| THE STATE BANK OF VIETNAM | THE SOCIALIST REPUBLIC OF VIET NAM |
| No. 25/VBHN-NHNN | Hanoi, July 23, 2024 |
CIRCULAR
PRESCRIBING PRUDENTIAL RATIOS AND LIMITS FOR OPERATIONS OF PEOPLE’S CREDIT FUNDS
The Circular No. 32/2015/TT-NHNN dated December 31, 2015 of the Governor of State Bank of Vietnam prescribing prudential ratios and limits for operations of people’s credit funds, coming into force from March 01, 2016, is amended by:
The Circular No. 13/2024/TT-NHNN dated June 28, 2024 of the Governor of the State Bank of Vietnam providing amendments to the Circular No. 32/2015/TT-NHNN dated December 31, 2015 of the Governor of State Bank of Vietnam prescribing prudential ratios and limits for operations of people’s credit funds, coming into force from August 12, 2024.
Pursuant to the Law on State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;
Pursuant to the Law on Credits Institutions No. 47/2010/QH12 dated June 16, 2010;
Pursuant to the Government’s Decree No. 156/2013/ND-CP dated November 11, 2013 defining functions, tasks, powers and organizational structure of the State Bank of Vietnam (SBV);
At the request of the Head of the SBV Banking Supervision Agency;
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Article 1. Scope and regulated entitiesPlease sign up or sign in to your TVPL Pro Membership to see English documents.
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a) Procedures and methods for monitoring CAR;
b) Methods for early warning of risks that lead to decrease in CAR;
c) Plan for dealing with failure to meet minimum CAR requirement which shall, inter alia, include: measures for increasing CAR; responsibilities, entitlements of and cooperation among relevant departments and individuals in implementation of the plan.
3. Internal regulations on liquidity management shall include the following as a minimum:
a) Regulations on decentralization, authorization, functions and tasks of relevant individuals and departments regarding monitoring and implementation of measures for maintaining the solvency ratio, maximum ratio of short-term capital used for granting medium- and long-term loans, and ratio of total received deposits to equity;
b) Procedures and limits for liquidity management and contingency plan for maintenance of the solvency ratio, maximum ratio of short-term capital used for granting medium- and long-term loans, and ratio of total received deposits to equity as prescribed in this Circular;
c) Regulations on management of budget, daily revenues, expenses and funding source;
d) Criteria for early warning of risks associated with inadequate solvency and liquidity, and response plans;
dd) Solutions for maintaining liquid assets such as increasing charter capital, establishing funds, and reducing risk weight for assets;
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4. Internal regulations on lending operations and management of loans granted shall comply with provisions of this Circular and relevant documents, and include the following as a minimum:
a) Criteria for identifying a client of the people’s credit fund and his/her related persons, including the cases prescribed in Points b, c, dd and g Clause 24 Article 4 of the Law on Credit Institutions 2024; an individual client and his/her spouse; natural parent, adoptive parent, stepparent, parent-in-law; natural child, adopted child, stepchild, daughter-in-law, son-in-law; sibling; half-sibling; spouse of his/her sibling or half-sibling;
b) Restrictions and limits on grant of loans to clients, clients and their related persons, mechanisms and principles for decentralization and authorization to grant loans to clients, clients and their related persons;
c) Maximum limit on loans, included in total outstanding amount of loans, granted to each of the following client groups: members of the people’s credit fund, clients that are not members of the people’s credit fund, and clients that are members of poor households of the people’s credit fund;
d) Procedures for monitoring loans with loan amount exceeding 5% of equity of the people’s credit fund;
dd) Regulations on reporting to SBV’s provincial branches and GMM on loans granted to the entities prescribed in clause 1 Article 135 of the Law on Credit Institutions 2024.
5. On a periodical basis of at least once a year and when necessary, people’s credit funds shall review, assess and revise their internal regulations to ensure their conformity with requirements for safe operations of people’s credit funds.
6. Within 10 (ten) business days from the date of issue, revision or substitution of its internal regulations, the people’s credit fund shall send their issued, revised or substitute internal regulations either directly or by post to the relevant SBV's provincial branch. In case of revision or substitution, the people’s credit fund shall send a written report on revised contents enclosed with its internal regulations.
7. People’s credit funds shall revise their internal regulations in conformity with provisions of this Circular by December 31, 2024.
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Section 1. PRUDENTIAL RATIOS AND LIMITS FOR OPERATIONS OF PEOPLE’S CREDIT FUNDS
Article 5. Capital adequacy ratio (CAR)
1. People’s credit funds must maintain the minimum CAR of 8%.
2. CAR is determined adopting the following formula:
CAR
=
Equity
x
100
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Where:
- The equity shall be determined according to clause 3 of this Article;
- Total risk-weighted assets are the sum of credit assets, determined according to the level of risks specified in clause 4 of this Article.
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(v) Financial reserve fund;
(vi) Grants offered by sponsors to the people’s credit fund;
(vii) Retained earnings;
The following amounts must be deducted from Tier 1 capital:
(i) Accumulated losses (if any); and
(ii) Capital amount contributed to the cooperative bank;
b) Tier 2 capital may not exceed 100% of Tier 1 capital, including: general provision which shall not exceed 1,25% of total risk-weighted assets;
c) Amount deducted from equity: 100% of decrease resulted from revaluation of assets as prescribed by law.
Determination of equity used for calculating the minimum CAR shall comply with Appendix 1 enclosed herewith.
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a) Assets given a risk weight of 0% include:
(i) Cash;
(ii) Deposits at SBV;
(iii) Deposits at the cooperative bank;
(iv) Outstanding balances of the granted loans which are fully secured by cash or deposits of borrowers at the people’s credit fund;
(v) Outstanding balances of the granted loans which are fully secured by valuable papers issued by the Government or SBV;
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c) Assets given a risk weight of 50% include: Outstanding balances of the granted loans which are fully secured by housing, land use rights, housing on land granted land use rights of borrowers in accordance with regulations of law;
d) Assets given a risk weight of 100% include:
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Total liabilities
Where: Liquid assets and total liabilities are determined according to Appendix 3 enclosed herewith.
2. At the end of each business day, the people’s credit fund shall be required to maintain the minimum solvency ratio of 1 for the next business day and for the next 7 (seven) business days.
Article 7. Maximum ratio of short-term capital used for granting medium- and long-term loans
1. Each people’s credit fund shall maintain a ratio of short-term capital used for granting medium- and long-term loans of not exceeding 30%.
2. The ratio of short-term capital sources used for granting medium and long-term loans is determined using the following formula:
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- A: Ratio of short-term capital sources used for granting medium and long-term loans.
- B: Total outstanding balance of medium- and long-term loans as prescribed in clause 3 of this Article.
- B: Total amount of medium- and long-term capital as prescribed in clause 4 of this Article.
- D: Total short-term capital as prescribed in clause 5 of this Article.
3. Total outstanding balance of medium- and long-term loans includes outstanding balances of loans with remaining term of over 01 (one) year. Total outstanding balance of medium- and long-term loans excludes outstanding balances of loans granted using trust funds of the Government, organizations (including other credit institutions and foreign bank branches) and individuals.
4. Medium- and long-term capital includes:
a) Please sign up or sign in to your TVPL Pro Membership to see English documents.
5. Short-term capital includes:
a) Demand deposits;
b) The following amounts with remaining term of up to 01 (one) year, including:
(i) Term deposits and saving deposits of organizations and individuals;
(ii) Loans received from other credit institutions and financial institutions.
Article 7a: Ratio of total received deposits to equity
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- A: Ratio of total received deposits to equity.
- B: Total received deposits as prescribed in clause 3 of this Article.
- C: Equity as prescribed in clause 4 of this Article.
3. Total received deposits include: demand deposits, term deposits, and saving deposits in VND of members of the people’s credit fund, and other organizations and individuals.
4. Equity is recognized according to the financial policies for people’s credit funds.
Article 8. Restrictions and limits on lending operationsPlease sign up or sign in to your TVPL Pro Membership to see English documents.
3. Regarding the loans granted to the entities prescribed in Point a Clause 1 of this Article, the people’s credit fund shall:
a) submit a report on the grant of loan to the relevant SBV’s provincial branch according to SBV's regulations;
b) publicly disclose at the GMM information on loans granted by the ending date of data collection which is conducted to serve the GMM.
4. Total outstanding balance on loans granted to a member that is a juridical person shall not exceed the sum of contributed capital and balance on deposits of that juridical person at the people’s credit fund at all times.
Total outstanding balance on loans granted to a client that is a juridical person or individual other than a member of the people’s credit fund shall not exceed the balance on deposit contract or passbook savings account of that client.
5. Limits prescribed in point b clause 1 of this Article shall not apply to:
a) Loans granted using trust funds of other organizations and/or individuals the risks of which are not taken by the people’s credit fund;
b) A loan granted to a client which is fully secured by that client's deposits at the people’s credit fund.
Article 8a. People’s credit funds at risk of becoming insolvent or considered insolventPlease sign up or sign in to your TVPL Pro Membership to see English documents.
2. A people’s credit fund is considered insolvent when it is unable to meet its debt obligations within 01 month as they become due.
3. The people’s credit fund that is at risk of becoming insolvency or has become insolvent must promptly submit reports to the relevant SBV’s provincial branch and the cooperative bank’s branch on its actual status, causes and remedial measures that have been or will be adopted, and suggested solutions (if any).
Chapter IIIPlease sign up or sign in to your TVPL Pro Membership to see English documents.
IMPLEMENTATION Please sign up or sign in to your TVPL Pro Membership to see English documents.