquidation and their depositors shall be paid by Deposit Insurance of Vietnam in accordance with the current provisions of applicable laws.

- Developing banking services of the local People’s credit funds in conformity with their management capacity; Focus should be paid to providing loans to members of local People’s credit funds and poor people. Expansion of credit should be performed in parallel with controlling credit quality. Modes of capital mobilization of the local People’s credit funds shall be diversified from both inside and outside the local area, particularly from small deposits.

- Gradually improving the financial capacity of local People’s credit fund in the direction of increasing in charter capital, attracting more new members on the basis of combining the expansion of capital sources and giving supportive loans to the members.

- Improving the management capacity of the local People’s credit funds, especially the internal control system, standardizing the operational and accounting processes; Ensuring the controllers, managers of local People’s credit funds to meet standards, conditions on capacity, qualification as required by laws; Restricting the governing in charter capital and operation of the local People’s credit fund by a minority of members.

- The State Bank of Vietnam shall co-ordinate with the Party executive committee, local authority of all levels in: (i) Strengthening the management, inspection, supervision on the local People’s credit funds and handling any shortcoming, weakness of the local People’s credit funds, especially in liquidation of the dissolved local People’s credit fund; (ii) Continuing to expand local People’s credit funds in the regions that are in need on principle of safety, effectiveness, in which priority is given to establishment of People’s credit fund in the areas which have not had or are in lack of local People’s credit fund. (iii) Strengthening the propaganda activity on guidelines, policies and laws of the Party and the State on the People’s credit funds;

- Enhancing the connection and mutual support among local People’s credit funds on the basis of agreement on goals, principles of operation and benefits; Completing the organization and operation model of the connected entities; Reviewing, summarizing the trial development of Funds for systematic security in some localities so as to perfect the model of Funds for systematic security. Capital sources of the Fund for systematic security are mainly contributed by the People’s credit funds; improving the scale of the Fund for systematic security to be able to support to the settlement of the temporary difficulties in liquidity and financial condition of the local People’s credit funds.

- Establishing an audit body for local People’s credit funds

- Operation area of the local People’s credit funds shall continue to be limited within the commune, ward, town where the head quarter of the local People’s credit fund is located.

- Gradually upgrading, completing facilities, equipment and IT system of the local People’s credit funds; ensuring that 100% of the local People’s credit funds have facilities that satisfy requirements of prudential operation and to be installed with internet service and fax.

- Focusing on improving control, management qualification, practice of personnel of the local People’s credit funds; Drawing up training programs up to the year 2015 for officers of local People’s credit funds.

- The State shall continue to give incentives to People’s credit funds: reduction and exemption of corporate income tax; giving support in capital from the state budget or from foreign loans, aids; rationally arranging premise and location for operation. The State Bank of Vietnam shall be the head in coordinating with the Ministries, industries and localities to mobilize, attract resources from local and foreign organizations, individuals to give support to People’s credit funds.

- Reviewing, completing policies on management, regulations on prudential operation, management and issuance, revocation of license, dissolution, liquidation of the People’s credit funds. Amending regulations on the minimum level of charter capital to be more corresponding to the actual operation and requirements of prudential operation of local People’s credit funds.

- To summarize 10 years of implementation of the Directive No. 57/CT-TW dated 10 October 2000 of the Politic Bureau on reinforcement, completion and development of the People’s credit funds system and the Decision No. 135/2000/QD-TTg dated 28 November 2000 of the Prime Minister on approving scheme on reinforcement, completion and development of the People’s credit funds.

c) Solution for development of micro financial institutions

To implement the Scheme on “Building and developing the micro financial system in Vietnam to 2020” as approved by the Prime Minister at the Decision No. 2195/QG-TTg dated 6 December 2011.

IV. ORIENTATIONS AND RESOLUTIONS FOR RESTRUCTURING FOREIGN CREDIT INSTITUTIONS

1. Orientations

Foreign credit institutions shall be facilitated in doing business in Vietnam and in enjoying equal competition with Vietnam credit institutions and encouraged to closely coordinate in business with Vietnamese credit institutions, especially in settlement of difficulties of Vietnamese credit institutions; Enhancing the co-operation, association between foreign credit institutions and Vietnamese credit institutions in developing products, renovating the management and modernizing banking technology.

2. Resolutions

Followings are several major resolutions for restructuring foreign credit institutions:

- Merger, integration, acquisition among credit institutions and between foreign and Vietnamese credit institutions shall be performed in voluntary principle and in compliance with the regulation of current law; encouraging the foreign credit institutions to contribute capital, buy shares, acquire, merge and integrate with the weak domestic credit institutions which must be restructured.

- Heightening responsibility of overseas parent credit institutions in ensuring the safe operation of its subsidiaries in Vietnam; the overseas parent credit institutions shall be responsible for ensuring the solvency and fulfilling the financial obligations of their subsidiaries in Vietnam.

- Considering and increasing the limit of share holding by foreign credit institutions at weak commercial banks which must be restructured.

- Closely controlling and supervising the operation of foreign credit institutions in international transactions, supply of new banking services in Vietnam to avoid the manipulation of foreign credit institutions and protecting interests of the consumers.

V. SOLUTIONS FOR SUPPORTING THE RESTRUCTURING OF CREDIT INSTITUTIONS

- Making and submitting to the Government for approval to Banking Development Strategy up to 2020.

- Renovating and completing the system of legal documents on banking activities, including:

+ Issuing standards on capital prudence in conformity with the Basel II;

+ Renovating, completing regulations on prudential activities of credit institutions, especially the solvency ratios to restrict and effectively control risks in activities of credit institutions;

+ Amending, supplementing regulations on credit extension, debt classification, making and use of provision against risk towards stricter and more conformable with the international practices;

+ Issuing regulations on information announcement by credit institutions in line with the actual condition of Vietnam and with principles of Basel Committee;

+ Completing documents guiding the implementation of the Law on Deposit Insurance and Law on anti-money laundering;

+ Completing regulations on issuance of establishment license to credit institutions, opening and terminating operation of branches, point of sales of credit institutions;

+ Issuing principles, standards on risk management applicable to credit institutions;

+ Amending, supplementing the accounting system of credit institutions to be more conformable to the international accounting standards;

+ Completing policies and regulations on the payment via banks and cash payment; implementing the Scheme on promotion of non-cash payment for the 2011-2015 period under the Decision No. 2459/QD-TTg dated 27 December 2011 of the Prime Minister.

- Continuing to renovate and improve the efficiency of banking inspection, supervision: Completing the model of organization and operation of the Banking Inspection and Supervision Agency; performing the inspection and supervision on the risk basis and general supervision over the credit institutions; developing the supervision system in accordance with CAMELS standards, the risk measurement system for credit institutions and early warning in the banking operation; Focusing on improvement of quality, qualification of the banking inspectors and supervisors.

- The State Bank of Vietnam shall facilitate credit institutions to merge, integrate, acquire by seeking, introducing counterpart, supplying information to the credit institutions in need of participation, in need of technical, legal and procedure support.

- Managing, on a proactive, flexible, effective manner, instruments of monetary policies, exchange rates, interest rates in the market principles to ensure the banking system security, minimizing risks to the economy, meanwhile to help control inflation, stabilize the macro economy and promote sustainable economic growth.

- Efficiently organizing and managing the gold market and monetary market, at the same time facilitating the secondary monetary market, derivative market to develop in a healthy and safe manner; Drawing up and submitting to the Government for approval to a Scheme on anti-dollarization in the economy.

- Continuing to modernize and comprehensively develop the banking technology system, especially the management information system of the State Bank of Vietnam and the bank payment system in conformity with basic principles of the major payment systems of the International Payment Bank.

- The State Bank of Vietnam shall preside over and co-ordinate with the Ministries, sectors and localities to promote the activities of information, propaganda about guidelines, policies of the Party and State on restructuring the system of credit institutions to make the mind stable and create the social consensus.

- Strictly dealing with violations in administration, management and act of violation of credit institutions.

C. IMPLEMENTATION SCHEDULE

I. In 2011-2012:

- Assessing, specifying the actual operation condition, assets quality and bad debt of credit institutions;

- Assessing and classifying credit institutions;

- Drawing up and implementing a plan on the restructuring of weak credit institutions and other credit institutions;

- Focusing on giving support to liquidity to ensure the solvency of credit institutions;

- Fundamentally completing the initial issue of stocks to the public by State-owned commercial banks (except for Vietnam Bank for Agriculture and Rural Development);

- Proceeding with merger, integration and acquisition of credit institutions;

- Raising charter capital and settling bad debts of credit institutions;

- Restructuring the operation and management system.

Expected result: Solvency of the entire system credit institutions are ensured, at the same time, the condition of weak credit institutions can be specified and controlled, which will be the basis for application of measures of restructuring in later period.

II. In 2013:

- Completing the amendment of, supplementation to regulations on banking operation security;

- Continuing to make the financial condition of the credit institutions healthy, including settlement of bad debts and increase of charter capital;

- Proceeding with the restructuring of operation and management;

- Fundamentally completing the restructuring of ownership, legal entity of weak commercial bank;

- Completing the restructuring of finance and finance leasing companies.

Expected result: Danger of collapse of the credit institutions system shall be crossed out. The weak credit institutions are basically dealt with. Rules and disciplines in banking sector shall be set up and reinforced.

III. In 2004:

- Basically completing the restructuring finance of the credit institution;

- Credit institutions shall fully satisfy levels of net charter capital, standards and limits on prudential banking activities in accordance with provisions of applicable laws;

- Continuing to restructure the operation and management;

- Continuing to merge, integrate, acquire on voluntary principle.

IV. In 2015: Completing the restructuring of operation and management

Expected result: Finance and business operation are reinforced, reorganized and made healthy; the management system shall be significantly improved. Requirements on capital and standard on prudential banking activities shall be fully satisfied by credit institutions.

Solutions for reinforcement, reorganization, restructuring of the above-mentioned credit institutions shall be implemented drastically and synchronously, by 2015 financial condition and operation of Vietnamese credit institutions shall be considerably made healthy, reducing the number of small, weak credit institutions and forming some large-scale and better competitive commercial banks, especially increasing the scale and controlling position of state-owned commercial banks in the banking system. The process of reinforcement, reorganization, restructuring of credit institutions system shall be performed at low cost, crossing out the danger of collapse of banks that is out of control, ensuring to keep the safety and stability for the system without causing any adverse effect on the macro economy and political security and social order.