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

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Circular No. 03/2024/TT-NHNN dated May 16, 2024 of the State Bank of Vietnam amending, supplementing a number of articles of the Governor of the State Bank of Vietnam’s Circular No. 19/2013/TT-NHNN dated September 06, 2013, providing the purchase, sale and handling of non-performing loans by the Asset Management Company of Vietnamese credit institutions
Issuing body: State Bank of VietnamEffective date:
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Official number:03/2024/TT-NHNNSigner:Doan Thai Son
Type:CircularExpiry date:Updating
Issuing date:16/05/2024Effect status:
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THE STATE BANK OF VIETNAM

___________

No. 03/2024/TT-NHNN

THE SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

_________________

Hanoi, May 16, 2024

         CIRCULAR

Amending, supplementing a number of articles of the Governor of the State Bank of Vietnam’s Circular No. 19/2013/TT-NHNN dated September 06, 2013, providing the purchase, sale and handling of non-performing loans by the Asset Management Company of Vietnamese credit institutions
_______________

 

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

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

Pursuant to the Law on Enterprises dated November 26, 2020;

Pursuant to the Government’s Decree No. 102/2022/ND-CP dated 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 dated May 18, 2013, on the establishment, organization and operation of  the Asset Management Company of Vietnamese credit institutions; Decree No. 34/2015/ND-CP dated March 31, 2015, amending Decree No. 53/2013/ND-CP on the establishment, organization and operation of the Asset Management Company of Vietnamese credit institutions; Decree No. 18/2016/ND-CP amending Decree No. 53/2013/ND-CP on the establishment, organization and operation of the Asset Management Company of Vietnamese credit institutions;

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

The Governor of the State Bank of Vietnam promulgates the Circular amending, supplementing a number of articles of the Governor of the State Bank of Vietnam’s Circular No. 19/2013/TT-NHNN dated September 06, 2013, providing the purchase, sale and handling of non-performing loans by the Asset Management Company of Vietnamese credit institutions.

 

Article 1. Amending, supplementing a number of articles of the Governor of the State Bank of Vietnam’s Circular No. 19/2013/TT-NHNN dated September 06, 2013, providing the purchase, sale and handling of non-performing loans by the Asset Management Company of Vietnamese credit institutions (herein referred to as Circular No. 19/2013/TT-NHNN)

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

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

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

a) To add Clause 1a to Clause 1 as follows:

“1a. Vietnamese credit institutions means credit institutions established and operating in accordance with the provisions of the Law on Credit Institutions, excepted for wholly foreign owned credit institutions, 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 a foreign bank branch is the outstanding principal of the non-performing loan 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 Vietnam Asset Management Company is the purchase price or the outstanding principal of the non-performing loan accounted on the balance sheet of Vietnam Asset Management Company”.

c) To amend and supplement Clause 7a (supplemented 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 loans mean loans which are determined as follows:

a) Non-performing loans of credit institutions, foreign bank branches include non-performing loans accounted on the balance sheet in accordance with the regulations of the Governor of the State Bank on classification of credit assets, non-performing loans which used risk provisions to handle but have not been recovered and are monitored off the balance sheet;

b) Non-performing loans purchased by the Vietnam Asset Management Company from credit institutions, foreign bank branches which are not recovered.”.

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

“5. The purchase of non-performing loans by Vietnam Asset Management Company from joint-venture credit institutions, wholly foreign owned credit institutions, foreign bank branches shall only be carried out at market price.”.

4. To amend and supplement Article 9 as follows:

“Borrowers with non-performing loans sold to Vietnam Asset Management Company and having effective production, business plans and investment projects shall be considered for credit extension by credit institutions and foreign bank branches according to agreements and provisions of law”.

5. To amend and supplement Article 23 as follows:

Article 23. Conditions on non-performing loans to be purchased at market prices by 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 assessed by the Vietnam Asset Management Company as fully recoverable.

3. The loans’ collaterals are saleable or borrowers show prospects of repaying the loan.

4. In case of converting non-performing loans purchased with special bonds into non-performing loan purchase at the market price, the special bond corresponding to such non-performing loans must be immature and not be frozen 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 plan on purchase of loans at market prices approved by the State Bank, its financial capacity, economic efficiency and market situation, the Vietnam Asset Management Company shall decide to purchase non-performing loans at market prices and take responsibility for its decision.

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

a) Assessing non-performing loans satisfying the conditions specified in Clause 1, Clause 2, Clause 3 Article 23 of this Circular;

b) Determining the market price of non-performing loans, including collaterals thereof. The Vietnam Asset Management Company must assess or hire a valuation enterprise to determine the value of non-performing loans and collaterals;

c) Assessing economic efficiency, risks and possibility of recovering amounts payable for the purchase of non-performing loans;

d) Analyzing and evaluating the actual state and prospects of non-performing loans, borrowers, guarantors, parties obliged to repay loans and loan purchase conditions and agreements with loan-selling credit institutions, foreign bank branches;

dd) Measures to be taken to handle non-performing loans and collaterals thereof.

3. When converting non-performing loans purchased with special bonds into non-performing loans purchased at market price, the Vietnam Asset Management Company shall perform the tasks specified in Clauses 2, Clause 3, Article 23 of this Circular, negotiate the purchase and sale price of non-performing loans at market price with Vietnamese credit institutions, sign a non-performing loan purchase and sale contract at market price and perform the following:

a) The Vietnam Asset Management Company shall receive back special bonds from Vietnamese credit institutions and settle special bonds and principal balances of the non-performing loan being accounted on the balance sheet; remit to the Vietnamese credit institution the proceeds from the recovery of loans entitled by the Vietnamese credit institutions as prescribed, the contributed capital and share capital at the borrower according to the book value being accounted on the balance sheet, in case a part of the non-performing loan has been converted into charter capital,  share capital of the borrower (if any). The Asset Management Company shall transfer all rights and obligations of contributed capital and share capital at the borrower to Vietnamese credit institutions;

b) The Vietnam Asset Management Company shall pay the Vietnamese credit institutions the purchase and sale price of the loans as agreed upon in the loan purchase and sale contract at market price;

c) The Vietnamese credit institutions shall return the special bonds to the Asset Management Company and receive payment of the purchase and sale price of the loan at the market price, contributed capital, share capital at the borrowers, proceeds from the recovery of loans as prescribed at Points a and b of this Clause and handle as follows:

(i) In case the purchase and sale price of the loans, the proceeds from the recovery of loans and the value of the contributed capital and share capital received from the Vietnam Asset Management Company are higher than the par value of special bonds, the Vietnamese credit institutions shall account for the difference to income of the fiscal year;

(ii) In case the purchase and sale price of the loans, the proceeds from the recovery of loans and the value of the contributed capital and share capital received from the Vietnam Asset Management Company are lower than the par value of special bonds, the Vietnamese credit institutions shall use the provision for risks set aside for special bonds to cover the difference. In case there is still a shortage, the Vietnamese credit institutions shall account for business expenses in the period in accordance with the provisions of law.

d) The Vietnamese credit institutions shall refund the risk provision amount set aside for the remaining special bonds after implementing the provisions at Points c(i), c(ii) of this Clause.

4. The purchase and sale of non-performing loans at market price must be made into a written contract in accordance with the provisions of this Circular and other relevant regulations. In case of converting non-performing loans purchased with special bonds into non-performing loans purchased at the market price specified in Clause 3 of this Article, the loan purchase and sale contract with special bonds shall terminate from the effective date of the loan purchase and sale contract at market price. The Asset Management Company shall agree with the credit institutions and foreign bank branches to divide the remaining value of the proceeds from the recovery of the non-performing loan after deducting the purchase price and handling 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 the market price specified in Clause 3 of this Article, the Vietnam Asset Management Company shall transfer all original dossiers and documents related to the proceeds from the recovery of loan, contributed capital, share capital in borrowers to Vietnamese credit institutions.”.

7. To add Clause 6 to Article 34 (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 non-performing loans to legal entities or individuals at a sale price that may be higher or lower than the principal balance of the non-performing loans.”.

8. To amend Point c, Clause 2, Article 36 (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 institutions selling such non-performing loans are commercial banks that meet the following requirements:

(i) Being permitted to contribute capital, to buy shares under the License for Establishment and Operation;

(ii) Ensuring the minimum capital adequacy ratio as prescribed at Point b, Clause 1, Article 138 of the Law on Credit Institutions, limit capital contribution and share purchase as prescribed in Article 137 of the Law on Credit Institutions, having the actual value of charter capital not lower than the legal capital level (when calculating the ratios, the actual value of the above-mentioned charter capital, including the value of contributed capital and share capital transferred from non-performing loans purchased with special bonds) at the time of issuance of documents as prescribed at Point b of this Clause;

(iii) Achieving profitable business results according to the audited financial statements of the independent auditing organization of the year preceding the year in writing as prescribed at Point b of this Clause;

(iv) Not being sanctioned for administrative violations of loan classification, setting up and using provisions to offset risks, contribute capital or buy shares in 12 months preceding the month in which the document is issued as prescribed at Point b of this Clause;

(v) Having an organizational structure, the Board of Directors, the Members' Council, the Board of Supervisors, the General Director (Director) in accordance with the Law on Credit Institutions and regulations of the State Bank.”.

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

“5. The Vietnam Asset Management Company may sell the collaterals of the non-performing loans at a sale price that may be higher or lower than the principal balance of the non-performing loans.”.

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

“g. Posting and listing the information of the non-performing loans, the collaterals of the non-performing loans purchased on the Loan Exchange and the Vietnam Asset Management Company's website. The posting and listing of information must comply with the provisions of the law on personal data protection.”.

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

“7. The removal of a loan handled with risk provisions as prescribed in Clause 6 of this Article from the off-balance sheet shall comply with regulations on classification of credit assets of the State Bank and regulations on levels and methods of formation of risk provisions and the use of provisions to handle risks in operations of credit institutions, foreign bank branches of the Government.”.

12. To amend and supplement Clause 1, Clause 2 Article 47a (supplemented 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 set aside the provisions for each non-performing loan purchased at market price (R) according to the following formula:

          R = (A-C) x r

Where:

a) A is the book value of the principal balance of non-performing loans at the Vietnam Asset Management Company as on December 31 of each year; C is the collateral deduction value of the loan; r is the level of formation of risk provisions decided by the Members' Council which must not be lower than 5%.

b) In case C > A then R is calculated as 0.

c) In case an asset is secured for 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 the deductible value of the collateral multiplied by the ratio of the collateral value of that non-performing loan.

2. Every year, before December 31, the Vietnam Asset Management Company shall re-evaluate the collateral of each loan, determine the provision amount to be set aside for the year for each loan as prescribed in Clause 1 of this Article and implement:

a) In case the risk provision amount to be set aside for the year of setting aside provisions is less than the amount already set aside, the Vietnam Asset Management Company is entitled to revert the excess difference.

b) In case the provision amount to be set aside for the year of setting aside provisions is greater than the amount already set aside, the Vietnam Asset Management Company must make additional deductions for the difference.”.

13. To add Point g to Clause 4 Article 50 (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. Implementation organization

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

Article 2. Replacing and annulling a number of phrases, points, clauses and articles of Circular No. 19/2013/TT-NHNN (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” with the phrase "credit institutions and foreign bank branches" in the title of Chapter II; Article 1; Clause 5 Article 2; Clauses 1, 7 and 8a of Article 3; Clauses 1 and 4 of Article 4a; Article 5; Clauses 1 and 2 Article 6; Article 7; Clause 4 Article 8; Clauses 2, 3 and 4 of Article 10; Point b, Clause 1, Clause 2, Point a, Clause 5, Clause 8, Article 11; Point e, Clause 1, Clause 2, Article 15; Article 19; Article 21; Article 31; Clause 1 Article 32; Clause 5 Article 34; Article 39; Article 40; Article 41; Article 43a; Article 44a; Clauses 5 and 6 Article 47a; Clauses 2, 6a, 7 Article 48; Clauses 1 and 7 Article 49; Clauses 3, 4a, 4b, 7 and the title of Article 50.

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

3. To replace the phrase “restructure” with the phrase “reconstruct” at Point b, Clause 5, Article 11; Clause 2b Article 46.

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

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

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. Organization of implementation

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

Article 4. Effect

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

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

 

 

FOR THE GOVERNOR

THE DEPUTY GOVERNOR

 

Doan Thai Son

 

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