Circular 03/2024/TT-NHNN amend Circular 19/2013/TT-NHNN purchase, sale and handling of non-performing loans by AMC

CIRCULAR

Amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN of September 6, 2013, of the Governor of the State Bank of Vietnam, providing the purchase, sale and handling of non-performing loans by the Vietnam Asset Management Company^[1]

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the January 18, 2024 Law on Credit Institutions;

Pursuant to the November 26, 2020 Law on Enterprises;

Pursuant to the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

Pursuant to the Government’s Decree No. 53/2013/ND-CP of May 18, 2013, on the establishment, organization and operation of the Vietnam Asset Management Company; the Government’s Decree No. 34/2015/ND-CP of March 31, 2015, amending and supplementing a number of articles of the Government’s Decree No. 53/2013/ND-CP of May 18, 2013, on the establishment, organization and operation of the Vietnam Asset Management Company; and the Government’s Decree No. 18/2016/ND-CP of March 18, 2016, amending and supplementing a number of articles of the Government’s Decree No. 53/2013/ND-CP of May 18, 2013, on the establishment, organization and operation of the Vietnam Asset Management Company;

At the proposal of the Chief of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam promulgates the Circular amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN of September 6, 2013, of the Governor of the State Bank of Vietnam, providing the purchase, sale and handling of non-performing loans by the Vietnam Asset Management Company.

Article 1. To amend and supplement a number of articles of Circular No. 19/2013/TT-NHNN of September 6, 2013, of the Governor of the State Bank of Vietnam, providing the purchase, sale and handling of non-performing loans by the Vietnam Asset Management Company (below referred to as Circular No. 19/2013/TT-NHNN)

1. To amend and supplement Clause 2, Article 2 as follows:

“2. Credit institutions and foreign bank branches.”.

2. To add Clause 1a to, and amend and supplement Clauses 6 and 7a of, Article 3 as follows:

a/ To add Clause 1a below Clause 1 as follows:

“1a. Vietnamese credit institution means a credit institution established and operating in accordance with the Law on Credit Institutions, except wholly foreign-owned credit institutions and joint-venture credit institutions.”.

b/ To amend and supplement Clause 6 as follows:

“6. Book value of the outstanding principal of a non-performing loan at a credit institution or foreign bank branch means the outstanding principal of the non-performing loan currently accounted on the balance sheet of such credit institution or foreign bank branch. The book value of the outstanding principal of a non-performing loan at the Vietnam Asset Management Company is the purchase price or the outstanding principal of the non-performing loan currently accounted on the balance sheet of the Vietnam Asset Management Company.”.

c/ To amend and supplement Clause 7a (which was added under Clause 2, Article 1 of Circular No. 09/2017/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

“7a. Non-performing loan means a loan that is determined as follows:

a/ Non-performing loans of a credit institution or foreign bank branch, including a non-performing loan currently accounted on the balance sheet according to the State Bank Governor’s regulations on classification of assets, and a non-performing loan for which risk provisions have been used for handling but which has yet to be recovered and is currently monitored out of the balance sheet;

b/ Non-performing loans which have been purchased by the Vietnam Asset Management Company from a credit institution or foreign bank branch but yet to be recovered.”.

3. To add Clause 5 to Article 8 as follows:

“5. The Vietnam Asset Management Company may only purchase non-performing loans of joint-venture credit institutions, wholly foreign-owned credit institutions and foreign bank branches at market prices.”.

4. To amend and supplement Article 9 as follows:

“Borrowers that sell non-performing loans to the Vietnam Asset Management Company and have efficient production and business plans or investment projects may be considered for extension of credit by credit institutions or foreign bank branches as agreed and provided by law.”.

5. To amend and supplement Article 23 as follows:

“Article 23. Conditions for a non-performing loan to be purchased at market price by the Vietnam Asset Management Company

1. The conditions specified in Clause 1, Article 16 of this Circular.

2. The amount payable for the purchase of the loan is evaluated by the Vietnam Asset Management Company as fully recoverable.

3. The loan’s collateral is saleable or the borrower shows prospect of repaying the loan.

4. In case a non-performing loan purchased with a special bond is converted into a non-performing loan purchased at market price, such special bond must be immature and is not subject to freezing at the State Bank.”.

6. To amend and supplement Article 26 as follows:

“Article 26. Purchase of non-performing loans at market prices

1. Based on the State Bank-approved plan on purchase of loans at market prices, its financial capacity, economic efficiency and market conditions, the Vietnam Asset Management Company shall decide on the purchase of non-performing loans at market prices and take responsibility for its decision.

2. The Vietnam Asset Management Company may only purchase non-performing loans specified at Point a, Clause 7a, Article 3 of this Circular at market prices after:

a/ Carrying out evaluation and seeing that the non-performing loans satisfy the conditions specified in Clauses 1, 2 and 3, Article 23 of this Circular;

b/ Determining the market value of non-performing loans, including also their collateral. The Vietnam Asset Management Company shall value, or hire a valuation enterprise to determine the value of, non-performing loans and their collateral;

c/ Evaluating economic efficiency, risks and possibility to recover amounts used for the purchase of non-performing loans;

d/ Analyzing and evaluating the actual state and prospect of non-performing loans, borrowers, guarantors, parties obliged to repay loans, and conditions on loan purchase agreement with loan-selling credit institutions or foreign bank branches;

dd/ Introducing measures to handle non-performing loans and their collateral.

3. When converting a non-performing loan purchased with a special bond into a non-performing loan purchased at market price, the Vietnam Asset Management Company shall perform the tasks specified in Clauses 2 and 3, Article 23 of this Circular, reach agreement with the Vietnamese credit institution on the purchase and sale price of the non-performing loan at market price, sign a contract on purchase and sale of the loan at market price, and proceed with the following:

a/ The Vietnam Asset Management Company shall receive back the special bond from the Vietnamese credit institution and finally settle the special bond and the outstanding principal of the non-performing loan currently accounted on the balance sheet; transfer back to the Vietnamese credit institution the recovered loan amount it is entitled to receive under regulations, and contributed capital amount or share capital amount at the borrower, calculated at the book value currently accounted on the balance sheet, in case part of the non-performing loan has been converted into the charter capital or share capital of the borrower (if any). The Vietnam Asset Management Company shall transfer all rights and obligations with regard to the contributed capital amount or share capital amount at the borrower to the Vietnamese credit institution;

b/ The Vietnam Asset Management Company shall pay the Vietnamese credit institution for the purchase and sale of the loan as agreed in the contract on loan purchase and sale at market price;

c/ The Vietnamese credit institution shall transfer back the special bond to the Vietnam Asset Management Company and receive payment for the purchase and sale of the loan at market price, contributed capital amount or share capital amount at the borrower, and the recovered loan amount specified at Points a and b of this Clause, and proceed with the following:

(i) In case the purchase and sale price of the loan, the recovered loan amount or the value of contributed capital amount or share capital amount received from the Vietnam Asset Management Company is higher than the par value of the special bond, the Vietnamese credit institution shall account the difference as its income in the fiscal year;

(ii) In case the purchase and sale price of the loan, the recovered loan amount or the value of contributed capital amount or share capital amount received from the Vietnam Asset Management Company is lower than the par value of the special bond, the Vietnamese credit institution shall use the risk provision deducted for the special bond to offset the difference. In case the risk provision is still insufficient to offset the difference, the Vietnamese credit institutions shall account deficit into their business expenses in the period in accordance with law.

d/ The Vietnamese credit institution shall refund the remaining amount of risk provisions deducted for the special bond after implementing Points c(i) and c(ii) of this Clause.

4. The purchase and sale of a non-performing loan at market price shall be included in a written contract in accordance with this Circular and relevant regulations. In case of converting a non-performing loan purchased with a special bond into a non-performing loan purchased at market price specified in Clause 3 of this Article, the contract on purchase and sale of the loan with the special bond shall terminate on the effective date of the contract on purchase and sale of the loan at market price. The Vietnam Asset Management Company may reach agreement with credit institutions and foreign bank branches on the division of the remainder of the recovered amounts of non-performing loans after subtracting the purchase price and relevant costs.

5. Credit institutions and foreign bank branches shall transfer all original dossiers and documents related to non-performing loans to the Vietnam Asset Management Company. In case of converting non-performing loans purchased with special bonds into non-performing loans purchased at market price specified in Clause 3 of this Article, the Vietnam Asset Management Company shall transfer all original dossiers and documents related to the recovered loan amounts and contributed capital amounts or share capital amounts at borrowers to Vietnamese credit institutions.”.

7. To add Clause 6 to Article 34 (which was amended under Clause 6, Article 1 of Circular No. 09/2017/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

“6. The Vietnam Asset Management Company may sell a non-performing loan to a legal person or an individual at a price that is higher or lower than the outstanding principal of such non-performing loan.”.

8. To amend Point c, Clause 2, Article 36 (which was amended under Clause 10, Article 1 of Circular No. 32/2019/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

“c/ The credit institution selling such non-performing loan is a commercial bank that meets the following requirements:

(i) Being permitted to contribute capital and purchase shares under its establishment and operation license;

(ii) Ensuring the capital adequacy ratio specified at Point b, Clause 1, Article 138 of the Law on Credit Institutions, and the capital contribution or share purchase limit specified in Article 137 of the Law on Credit Institutions; having the actual value of the charter capital not smaller than the legal capital (when calculating the above-mentioned ratio, limit and actual value, it is required to include also the value of contributed capital or share capital converted from the non-performing loan purchased with the special bond) at the time of issuance of the document specified at Point b of this Clause;

(iii) Having earned profits from business activities as shown in its financial statement audited by an independent audit firm for the year preceding the year of issuance of the document specified at Point b of this Clause;

 (iv) Not being sanctioned for administrative violations related to loan classification, deduction and use of provisions for handling risks, capital contribution or share purchase during 12 months preceding the month of issuance of the document specified at Point b of this Clause;

(v) Having an organizational structure, the Board of Directors, Members’ Council, Supervisory Board and Chief Executive Officer in accordance with the Law on Credit Institutions and the State Bank’s regulations.”.

9. To add Clause 5 to Article 38 as follows:

“5. The Vietnam Asset Management Company may sell collateral of a non-performing loan at a price that is higher or lower than the outstanding principal of such non-performing loan.”.

10. To add Point g to Clause 1, Article 41 as follows:

“g/ To post information on purchased non-performing loans and collateral thereof on the Loan Exchange and the website of the Vietnam Asset Management Company. The posting of information must comply with regulations on personal data protection.”.

11. To amend and supplement Clause 7, Article 46 as follows:

“7. The exclusion of a loan for which a risk handling measure has been applied under Clause 6 of this Article from the balance sheet must comply with the State Bank’s regulations on classification of assets, the Government’ regulations on levels and methods of deduction and use of provisions for handling risks in the operations of credit institutions and foreign bank branches.”.

12. To amend and supplement Clauses 1 and 2, Article 47a (which was added under Clause 33, Article 1 of Circular No. 14/2015/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

“1. The Vietnam Asset Management Company shall make deductions for a risk provision (R) for each non-performing loan purchased at market price (R) according to the following formula:

R = (A-C) x r

Of which:

a/ A is the book value of the outstanding principal of the non-performing loan at the Vietnam Asset Management Company as of December 31 every year; C is the deduction value of collateral of the loan; r is the rate for making deductions for risk provisions decided by the Members’ Council, which, however, must not be lower than 5%.

b/ In case C > A, then R is considered 0.

c/ In case of using one asset as collateral to multiple non-performing loans, the Vietnam Asset Management Company shall determine the ratio of the collateral value for each non-performing loan; C shall be considered the deductible value of the collateral multiplied by the ratio of the collateral value of such non-performing loan.

2. Before December 31 every year, the Vietnam Asset Management Company shall re-evaluate the collateral of each loan, determine the risk provision amount to be deducted for the year for each loan as specified in Clause 1 of this Article, and proceed with the following:

a/ In case the risk provision amount to be deducted for the year is smaller than the balance of the deducted risk provision amount, the Vietnam Asset Management Company is entitled to refund of the difference.

b/ In case the risk provision amount to be deducted for the year is higher than the balance of the deducted risk provision amount, the Vietnam Asset Management Company shall make additional deductions for the difference.”.

13. To add Point g to Clause 4, Article 50 (which was amended and supplemented under Clause 37, Article 1 of Circular No. 14/2015/TT-NHNN and Clause 19, Article 1 of Circular No. 32/2019/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

“g/ Coordinate with the Vietnam Asset Management Company in implementing Point g, Clause 1, Article 41 of this Circular.”.

14. To amend and supplement Article 54 as follows:

“Article 54. Organization of implementation

The Office, the Chief of the Banking Supervision Agency, and heads of units of the State Bank, directors of the State Bank’s provincial-level branches, credit institutions and foreign bank branches; the Vietnam Asset Management Company and related organizations and individuals shall implement this Circular.-”.

Article 2. To replace or annul a number of phrases, points, clauses and articles of Circular No. 19/2013/TT-NHNN (which was amended and supplemented under Circular No. 14/2015/TT-NHNN, Circular No. 08/2016/TT-NHNN, Circular No. 09/2017/TT-NHNN and Circular No. 32/2019/TT-NHNN amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN) as follows:

1. To replace the phrase “credit institutions” in the title of Chapter II; Article 1; Clause 5, Article 2; Clauses 1, 7 and 8a, Article 3; Clauses 1 and 4, Article 4a; Article 5; Clauses 1 and 2, Article 6; Article 7; Clause 4, Article 8; Clauses 2, 3 and 4, Article 10; Point b of Clause 1, Clause 2, Point a of Clause 5, and Clause 8, Article 11; Point e of Clause 1, and Clause 2, Article 15; Articles 19, 21 and 31; Clause 1, Article 32; Clause 5, Article 34; Articles 39, 40 and 41; Articles 43a and 44a; Clauses 5 and 6, Article 47a; Clauses 2, 6a and 7, Article 48; Clauses 1 and 7, Article 49; and Clauses 3, 4a, 4b and 7 and the title of Article 50, with the phrase “credit institutions and foreign bank branches”.

2. To replace the phrase “credit institutions” in Clauses 5, 8 and 11, Article 3; Clause 2, Article 12; Clauses 5 and 6, Article 13; Point g, Clause 1, Article 15; Articles 15a, 16, 17, 17a, 17b, 18, 20 and 22; Clause 4, Article 28; Articles 29, 30 and 35; Clauses 2 and 3, Article 36; Clause 3, Article 38; Articles 43, 44 and 45; Clauses 1, 2, 2a, 2b, 2c, 3, 4, 5, 6 and 8 Article 46; Clauses 3 and 5, Article 49; and Clause 4, Article 50, with the phrase “Vietnamese credit institutions”.

3. To replace the phrase “tai co cau” (restructure) at Point b, Clause 5, Article 11; and in Clause 2b, Article 46, with the phrase “co cau lai” (restructure).

4. To replace the phrase “independent organization with valuation function” and the phrase “independent valuation organization” at Point dd, Clause 1, Article 20; Clause 2, Article 34; Point a, Clause 4, Article 35; and Clause 4, Article 38, with the phrase “valuation enterprise”.

5. To replace the phrase “organization with valuation function” in Article 47a with the phrase “valuation enterprise”.

6. To remove the phrase “uses special bonds” in Clauses 2 and 3, Article 6.

7. To annul Point d, Clause 3, Article 47b.

8. To annul Point c, Clause 4a, Article 50.

Article 3. Responsibility for organization of implementation

The Chief of the Office, Chief of the Banking Supervision Agency, and heads of units of the State Bank, directors of the State Bank’s provincial-level branches, credit institutions and foreign bank branches; the Vietnam Asset Management Company and related organizations and individuals shall implement this Circular.

Article 4. Implementation provisions

1. This Circular takes effect on July 1, 2024.

2. This Circular annuls Clauses 3 and 4, Article 1 of the State Bank Governor’s Circular No. 09/2017/TT-NHNN of August 14, 2017, amending and supplementing a number of articles of Circular No. 19/2013/TT-NHNN.-

For the State Bank Governor
Deputy Governor
DOAN THAI SON