CIRCULAR

On banking supervisory procedures

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law on amendments to the Law on Credit Institutions dated November 20, 2017;

Pursuant to Decree No. 16/2017/ND-CP dated February 17, 2017 of the Government on function, tasks, powers and organizational structures of the State Bank of Vietnam;

Pursuant to Decree No. 26/2014/ND-CP dated April 07, 2014 of the Government of Vietnam on organization and operation of bank inspectors and supervisors and Decree No. 43/2019/ND-CP dated May 17, 2019 of the Government of Vietnam on amendments to certain Articles of Decree No. 26/2014/ND-CP dated April 07, 2014 of the Government of Vietnam on organization and operation of bank inspectors and supervisors;

Pursuant to Decision No. 20/2019/QD-TTg dated June 12, 2019 of the Prime Minister on functions, tasks, powers and organizational structure of the Banking Inspection and Supervision Agency under direct management of the State Bank of Vietnam;

At the request of Chief Inspector and supervisor of the Bank;

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Chapter I

GENERAL PROVISIONS

Article 1. Scope

1. This Circular provides for banking supervisory procedures applicable to credit institutions and foreign bank branches.

2. The supervision of payment systems and information systems security of credit institutions and foreign bank branches shall comply with regulations of relevant laws.

3. The supervision of anti-money laundering of credit institutions and foreign bank branches shall comply with regulations of laws thereon.

4. The supervision of the compliance with laws on investment, management and use of the state budgets at credit institutions shall comply with regulations of laws thereon at enterprises.

5. The banking supervision of credit institutions which are controlled strictly shall comply with regulations of laws on strict control of credit institutions and regulations herein.

Article 2. Regulated entities

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a) Micro-prudential supervision units;

b) Macro-prudential supervision units.

2. Banking supervised entities include:

a) Micro-prudential supervised entities;

b) Macro-prudential supervised entities.

3. Other agencies, organizations and individuals engaged in the banking supervisory procedures.

Article 3. Definitions

For the purposes of this Circular, the terms below shall be construed as follows:

1. “banking supervision” includes micro-prudential supervision and macro-prudential supervision.

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3. “macro-prudential supervision” is the prudential supervision form applicable to the system of credit institutions and foreign bank branches.

4. Banking supervised entities include:

a) Micro-prudential supervised entities include:

(i) Credit institutions, excluding policy banks complying with regulations of laws;

(ii) Foreign bank branches;

(iii) Branches of credit institutions. For transaction offices of the people's credit funds, the supervision is performed through the people's credit funds. For transaction offices of other credit institutions, the supervision is performed through branches managing such transaction offices;

(iv) Other entities decided by the Governor of the State Bank of Vietnam.

b) Macro-prudential supervised entities are the system of credit institutions and foreign bank branches, including a group of credit institutions and foreign bank branches which play a significant role in the system and a group of credit institutions and foreign bank branches classified according to forms of operation and ownership.

5. “micro-prudential supervision unit” is a unit under the organizational structure of the Banking Inspection and Supervision Authority, a branch of the State Bank of Vietnam that are assigned to perform the micro-prudential supervision according to the Decision of the Governor of the State Bank of Vietnam and regulations of laws.

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7. " supervision of compliance” is the consideration, monitoring and analysis (hereinafter referred to as “analysis and consideration”) of the compliance with regulation of laws on operational safety of banks and other regulations of laws on finance and banking; directions and requests of state authorities competent to banking supervised entities as prescribed in clause 9 of this Article.

8. “enhanced supervision” is the micro-prudential supervision of micro-prudential supervised entities through the addition of some supervisory contents and reporting frequency according to the Decision of the Governor of the State Bank of Vietnam or the Director of a branch of the State Bank of Vietnam for each specific case.

9. “directions and requests of state competent authorities applicable to banking supervised entities” means the provision of directions of and requests for performance of some contents and tasks specified in the following documents applicable to banking supervised entities by the State Bank of Vietnam ( or the State Bank of Vietnam proposed by other state competent authorities):

a) Inspection conclusion, audit conclusion, examination results and decisions on handling of inspection-related violations;

b) Written recommendations and warnings in the banking supervision;

c) Other documents of the State bank of Vietnam with specific requirements for contents and tasks.

10. "risk supervision” means the analysis and consideration of risks (including systemic risks) to warn and recommend banking supervised entities.

11. “risk” means the potential of causing loss (financial loss and non-financial loss) which reduces the equity and revenue, thereby reducing the capital adequacy ratio or restricting the capacity to achieve business objectives by a credit institution or branch of a foreign bank.

12. “systemic risk” means the potential of losses, spreading from the collapse of one credit institution or branch of a foreign bank to a system or group of other credit institutions and branches of a foreign bank, thereby disrupting the operations of the credit institutions or foreign bank branches.

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14. “contact with banking supervised entities" means one where a banking supervision unit requests banking supervised entity to explain and provide written proofs of the accuracy and adequacy of documents, information and reports and clarify the issues concerning risks and compliance with regulations of laws on monetary and banking operations and in service of banking supervision.

15. “systemically important credit institutions or foreign bank branches” means credit institutions or foreign bank branches that may cause negative effects on the entire system of credit institutions or foreign bank branches and/or systemic risks that disrupt operations of the system of credit institutions and foreign banks branches and entire economy in case of insolvency or bankruptcy.

16. “database management” means the development, update and maintenance of fulfillment of requirements for access and use of documents, information and data in serve of banking supervision.

17. "banking supervision manual” is a specific guidance document on banking supervisory operations issued by the State Bank of Vietnam, including the following contents:

a) Collection, consolidation, processing of documents, information and data;

b) Supervisory guidance;

c) Supportive supervision tools;

d) Sanctions in banking supervision

d) Banking supervision dossiers.

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Article 4. Rules for banking supervision

The banking supervision shall comply with the following rules:

1. Rules prescribed in Article 51 of the Law on the State Bank of Vietnam, Article 4 of Decree No. 26/2014/ND-CP dated April 07, 2014 of the Government (revised version) on organization and operation of bank inspectors and supervisors.

2. Rules for combination of compliance supervision and risk supervision as well as micro-prudential supervision and macro-prudential supervision.

Article 5. Banking supervisory procedures

1. Banking supervisory procedures shall be carried out as follows;

a) Step 1: Collect, consolidate, process documents, information and data;

b) Step 2: Carry out contents of compliance supervision and/or risk supervision;

c) Step 3: Prepare reports on the supervision and propose sanctions.

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Article 6. Management and storage of documents, information and data

Documents, information and data must, after being consolidated and processed, be stored and managed for the purpose of the banking inspection and supervision according to the following rules:

1. Documents, information and data must be stored scientifically and fully according to each dossier of each banking supervised entity and entire system.

2. Documents. Information and data must be stored as per existing law on archives.

3. Documents, information and data consisting of information of the State secret must be managed, stored and used according to regulations of laws on the protection of State secrets.

4. Information and data of credit institutions and information of customers must be secured as per regulation of law.

Chapter II

MICRO-PRUDENTIAL SUPERVISION

Section 1: Collection, consolidation and processing of documents, information and data

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1. Sources of documents, information and data serving the banking supervision include:

a) Data and reports under regulations of existing law on statistical reporting regimes of the State Bank of Vietnam;

b) Customer data of banking supervised entities from the National Credit Information Center of Vietnam (hereinafter referred to as "CIC”), sources of information and documents serving the supervision from the Cooperative Bank of Vietnam (Co-opBank) and the Deposit Insurance of Vietnam (DIV);

c) Information from inspection, supervision and post-inspection handling;

d) Information from the issuance of licenses of the State Bank;

dd) Independent audit results;

e) Results of credit ratings of State regulatory authorities;

g) Reports on micro-prudential supervision and macro-prudential supervision, sanctions therein;

h) Reports on request of the State Bank of Vietnam and other competent authorities;

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k) Work records, written explanations, dossiers and data provided by banking supervised entities;

l) Documents, information and data collected from units affiliated to the State Bank of Vietnam and other sources (if any).

2. Micro-prudential supervision units shall collect documents, information and data from the sources prescribed in points a, b, c, d, dd, e and g clause 1 of this Article via the electronic statistical reporting system of the State Bank of Vietnam and the remote supervisory system.

3. Micro-prudential supervision units shall collect documents, information and data provided by the sources prescribed in points h, i, k, and l clause 1 of this Article.

4. Based on requests for banking supervision, micro-prudential supervision units shall request or appeal to Chief Inspectors, bank supervisors, Directors of branches of the State Bank of Vietnam to request banking supervised entities to provide documents, information and data other than those prescribed in clause 1 of this Article.

Section 8: Processing, updating and consolidating documents, information and data

According to sources of documents, information and data prescribed in Article 7 hereof, micro-prudential supervision units shall process and consolidate them as follows:

1. For documents, information and data updated automatically from the electronic statistical reporting system of the State Bank of Vietnam, from the CIC to the remote supervisory system, micro-prudential supervision units shall process according to regulations on statistical reporting regimes of the State Bank of Vietnam and regulations on administration, operation and use of the remote supervisory system.

2. For other documents, information and data not prescribed in clause 1 of this Article, micro-prudential supervision units shall:

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b) update necessary documents, information and data into the remote supervisory system according to regulations on administration, operation and use of the remote supervisory system promulgated by the Governor of the State Bank of Vietnam.

3. In case of detection of inadequate, failed or inappropriate documents, information and data at the requests of micro-prudential supervisors, micro-prudential supervision units shall request supervised entities to submit reports and explanations in the form of contact with supervised entities as prescribed in Chapter IV of this Circular.

4. According to information consolidated and processed, micro-prudential supervision units shall implement contents prescribed in Sections 2 and 3 of this Chapter.

Section 2. Micro-prudential supervision

Article 9. Contents of micro-prudential supervision of credit institutions and foreign bank branches

1. A micro-prudential supervision unit shall determine scope and contents of information related to the operation of a micro-prudential supervised entity for supervision of compliance with laws on the operational safety of banks, other regulations of monetary and banking laws in the operation of the micro-prudential supervised entity, which focuses on one or some or all of the following contents:

a) Provide supervision of compliance with statistical reporting regimes, information reporting regimes under regulations of the Law on Credit Institutions (revised version) and guidance documents related in its competence and responsibilities of the micro-prudential supervision unit;

b) Provide supervision of compliance with limits and prudential ratios in the operation of credit institutions prescribed in Articles 126, 127, 128, 129 and 130 of the Law on Credit Institutions (revised version; classify debts, extract risk reserve funds of credit institutions and foreign bank branches on the basis of results from the remote supervisory system and electronic statistical reporting system of the State Bank of Vietnam;

c) Provide supervision of compliance with the satisfaction of conditions and standards applied to managers and operators prescribed in Article 50 and clause 4 Article 89 of the Law on Credit Institutions (revised version); and compliance with administrative mechanisms of the supervised entity as prescribed in Chapter III of the Law on Credit Institutions (revised version);

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dd) Review internal regulations promulgated by the micro-prudential supervised entity according to regulations in Article 93 of the Law on Credit Institutions (revised version): Annually, the micro-prudential supervision unit shall choose certain internal regulations for reviewing.

2. The micro-prudential supervision unit shall carry out the supervision of compliance with directions and requests of state competent authorities applicable to the micro-prudential supervised entity (if any).

3. The micro-prudential supervision unit shall carry out risk supervision via the use of modules and methods of risk analysis promulgated by the Governor of the State Bank of Vietnam in each period and/or carry out analysis and consideration of risks of banking supervised entities via one or some or all of the following contents:

a) Analyze and consider key changes and unusual fluctuations via the use of change thresholds in items including assets, liabilities, equities, revenues and accrued interests, costs, business results, limits and prudential ratios on the basis of results from the State Bank's electronic statistical reporting system, the remote supervisory system. Chief Inspectors and bank supervisors shall decide change thresholds of the above-mentioned items.

b) Consider key impact on management and operation of the micro-prudential supervised entity by assessing the following contents:

(i) changes in managers and executives as prescribed in Article 50 and Article 89 of the Law on Credit Institutions (revised version) of the micro-prudential supervised entity;

(ii) Changes in the situation of shareholders, share ownership of managers, executives, major shareholders and related persons of these individuals and organizations (including investment in the form of capital contribution or share purchase with the aim of holding control over a credit institution being a joint-stock company);

(iii) Changes in the situation of capital contribution, limited partners and owners of credit institutions being limited liability companies or credit institutions being cooperatives.

c) On the basis of receiving adverse information that is possible to cause key impact on the micro-prudential supervised entity, the micro-prudential supervision unit shall assess and consider the risk situation of the micro-prudential supervised entity;

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The micro-prudential supervision unit shall determine fields, customers and transactions with high risks in each period.

4. For joint-stock commercial banks, when necessary, the micro-prudential supervision unit shall review and assess the compliance with laws, credit quality and risks of high-value transactions (including credit extensions, investments, capital contributions, share purchases, other receivables). The micro-prudential supervision unit shall consider and decide specific high-value degrees of the above-mentioned transactions.

5. The micro-prudential supervision unit shall decide or appeal to the competent authority to decide other supervision contents applicable to the micro-prudential supervised entity within its assigned supervision suitable for needs and sources of the unit.

Article 10. Contents of macro-prudential supervision of a branch of a credit institution

1. Supervision of compliance includes:

a) Supervision of compliance with regulations of laws on:

(i) Statistical reporting regime of the branch as prescribed in statistical reporting regimes;

(ii) Other regulations of monetary and banking laws applicable to the branch.

b) The micro-prudential supervision unit shall carry out the supervision of compliance with directions and requests of state competent authorities applicable to the micro-prudential supervised entity (if any).

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a) Items of assets, liabilities, revenues, costs and differential revenues and costs;

b) Situation of credit extensive and credit quality of the micro-prudential supervised entity. When necessary, the micro-prudential supervision unit shall review and assess the credit extensive and other high-value receivables of the micro-prudential supervised entity. Director of a branch of the State Bank of Vietnam shall decide specific high-value degrees of these transactions;

c) Preparation and update of the list of personnel information, including at least the branch director of the credit institution;

d) Information causing negative impact on the operation of the supervised entity.

3. For large-scale transaction offices in a particular area decided by the branch Director of the State Bank or transaction offices having information causing negative impact on the operation of such transaction offices, the micro-prudential supervision unit shall carry out the supervision as prescribed in clauses 1 and 2 of this Article via branches that managing such transactions.

Article 11. Enhanced supervision

1. Based on the operational situation of the micro-prudential supervised entity, the micro-prudential supervision unit shall consider and report to the Governor of the State Bank of Vietnam, branch Director of the State Bank of Vietnam the applicable to micro-prudential supervised entities through the addition of some supervisory contents and reporting frequency according to the Decision of the Governor of the State Bank of Vietnam or the Director of a branch of the State Bank of Vietnam for each specific case.

a) The micro-prudential supervised entity is classified at level C or D in case of the People’s credit funds; or level D or E in case of other credit institutions and foreign bank branches as prescribed in regulations of the State Bank of Vietnam on the credit rating of credit institutions and foreign bank branches;

b) Early intervention measure shall be imposed on the micro-prudential supervised entity according to regulations of laws and this Circular;

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2. Based on the operational situation of the micro-prudential supervised entity, the micro-prudential supervision unit shall appeal to the Governor of the State Bank of Vietnam, branch Director of the State Bank of Vietnam to decide the enhanced supervision, including:

a) Supervisory cope;

b) Supervisory subjects;

c) Supervisory contents, including supervision of liquidity situation; credit extensions, receivables and investments, capital contributions, share purchases or investments in the form of capital contributions and share purchases in order to take control of enterprises;

d) Reporting frequency of the micro-prudential supervised entity;

dd) Cooperative contents of units and individuals related to the enhanced supervision (if any).

Section 3. Preparation of reports and supervisory dossiers and proposal and imposition of sanctions

Article 12. Preparation of reports on the micro-prudential supervision and proposal and imposition of sanctions therefor

1. On the basis of results of the compliance supervision and risk supervision as prescribed in Section 2 of this Chapter and based on regulations of current laws, the micro-prudential supervision unit shall:

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b) propose and impose sanctions as prescribed in Chapter V of this Circular (if necessary).

2. Rules for preparation, approval and submission of the ad hoc report on micro-prudential supervision:

a) The ad hoc report on micro-prudential supervision must be made when the micro-prudential supervision unit detects violations and risks of legal violations, risks that threaten the operational safety of the banking supervised entity or at the request of the competent authority;

b) The ad hoc report on micro-prudential supervision shall be approved and submitted as follows:

(i) The ad hoc report on micro-prudential supervision must be approved by the leader of the micro-prudential supervision unit;

(ii) Based on petitions in the ad hoc report on micro-prudential supervision and competence in solving the petitions according to regulations of laws, the ad hoc report on micro-prudential supervision must be submitted to the competent authority for consideration and decision;

(iii) The ad hoc report on micro-prudential supervision made at the request of any competent authority must be submitted to that competent authority for consideration and handling.

3. Rules for preparation, approval and submission of periodic report on the micro-prudential supervision:

a) A report on micro-prudential supervision for the first 6 month of a year must be completed before August 31 of the year. An annual report on micro-prudential supervision must be completed before April 15 of the next year;

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c) The periodic report on micro-prudential supervision shall be approved and submitted as follows:

(i) For the micro-prudential supervision unit under the organizational structure of the State Bank Branch, a 6-month or annual report must be approved by the leader of the micro-prudential supervision unit and must be sent to the leader of the State Bank Branch;

(ii) For the micro-prudential supervision unit under the organizational structure of the Banking Inspection or Supervision of the State Bank Branch of Hanoi or Ho Chi Minh City, a 6-month or annual report must be approved by the leader of the micro-prudential supervision unit and must be sent to the leader of the Inspection and Supervision of the State Bank Branch and the leader of the State Bank Branch;

(iii) For the micro-prudential supervision unit under the organizational structure of a Banking Inspection and Supervision Agency of the State Bank Branch of Hanoi or Ho Chi Minh City, a 6-month or annual report must be approved by the leader of the micro-prudential supervision unit and must be sent to the leader of the Inspection and Supervision Agency of the State Bank Branch and the leader of the State Bank;

(iv) In case the report on micro-prudential supervision including the petition for imposing sanctions on a competent authority as prescribed by laws, the report on micro-prudential supervision must be submitted to such competent authority for consideration and decision.

Article 13. Micro-prudential supervision dossiers

1. A micro-prudential supervision dossier shall include ad hoc and periodic reports on the micro-prudential supervision, documents on the contact with the banking supervised entity and a dossier of sanctions in the micro-prudential supervision.

2. In case an early intervention measure is imposed on the banking supervised entity, the micro-prudential supervision dossier needs to include a Decision on applying the early intervention measure as well as remedial measures therefor.

3. In case an enhanced supervision measure is applied to the banking supervised entity, the micro-prudential supervision dossier needs to include a Decision on applying the enhanced supervision measure as well as information, documents, data and remedial measures therefor.

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MACRO-PRUDENTIAL SUPERVISION PROCEDURES

Section 1: COLLECTION, CONSOLIDATION AND PROCESSING OF DOCUMENTS, INFORMATION AND DATA

Article 14: Collection, consolidation and processing of documents, information and data

1. A macro-prudential supervision unit shall collect documents, information and data provided by the following sources of a banking supervised entity:

a) Sources specified in Clause 1 Article 7 of this Circular;

b) The reports on micro-prudential supervision and the dossier of sanctions in the micro-prudential supervision (except for the People's Credit Funds);

c) Based on requests for banking supervision, the macro-prudential supervision unit shall request or appeal to a competent authority to request the banking supervised entity to provide documents, information and data other than those prescribed in points a and b clause 1 of this Article.

2. The macro-prudential supervision unit shall consolidate and process documents, information and data provided by the sources prescribed in clause 1 of this Article and set up databases serving the macro-prudential supervision.

3. When detecting inadequate, failed or inappropriate documents, information and data at the request of a micro-prudential supervisor, the macro-prudential supervision unit shall cooperate with the micro-prudential supervision unit in requesting the supervised entity to provide reports and explanation.

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Article 15. Contents of macro-prudential supervision of a system of credit institutions and foreign bank branches

The macro-prudential supervision unit shall carry out risk supervision via one or some or all of the following contents:

1. Analysis and consideration of financial soundness indicators for the purpose of detecting risks threatening the safety system shall be classified as follows:

a) Analysis and consideration of equity, capital adequacy ratios, capital mobilization and use;

b) Analysis and consideration of the liquidity;

c) Analysis and consideration of bad debts and asset quality;

d) Analysis and consideration of interbank activities;

dd) Analysis and consideration of business results; accrued interests.

The macro-prudential supervised entity shall use change thresholds suitable for characteristics of the macro-prudential supervised entity for assessing risks threatening the safety system. Chief Inspectors and bank supervisors shall decide change thresholds of the above-mentioned items.

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3. An annual or ad hoc endurance test at the request of the Governor of the State Bank, including the following contents:

a) Take the endurance test on credit risks via analysis and forecast of the bad debt developments according to macro-economic scenarios, impact of suppositions about transferring debt groups and suppositions about big customers insolvent;

b) Take the endurance test on market risks via analysis of impact according to volatility scenarios of exchange rates and interest rates on the safety and soundness indicators of the system, group of credit institutions, foreign bank branches;

c) Take the endurance test on interbank contagion risks;

d) Take the endurance test on liquidity risks via analysis of the liquidity in case of bank run.

4. When necessary or at the request of the Governor of the State Bank of Vietnam, the macro-prudential supervision unit shall analyze and consider the potential for causing a systemic banking crisis and response measures.

5. For the group of systematically important credit institutions and foreign bank branches, the macro-prudential supervision unit shall supervise at least the contents prescribed in clause 1 of this Article and take the 6-month or ad hoc endurance test upon arising consideration for systemic risks at the request of the Governor of the State Bank of Vietnam.

The macro-prudential supervision unit shall, based on criteria on scale, inter-linkage and interchangeability, make a list of systematically important credit institutions and foreign bank branches and appeal to the Governor of the State Bank of Vietnam to promulgate before March 31 every year.

6. For the group of the people's credit funds and micro-financial organizations, the macro-prudential supervision unit shall at least follow contents prescribed in clause 1 of this Article.

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Section 3. PREPARATION OF REPORTS AND SUPERVISORY DOSSIERS AND PROPOSAL AND IMPOSITION OF SANCTIONS

Article 16. Preparation of reports on the micro-prudential supervision and proposal and imposition of sanctions therefor

1. On the basis of results of the risk supervision as prescribed in Section 2 of this Chapter and based on regulations of current laws, the macro-prudential supervision unit shall:

a) make an ad hoc or periodic report on the macro-prudential supervision as prescribed in clauses 2 and 3 of this Article according to Appendix IV issued together with this Circular;

b) request the micro-prudential supervision unit to research and consider the imposition of sanctions prescribed in Chapter V of this Circular for the banking supervised entity (if necessary).

2. Rules for preparation and submission of the ad hoc report on the macro-prudential supervision:

a) The ad hoc report on micro-prudential supervision must be made when the macro-prudential supervision unit detects risks that threaten the safety or cause banking crisis of the system, group of credit institutions and foreign bank branches or at the request of the Governor of the State Bank of Vietnam;

b) The ad hoc report on the macro-prudential supervision shall be approved and sent to the competent authority according to the following rules:

(i) The ad hoc report on macro-prudential supervision must be approved by the leader of the macro-prudential supervision unit;

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(iii) Based on petitions in the ad hoc report on macro-prudential supervision and competence in solving the petitions according to regulations of laws, the ad hoc report on macro-prudential supervision must be submitted to the competent authority for consideration and decision.

3. Rules for preparation and submission of the periodic report on the macro-prudential supervision:

a) A report on macro-prudential supervision for the first 6 month of a year must be completed before August 31 of the year. An annual report on macro-prudential supervision must be completed before April 15 of the next year;

b) The periodic report on the macro-prudential supervision shall be approved and sent to the competent authority according to the following rules:

(i) The report on macro-prudential supervision must be approved by the leader of the micro-prudential supervision unit and must be sent to the leader of the Banking Inspection and Supervision Agency and the Steering Committee of the State Bank of Vietnam;

(ii) In case the report on macro-prudential supervision including the petition for imposing sanctions on a competent authority as prescribed by laws, the report on macro-prudential supervision must be submitted to such competent authority for consideration and decision.

Article 17. Macro-prudential supervision dossiers

A macro-prudential supervision dossier shall include ad hoc and periodic reports on the macro-prudential supervision, a dossier of sanctions in the macro-prudential supervision.

Chapter IV

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Article 18. Forms of contact with a banking supervised entity

Forms of contact with the banking supervised entity include:

1. A request for written explanation.

2. Contact in person.

Article 19. The request for written explanation

1. When detecting inadequate, failed or inappropriate documents, information and data at the request of a micro-prudential supervisor or issues related to the inadequate compliance with regulations of laws, directions and requests of the state competent authority or risks of the banking supervised entity, the banking supervision unit shall send a request or appeal to a Chief Inspector or bank supervisor (applicable to macro-prudential supervision units) to request the banking supervised entity to explain.

2. Based on the time limit for explanation prescribed in the written request for explanation, the banking supervised entity must provide the written explanation including the following contents:

a) Explanation for each specific request, including the analysis of real situation and reasons;

b) Proposal for remedial measures (including the roadmap for implementation thereof) upon the request of the banking supervision unit.

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1. When documents, information and data that are inadequate, failed, inappropriate or necessary to be clarified are detected at the request of the micro-prudential supervisor or issues related to the inadequate compliance with regulations of laws, directions and requests of the state competent authority or risks of the banking supervised entity are , the banking supervision unit shall make a request or appeal to a Chief Inspector or bank supervisor (applicable to macro-prudential supervision units) to decide the establishment of a working team and contents of the contact with the banking supervised entity.

2. Before contact in person, the banking supervision unit must send a written notification to the banking supervised entity before at least 03 working day; the written notification must clarify participants of the working team, contents, time and location of contact.

3. Results of the contact in person with the banking supervised entity must be recorded in writing according to Appendix I issued together with this Circular and signed to confirm between a representative of the working team and the banking supervised entity.

Chapter V

SANCTIONS IN BANKING SUPERVISION

Article 21. Sanctions in the banking supervision

1. Based on results of the banking supervision, the banking supervision unit shall provide warnings and recommendations for the banking supervised entity; depending on the indicators of safety, soundness and violation against laws of the banking supervised entity, the unit shall impose administrative penalties according to regulations of laws (if any); submit the Governor of the State Bank of Vietnam or the Director of the State Bank Branch under its competence:

a) Apply sanctions prescribed in Article 25 of Decree No. 26/2014/ND-CP dated April 07, 2014 of the Government of Vietnam (revised version) on organization and operation of bank inspectors and supervisors;

b) Apply the enhanced supervision to the banking supervised entity;

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d) Amendments to and replacement of documents on monetary and banking laws (if any).

2. If necessary, in order to fully assess the operational reality of the banking supervised entity, the banking supervision unit shall appeal to the Chief Inspector and bank supervisor to request the banking supervised entity (excluding branches of credit institutions) to hire an independent audit organization to audit one, some or all contents of the operation as prescribed in laws.

Article 22. Warnings and recommendations

1. Based on results of the supervision, the banking supervision units shall decide or appeal to the Chief Inspectors, bank supervisors, Directors of the State Bank Branches to consider and approve the recommendations and warnings for the banking supervised entity.

2. The recommendations and warnings for the banking supervised entity shall be provided according to one or multiple following grounds:

a) The supervision results that are shown by quantitative indicators exceed the warning threshold;

b) On the basis of applying professional methods upon assessing and analyzing qualitative information showing potential risks and risks of legal violation of the banking supervised entity from the supervision results combined with inspection conclusions, independent audit results, internal audit results and information from other regulatory authorities;

c) When the Governor of the State Bank makes a request derived from the state management of finance and banking.

3. Upon receipt of the recommendations and warnings, the banking supervised entity must be responsible for promptly providing a report on and explanation for recommendations and warnings at the request of the banking supervision unit including at least condition, reasons and remedial measures. The time limit for submitting the report and written explanation of the banking supervised entity shall be particularly stated in the recommendations and warnings sent to the banking supervised entity. The banking supervision unit shall be responsible for monitoring and urging the recommendations and warnings of the banking supervised entity.

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Article 23. Early intervention measures

1. The competence in deciding the early intervention prescribed in Article 130a of the Law on Credit Institutions (revised version):

a) The Governor of the State Bank shall consider and decide the early intervention applied to the banking supervised entity under supervision of the Banking Inspection and Supervision Agency;

b) The Director of a State Bank Branch shall consider and decide the early intervention applied to the banking supervised entity (excluding branches of credit institutions) under supervision of the Inspector and Supervisor of the State Bank Branch.

2. Based on the results of banking supervision and regulations in clauses 1 and 2 of Article 130a of the Law on Credit Institutions (revised version), the micro-prudential supervision unit shall:

a) appeal to the Chief Inspector and bank supervisor to request the Governor of the State Bank to consider and promulgate a document on applying the early intervention measures as prescribed in point a clause 1 of this Article;

b) appeal to the Director of the State Bank Branch to consider and promulgate a document on applying the early intervention measures as prescribed in point b clause 1 of this Article.

3. Within 30 days from the day of receiving the document on applying the early intervention measures, the banking supervised entity shall be responsible for sending a written report to the State Bank (Banking Inspection and Supervision Agency, State Bank Branch) on condition, reasons, remedial measures and organization of implementation thereof. The State Bank shall make a written request for adjustment of remedial measures in necessary by credit institutions and foreign bank branches.

Remedial measures of the banking supervised entity must be developed and adjusted on the basis of the operational condition of the banking supervised entity and must ensure the compliance with the regulations in clauses 3 and 4 Article 130a of the Law on Credit Institutions (revised version).

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5. In case the banking supervised entity cannot develop the remedial measures as prescribed in clause 3 Article 130a of the Law on Credit Institutions (revised version) or the time limit for implementation thereof end but the entity does not overcome the situation specified in clause 1 of Article 130a of the Law on Credit Institutions (revised version), the micro-prudential supervision unit shall appeal to:

a) The Chief Inspector and bank supervisor to request the Governor of the State Bank to consider and promulgate the written request for implementing one or some measures prescribed in clause 4 Article 130a of the Law on Credit Institutions (revised version) by the banking supervised entity under supervision of the Banking Inspection and Supervision Agency;

b) The Director of the State Bank Branch to consider and promulgate the written request for implementing one or some measures prescribed in clause 4 Article 130a of the Law on Credit Institutions (revised version) by the banking supervised entity under supervision of the Inspector and Supervisor of the State Bank Branch;

6. After the banking supervised entity overcomes the situation specified in clause 11 Article 130a of the Law on Credit Institutions (revised version) or when the banking supervised entity is set on special control, the micro-prudential supervision unit shall appeal to:

a) The Chief Inspector and bank supervisor to request the Governor of the State Bank to consider and decide a document on termination of the early intervention measures applied to the banking supervised entity under supervision of the Banking Inspection and Supervision Agency;

b) The Director of the State Bank Branch to consider and promulgate a document on termination of the early intervention measures applied to the banking supervised entity under supervision of the Bank Inspector and Supervisor of the State Bank Branch.

7. During the period of developing and implementing the early intervention measures and remedial measures, if necessary, in order to clarify limits and suitable remedial measures, the banking supervision unit shall appeal to the Governor of the State Bank (via the Banking Inspection and Supervision Agency) or the Director of the State Bank Branch to request the banking supervised entity (excluding branches of credit institutions) to hire the independent audit organization to audit one, some or all contents as prescribed in laws.

8. Report and banking supervision of remedial measures:

a) Monthly or ad hoc, at the request of the micro-prudential supervision unit, the banking supervised entity shall report progress and results of implementing the remedial measures to the State Bank (Banking Inspection and Supervision Agency or State Bank Branch) before the 10^th of the next month for banking supervision according to regulations herein;

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c) Based on the results after implementing remedial measures of the banking supervised entity, in case of delay or inefficacy, the micro-prudential supervision unit shall appeal to the Chief Inspector, bank supervisor or Director of the State Bank Branch to prepare a written request for reporting explanation for reasons and remedial measures by the banking supervised entity.

Chapter VI

RESPONSIBILITIES OF RELEVANT ORGANIZATIONS AND INDIVIDUALS DURING THE BANKING SUPERVISORY

Article 24. Responsibilities of the Banking Inspection and Supervision Agency

1. Take responsibilities for state management of the banking supervision in the entire system of banking inspection and supervision.

2. Take charge and cooperate with the State Bank Branch and other units of the State Bank of Vietnam and relevant organizations in carrying out the banking supervision.

3. Take charge and cooperate with the State Bank Branch in carrying out the banking supervision according to regulations herein and the Decision of the Governor of the State Bank of Vietnam of the banking supervision entity under assigned supervision of the Banking Inspection and Supervision Agency.

4. Based on the regulations herein, take charge and cooperate with relevant formulation units in submitting the Decision on promulgating the banking supervision manual to the Governor of the State Bank in order to provide professional instruction in the banking supervision according to the regulations herein and the List of systematically important credit institutions and foreign bank branches.

5. Take charge and cooperate with the Department of Information Technology and relevant units of the State Bank in studying, investing, applying and managing databases and developing an information technology system to ensure uniformity in the banking supervision in accordance with regulations of law.

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7. Decide change thresholds of the micro-prudential supervision and macro-prudential supervision in each period.

8. Appeal to the Governor of the State Bank of Vietnam to issue modules and methods of risk analysis in each period.

9. Other responsibilities according to regulations of laws.

Article 25. Responsibilities of the State Bank Branch

1. Take charge and cooperate with the Banking Inspection and Supervision Agency, units affiliated to the State Bank of Vietnam and organizations relevant in the micro-prudential supervision under their assigned supervision.

2. Carry out the enhanced supervision of the banking supervised entity according to regulations herein and the Decision of the Governor of the State Bank of Vietnam or the Director of the State Bank Branch in each specific case.

3. Other responsibilities according to regulations of laws.

Article 26. Responsibilities of the micro-prudential supervision unit

1. Advise and request the Chief Inspector, bank supervisor, Director of the State Bank Branch to carry out the tasks prescribed in this Circular and carry out them.

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3. The macro-prudential supervision unit may consider and decide a mechanism of responsible officials applicable to each banking supervised entity according to the following regulations:

a) Responsible officials have powers to access general information on the banking supervised entity under its supervision, including information about the banking supervision and issuance of licenses;

b) Responsible officials may consider participation in inspectorates that their inspected entities are banking supervised entities supervised by such responsible officials.

4. Carry out the enhanced supervision of the banking supervised entity according to the Decision of the Governor of the State Bank of Vietnam or the Director of the State Bank Branch in each specific case.

5. Periodically or ad hoc provide results of the micro-prudential supervision (including the report on the micro-prudential supervision and excluding the report on the micro-prudential supervision of the banking supervised entity which is a branch of a credit institution or the people's credit fund) to the macro-prudential supervision unit.

6. Cooperate with the macro-prudential supervision unit in determining macro-prudential supervision thresholds of each form of credit institutions.

Article 27. Responsibilities of the macro-prudential supervision unit

1. Advise and request the Chief Inspector and bank supervisor to carry out the tasks prescribed in this Circular and carry out them.

2. Assign officials to carry out the macro-prudential supervision as prescribed herein.

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4. Act as the focal point and cooperate with the micro-prudential supervision unit in determining micro-prudential supervision thresholds of each form of credit institutions and appeal to the Chief Inspector and bank supervisor to decide.

5. Determine micro-prudential supervision thresholds and appeal to the Chief Inspector and bank supervisor to decide.

6. Make a list of systematically important credit institutions and foreign bank branches and appeal to the Chief Inspector and bank supervisor.

Article 28. Responsibilities of relevant units affiliated to the State Bank of Vietnam

1. Provide information, documents and data at the request of the Banking Inspection and Supervision Agency and the State Bank Branch according to the regulations herein and regulations of laws.

2. Cooperate with the Banking Inspection and Supervision Agency and the State Bank Branch in the banking prudential supervision.

3. Cooperate with the Banking Inspection and Supervision Agency and the State Bank Branch in reviewing internal regulations of the supervised entity issued according to legislative documents formulated by the supervisory unit and appealed to a competent authority to promulgate.

Article 29. Responsibilities of the banking supervised entity

1. Provide documents, information and data prescribed in Article 7 and Article 14 hereof and be responsible for the accuracy and reliability of such documents, information and data.

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3. Fully comply with sanctions in the banking supervision according to regulations in Chapter V hereof.

4. Other responsibilities according to regulations of laws.

Chapter VII

IMPLEMENTATION CLAUSES

Article 30. Effect

1. This Circular comes into force from September 01, 2022, excluding regulations in clause 2 hereof.

2. Documents, information and data shall be automatically processed and updated into the remote supervision system of the micro-prudential supervised entity which is the people's credit fund or micro-financial organization according to regulations in clause 1, point b clause 2 Article 8 of this Circular when having a corresponding remote supervision system. When the corresponding remote supervision system is not developed, the micro-prudential supervision unit shall:

a) Based on the sources of documents, information and data prescribe din clause 1 and 4 Article 7 hereof, the micro-prudential supervision unit shall collect and review the logic of the information via the comparison of collected documents, information and data with the historical data to detect issues that are unusual, illogical or unreasonable.

b) The micro-prudential supervision unit shall process and consolidate documents, information and data according to regulations in clauses 3 and 4 Article 8 hereof.

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Article 31. Organizing implementation

Chiefs of Offices, Chief Inspectors, banking supervisors, heads of units affiliated to the State Bank of Vietnam, credit institutions and foreign bank branches are responsible for implementation of this Circular./.

PP. GOVERNOR
DEPUTY GOVERNOR




Doan Thai Son