Directive 01/CT-NHNN 2009 ensuring the prudential, effective business operation of credit institutions

DIRECTIVE

ON SEVERAL MEASURES OF ENSURING THE PRUDENTIAL, EFFECTIVE BUSINESS

OPERATION OF CREDIT INSTITUTIONS

OF GOVERNOR OF STATE BANK OF VIETNAM

During the first months of 2009, the State Bank of Vietnam has flexibly managed instruments of monetary policy on the basis of loosening in a prudent manner; total means of payment, credit of the economy have increased in conformity with the demand stimulating policy of the Government; macro economic balances are basically held fast, prices and currency market have been relatively stable, solvency of credit institutions has been ensured. However, credit is likely to increase faster than the capital mobilization capacity, available capital of some credit institutions has decreased, which may give impact on the stability of the currency market. With a view to ensuring the prudential, effective business operation of credit institutions, stabilizing the currency and foreign exchange market, making contribution to the prevention from economic recession, maintenance of economic growth at a proper and sustainable level, taking initiative in preventing from inflation; the Governor of the State Bank hereby requires credit institutions, units at the Head Office of the State Bank of Vietnam and State Bank Branches in provinces, cities under the central Government’s management to implement several measures as follows:

1. For credit institutions:

1.1. To continue implementing, on an effective manner, measures provided for in the Directive No.06/2008/CT-NHNN dated 31 December 2008 of the Governor of the State Bank on the implementation of measures for making contribution to the promotion of business and production, goods circulation, prevention from economic recession, maintenance of economic growth, social security and other measures as directed by the State Bank of Vietnam in the last months of 2009. Based on the changes of the world financial crisis and economic recession, on the domestic macro economic – monetary changes and guidelines, solutions of financial and monetary management of the Government and State Bank of Vietnam to closely forecast the economic, monetary situation and to implement appropriate business solutions, taking initiative in preventing from business risks.

1.2. In respect of operating capital management and administration

a. To strengthen both local and overseas capital mobilization, extend credit on an effective basis for the economy; to specifically determine the outward and inward cash flow so as to take measures of balancing the capital sources and use of capital.

b. To control the scale, structure of short term, medium and long term credit, in Vietnamese dong and foreign currency in line with the capacity, term and structure of the mobilized capital; to maintain a proper amount of available capital in order to permanently ensure the solvency security.

c. To correctly comply with provisions of applicable laws on the mechanism of managing instruments of monetary policy, ensuring the prudential ratios in business activity; to seriously observe the liquidity ratios, maximum ratio of short term capital source used for medium and long term lending in accordance with current provisions; to timely overcome the imbalance in terms of period between the capital sources and the use of capital. The performance of transaction in the inter-bank currency market for an efficient employment of capital, covering the temporary deficit in required reserve and solvency, but not balancing the capital mobilized from the inter-bank currency market (deposits, loans…) for providing loan to organizations, individuals and determining prudential ratios in business activity.

d. To fix the interest rate for capital mobilization in Vietnamese dong and foreign currency in correspondence with the supply – demand situation in the capital market, in line with applicable provisions of the State Bank of Vietnam on the management mechanism to base interest rate in Vietnamese dong with interest rate difference at a reasonable level; the application of forms of sales promotion in capital mobilization must comply with provisions of applicable laws.

dd. To seriously implement provisions of the State Bank of Vietnam on the exchange rate and foreign exchange control.

1.3. In respect of credit activity

a. To concentrate on efficient implementation of mechanism on lending with interest rate support in compliance with provisions of the Prime Minister, guidance of the State Bank of Vietnam and related ministries, industries.

b. To closely control the credit quality together with expanding credit in the orientation of focusing capital on loan demands for production – business of small and medium enterprises, rural areas and big, key projects of the State; to closely control the real estate trading loans, securities trading loans, consumer loans.

c. To correctly comply with provisions of applicable laws on lending, debt classification, making and use of provisions against credit risk; any act of loosening conditions of credit extension shall be strictly prohibited.

d. For lending in Vietnamese dong, foreign currency to capital demand of enterprises which have source of income in foreign currency from export of goods, services: To closely control and comply with provisions of applicable laws on such loans; to determine the loan term in line with the duration of a business – production circle, period of capital recovery of an investment project; in credit contract, it should be agreed with the borrower about the loan repayment immediately at the time he receives foreign currency payment from overseas.

2. For units at the Head Office of the State Bank of Vietnam and State Bank Branches in provinces, cities under the central Government’s management:

2.1. Units at the Head Office of the State Bank shall, within their function and duty, act as an advisor for the Governor of the State Bank to implement following measures:

a. To flexibly manage instruments of monetary policy, credit and exchange rates in order to stabilize interest rate, exchange rate, to control the growth rate of total means of payment, credit at a reasonable level.

b. To intensify the inspection, supervision over the compliance with provisions of applicable laws on business activities of credit institutions; in which, key task in the last months of 2009 shall be the inspection, supervision over the implementation of provisions of applicable laws on lending with interest rate support, quality and purpose of using loan capital, foreign exchange control.

c. To implement measures, tasks as stated in the Decision No.342/QD-NHNN dated 19 February 2009 of the Governor of the State Bank on the issuance of the Action Plan of the State Bank of Vietnam for the implementation of monetary, credit and banking solutions at the Resolution No. 01/NQ-CP dated 09 January 2009, Resolution No. 30/2008/NQ-CP dated 11 December 2008 and Resolution No. 30a/2008/NQ-CP dated 27 December 2008 of the Government.

2.2. State Bank Branches in provinces, cities under the central Government’s management: to regularly follow up, examine, supervise and inspect the business activity of credit institutions in the local area of the province, city under the 2009 inspection program.

3. Implementing organization:

3.1. This Directive shall be effective from the date of signing.

3.2. Director of Administrative Department, Director of Monetary Policy Department and Heads of units of the State Bank, Manager of State Bank Branches in provinces, cities under the central Government’s management, Chairperson of the Board of Directors and General Director (Director) of credit institutions shall be responsible for the implementation of this Directive.