Must not have a non-performing loan ratio under 3% when purchasing debts

On December 26, 2022, the State Bank of Vietnam issues the Circular No. 18/2022/TT-NHNN on amending and supplementing the Circular No. 09/2015 prescribing debt purchase and sale by credit institutions and foreign bank branches.

Accordingly, the on-balance sheet book value of the purchased, sold debt includes: the book value of outstanding principal and interest of the debt and other financial obligations related to the debt (if any) being accounted for on-balance sheet at the time of debt purchase, sale.

On the other hand, credit institutions are not required to have a non-performing loan ratio under 3% when purchasing debts in the following cases:

• The credit institution under special control purchases qualified debts as prescribed in Clause 2, Article 146a of the Law on Credit Institutions;
• The commercial bank subject to the compulsory transfer for purchase of qualified debts from the credit institution takes the compulsory transfer according to the compulsory transfer plan approved by the competent authority....

Besides, credit institutions and foreign bank branches that are considered and approved by the State Bank for debt purchase must have a non-performing loan ratio under 3% according to the latest classification period pursuant to the State Bank's regulations on property classification, level of deduction, method of setting up risk provisions and use of provisions to deal with risks in the operation of credit institutions, foreign bank branches before the time of requesting for debt purchase’s approval, except for credit institutions under special control.

This Circular takes effect on September 09, 2023.