Decision No. 369/QD-TTg dated February 28, 2013 of the Prime Minister approving the Strategy on development of Vietnam Development Bank through 2020, with a vision toward 2030

THE PRIME MINISTER

Decision No. 369/QD-TTg of February 28, 2013, approving the Strategy on development of Vietnam Development Bank through 2020, with a vision toward 2030

THE PRIME MINISTER

Pursuant to December 25, 2001 the Law on Organization of the Government;

Pursuant to the December 16, 2002 Law on State Budget;

Pursuant to the June 16, 2010 Law on Credit Institutions;

Pursuant to the Government’s Decree No. 75/2011/ND-CP of August 30, 2011, on investment credit and export credit of the State;

Pursuant to the socio-economic development strategy for 2011-2020;

At the proposal of the Minister of Finance,

DECIDES:

Article 1. To approve the Strategy on development of Vietnam Development Bank through 2020 with a vision toward 2030, with the following contents:

1. General objectives

To continue to strengthen and develop Vietnam Development Bank as a  policy bank of the Government operating not for profit purposes in a sustainable and efficient direction, ensuring adequate capacity to implement investment credit and export credit policies of the State and other tasks assigned by the Government and the Prime Minister, contributing to implementing the national socio-economic development strategy and plan in each period.

2. Specific objectives

a/ The credit growth rate of Vietnam Development Bank during 2013-2020 will be about 10%/year on average, with its asset size reaching approximately 500 trillion dong by 2020. After 2020, its credit growth rate will be determined according to the requirements of socio-economic development.

b/ To determine the structure between equity and mobilized capital of the Bank with a roadmap to increase equity in order to achieve a ratio between equity and total outstanding loans of investment credit and export credit of Vietnam Development Bank suitable to each period.

c/ To improve credit quality, especially the appraisal, disbursement, and management of debt recovery; to build a mechanism of non-performing loan classification suitable to the nature of operation of Vietnam Development Bank; to build a mechanism for setting up risk provisions and measures to treat non-performance loans for programs; to positively recover debts and handle risks aiming to reduce the overall non-performing loan ratio to below 7% by 2015 and at 4-5% by 2020; and the non-performing loan ratio to below 3% during 2020-2030.

d/ To standardize the operation process to meet the requirements of implementation of development support policy according to the guidelines of the Party and the State, and the target program decided by the Government and the Prime Minister; to diversify banking services to better serve investment credit and export credit policy of the State including provision of loans under agreement for these policy beneficiaries in certain conditions in order to improve the quality of operation and gradually reduce offsetting state budget allocations toward financial autonomy.

dd/ To improve the governance model and organizational structure in line with the nature and characteristics of a policy bank; to standardize and professionalize the staff to promote the effectiveness and efficiency of operation of the risk inspection, control, analysis and warning system while enhancing control and supervision by state management agencies, and enhancing the application of information technology in banking operations.

3. Operational direction

a/ Objects of service

- Vietnam Development Bank focuses on development investment credit and export credit operations of the State decided by the Government and the Prime Minister in each period.

+ Focusing investment credit capital on the areas of socio-economic infrastructure; auxiliary industries; agriculture and rural development; socialization in education, health, environmental protection and green technology; clean energy and renewable energy.

+ Focusing export credit on commodity lines to bring high export value, which need the support of the State while ensuring the implementation of international commitments.

- To focus on lending ODA loans of the Government ​​provided through Vietnam Development Bank; to encourage local financial funds (such as local development investment funds and credit guarantee funds) to perform entrusted investment through the Bank ​​in accordance with local development objectives.

- To complete the credit guarantee operation for small- and medium-sized enterprises to take out loan from credit institutions, creating conditions for enterprises to have access to loans for effective production and business development while enhancing financial capacity to facilitate the expansion of the guarantee scale and enhancement of risk management.

- To study and permit the performance of the operation of lending under agreement on the principle of self-financing to entities having loan relations at Vietnam Development Bank aiming to improve capital use efficiency and create conditions for Vietnam Development Bank to gradually ensure financial autonomy and limit offsetting state budget allocations. The lending under agreement must ensure the principle of using mobilized funds for lending without affecting the performance of tasks of investment credit and export credit of the State annually assigned, and ensuring effectiveness and capital recovery.

b/ Financial safety criteria

- To determine the relationship between equity and total outstanding loans of investment credit and export credit of the State. On that basis, to develop a roadmap to increase the charter capital of the bank appropriately (expected to reach 10% of total outstanding loans of investment credit and export credit of the State by 2020, equivalent to VND 20 trillion by 2015 and VND 30 trillion by 2020).

- To implement the mechanism of interest rates for investment credit and export credit on the non-profit principle, which, however, must assure sufficient payment of the cost of capital, operating costs and increase of risk provisions in credit activities of Vietnam Development Bank.

- To apply the mechanism of loan classification in line with specific activities of Vietnam Development Bank, studying the exclusion of governmental debts or government-guaranteed debts; to increase risk provisions and apply a risk-handling mechanism suitable to its specific activities, studying the issuance of regulations on risk handling through decentralizing more power to Vietnam Development Bank to handle risks in accordance with law (under the charter on organization and operation and the financial mechanism for Vietnam Development Bank decided by the Prime Minister).

- To study, stipulate and apply financial safety norms after the model applicable to credit institutions, ensuring conformity with international practices.

c/ Banking governance

- To study and adopt a law exclusively applicable to policy banks including Vietnam Development Bank; in the immediate time, Vietnam Development Bank shall comply with both laws, namely the Law on State Budget and the Law on Credit Institutions:

+ Under the Law on State Budget: Vietnam Development Bank may receive charter capital from the state budget and amounts to offset interest rate differences, and shall comply with regulations on state budget estimation and submit to the state financial management by the Ministry of Finance.

+ Under the Law on Credit Institutions: Vietnam Development Bank shall perform internal control and internal audit; prepare and issue internal processes for professional operations; and implement statistics, operation and payment reporting regime prescribed by the State Bank of Vietnam.

- To clearly define the rights and obligations of the owners to the State at Vietnam Development Bank through clearly defining the roles and responsibilities of the Government, the Prime Minister and the ministries and sectors (the Ministry of Finance, the Ministry of Planning and Investment, the State Bank of Vietnam, etc.) in the state management of relevant sectors. To assign the ministry managing the major business line to take the role of owner’s representative for Vietnam Development Bank (under the charter on organization and operation of Vietnam Development Bank decided by the Prime Minister).

- To apply the model of Members’ Council to administer activities of Vietnam Development Bank as a credit institution with 100% state-owned equity, clearly identifying the powers and responsibilities of the Members’ Council, Control Board, Executive Board and sections in the system of Vietnam Development Bank; decentralizing more power to the Members’ Council of Vietnam Development Bank to decide on issues concerning management of capital, assets, mobilization interest rates, interest rates for investment credit and export credit of the State; and handling of credit risks.

- To complete the functions and duties of Vietnam Development Bank which include the functions of international payment, participating in the open market and inter-bank market, etc., in accordance with law and the nature and characteristics of its operation.

- To build the inspection and supervision systems of ministries and sectors to be compatible with the model and specific activities of Vietnam Development Bank in which: the Ministry of Finance shall perform state inspection, supervision and management of financial matters; the State Bank of Vietnam shall perform the management and supervision of credit and payment; the Ministry of Planning and Investment shall perform the management and supervision of development investment; the Ministry of Labor, War Invalids and Social Affairs shall perform the state management of wages and labor; to complete the system of internal control and inspection and uniform organization and operation; to ensure close coordination between the Control Board and the system of internal control and inspection.

d/ Restructuring of banking activities

- Stage 1 (from 2013 to 2015):

+ To review the list of programs, projects and commodity lines eligible for investment credit and export credit of the State, determine a reasonable credit growth rate for restructuring loan capital sources.

+ To determine the ratio between equity and total outstanding loans of investment credit and export credit of the State, which will reach 10% by 2015; to work out a roadmap to increase equity for the Bank.

+ To re-assess non-performing loans and issue regulations on loan classification in conformity with the characteristics of the Bank, definitely settle non-performing loans transferred from the Development Assistance Fund and preceding organizations, striving to reduce non-performing loans to 7% of total outstanding loans by the end of 2015.

+ To strengthen the organization and operation of Vietnam Development Bank, issue the Regulation on organization and operation of the Bank, identifying owner’s representative and clearly defining powers and responsibilities of the Members’ Council, Control Board and Executive Board.

+ To reorganize its branches and operation centers in conformity with the orientations on the scope and scale of activities toward forming regional branches, for the objective that by the end of 2015, the entire system will have about 45 branches.

- Stage 2 (from 2016 to 2020):

+ To determine the program and list of investment credit and export credit of the State applicable from 2016 to 2020, focusing resources on these programs and list.

+ To strive to achieve the capital adequacy ratio of 10%, equity of VND 30,000 trillion and non-performing loans of 4-5% by 2020.

+ To improve the balance of financial revenues and expenditures, reduce offsetting state budget allocations to ensure financial autonomy in operation from 2020.

+ To modernize banking technology according to the financial safety criteria applicable to banks according to the system restructuring roadmap of Vietnam Development Bank.

- Stage 3 (after 2020):

+ To modernize banking activities to implement preferential credit policies in the country and gradually in other regional countries.

+ To apply the criteria of financial security and risk management according to international standards, ensuring the rate of non-performing loans below 3%.

4. Implementation solutions

a/ Improving the legal framework for the operation of Vietnam Development Bank:

- To amend and supplement a number of legal provisions on investment credit and export credit of the State, including revising the Government’s Decree No. 75/2011/ND-CP of August 30, 2011.

- To complete the functions, tasks and management apparatus of Vietnam Development Bank; including amending its charter on organization and operation.

- To complete the financial management mechanism for Vietnam Development Bank: from now to 2015 to evaluate and restructure outstanding loans and existing customers at Vietnam Development Bank; to plan and implement the restructuring of non-performing loans at Vietnam Development Bank, especially outstanding loans from the predecessors General Department of Development Investment and Development Assistance Fund.

- To improve the mechanism of management and handling of risky loans on the basis of building a system of criteria for evaluating the possibility of recovering loans when due or overdue; to study and develop mechanisms for identifying and early warning risks and planning the handling of each type of risk; to formulate policies on loan classification and deductions of provisions for credit risks suitable to specific activities of Vietnam Development Bank.

b/ Supplementing charter capital for Vietnam Development Bank:

The supplementation of charter capital for Vietnam Development Bank in the future aims to enhance the operational capacity and ensure capital adequacy standards prescribed for credit institutions. The sources of supplementing charter capital include state budget, enterprise arrangement support and development fund, and lawfully accumulated sources of Vietnam Development Bank.

c/ Strengthening and improving the quality and performance of the organizational apparatus and staff of Vietnam Development Bank. Operating according to the principle of openness and transparency of financial matters and being subject to the audit by the State Audit Office. Developing mechanisms of salaries, bonuses and benefits for staff in conformity with the Bank’s financial condition and operation.

d/ Continuing to develop physical and technical foundations and human resources: making use of resources from the central and local levels to invest, upgrade and stabilize the Bank’s offices at all level, warehouses, vehicles and working equipment, concentrating financial resources and personnel on modernizing information technology to serve the operation and management of Vietnam Development Bank.

Developing human resources: Attaching importance to training and retraining to improve the quality of the staff of Vietnam Development Bank, raising their professional capacity, professional skills and ethics; ensuring sufficient qualified human resources to fulfill assigned tasks.

Increasing public information and expanding international cooperation in order to learn and share experiences with other countries in the world, especially those in the region, on the management of investment credit and export credit and the model of development banks. Making use of capital and technical assistance sources of international organizations to build the capacity, especially governance and risk management capacity, and supplement loans for Vietnam Development Bank.

dd/ Raising the effectiveness of inspection and supervision by state management agencies and internal control: Intensifying the inspection and supervision by related ministries and agencies including the Ministry of Finance, the Ministry of Planning and Investment and the State Bank of Vietnam; improving the organizational model and raising capacity and performance of the inspection and internal control system.

Article 2. Organization of implementation

The Ministry of Finance shall assume the prime responsibility for, and coordinate with related ministries and agencies in:

a/ Submitting to the Government amendments and supplements to policies on investment credit and export credit of the State in each period.

b/ Submitting to the Prime Minister for promulgation amendments to the charter on organization and operation of Vietnam Development Bank; a revised financial mechanism for Vietnam Development Bank; and the Regulation on the handling of risks of investment credit capital and export credit of the State.

c/ Submitting to the Prime Minister for approval a scheme for handling non-performing loans and a scheme for increasing the charter capital of Vietnam Development Bank.

2. The Ministry of Planning and Investment shall assume the prime responsibility for, and coordinate with related ministries and agencies in:

a/ Balancing medium and long-term plans on investment capital, and investment credit of the State for implementation by Vietnam Development Bank.

b/ Coordinating with the Ministry of Finance in allocating resources and implementing the strategy of Vietnam Development Bank.

c/ Performing the state management of the planning and development investment for the operation of Vietnam Development Bank in accordance with the Investment Law and other relevant laws.

3. The State Bank of Vietnam shall assume the prime responsibility for, and coordinate with the Ministry of Finance and other related ministries and agencies in:

a/ Guiding the loan classification for Vietnam Development Bank to suit its nature and activities.

b/ Reviewing and deciding on the grant of a license for foreign exchange management operation in accordance with the tasks of Vietnam Development Bank.

c/ Guiding Vietnam Development Bank to participate in the inter-bank market and refinancing from the State Bank of Vietnam according to regulations.

d/ Performing the state management of monetary and banking activities related to investment credit and export credit of the State in accordance with the Law of the State Bank of Vietnam, the Law on Credit Institutions and other relevant laws.

4. The Ministry of Labor, War Invalids and Social Affairs shall assume the prime responsibility for, and coordinate with the Ministry of Finance in, ensuring that Vietnam Development Bank has appropriate and stable labor management and wage mechanisms in order to encourage its officials, public employees and workers to work and dedicate to the sector.

5. Vietnam Development Bank shall:

a/ Prepare and report to the Ministry of Finance for appraisal and submission to the Prime Minister:

- The charter on organization and operation of Vietnam Development Bank.

- Scheme for increasing charter capital.

- Scheme for handling non-performing loans.

b/ Organize the restructuring of Vietnam Development Bank activities according to the contents approved by the Prime Minister and the guidance of the Ministry of Finance. Implement the schemes on strengthening the internal management apparatus, building risk management capacity and modernizing banking technology; and review the appraisal and intensifying the supervision of credit.

Article 3. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, chairperson of the Management Board and Director General of Vietnam Development Bank shall implement this Decision.-

Prime Minister
NGUYEN TAN DUNG