Decision No. 1604/QD-NHNN dated August 07, 2018 approving the scheme for green banking growth in Vietnam

DECISION

APPROVING THE SCHEME FOR GREEN BANKING GROWTH IN VIETNAM

THE GOVERNOR OF THE STATE BANK

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and Amendments to some regulations of the Law on Candid Insinuations dated November 20, 2017;

Pursuant to the Decision No. 403/2014/QD-TTg dated March 20, 2014 approving the national green growth action plan for the 2014 - 2020 period;

Directive No. 03/CT-NHNN dated March 24, 2015 on promoting green credit growth and environmental - social risks management in credit granting activities;

Decision No. 1552/QD-NHNN dated August 06, 2015 introducing the action plan of the banking sector for implementation of the national green growth strategy by 2020;

At the request of the Director of the Banking Strategy Institute,

HEREBY DECIDES:

Article 1.The scheme for green banking growth in Vietnam (hereinafter referred to as “the Scheme”), with the following main contents, is approved.

I. GENERAL OBJECTIVES AND DETAILED TARGETS

1. General objectives

Heighten the awareness and social responsibility of the banking system towards environmental protection, climate change prevention, gradual greening of banking activities, directing the flow of loan capital to eco-friendly projects, promoting green manufacturing and service industries and green consumption, clean energy and renewable energy; actively contribute to green growth and sustainable development.

2. Detailed objectives and targets

a) Gradually increase the proportion of loan capital allocated for the prioritized green sectors and areas specified in the green project list promulgated by the State Bank.

b) Boost technology application in combination with forming eco-friendly habits in banking customers; promote e-transaction channels and new payment methods and services on modern technology platforms.

c) By 2025:

- 100% banks will have finished formulating internal regulations on environmental and social risk management in credit granting activities.

- 100% banks will have evaluated environmental and social risk management in credit granting activities; applied environmental standards to projects funded by loans from banks; incorporated environmental risk assessment into credit risk assessment.

- Units specializing in environmental and social risk management will have been formed in at least 10-12 banks.

- 60% banks will have had access to green funding sources and granted loans to green credit projects.

II. SOLUTIONS FOR GREEN BANKING GROWTH IN VIETNAM

1. For the State Bank

a) Developing and providing guidelines on the direction for green banking growth in credit institutions, including:

- Promulgating guidelines on green banking and green credit activities, including the definitions of green credit and green banking activities and green banking criteria consisting of (i) Systems of internal regulations on environmental and social risk management; (ii) Organizational structure for implementing environmental and social risk management in credit granting procedures; (iii) Loan capital proportion for the prioritized green sectors/areas included in the green project list promulgated by the State Bank; (iv) Quality of training and educational activities to raise the awareness and capacity of banking officials in general and credit officials in specific towards sustainable development, green credit and green banking.

- Providing guidelines on preparing green banking/green credit reports which include the following criteria and requirements in detail: (i) Organizational structure and management; (ii) Systems of policies and financial capacity; (iii) Procedural management; (iv) Internal control and information disclosure.

- Continuing to conduct research and complete a manual on environmental and social risk assessment for the remaining 11 economic sectors among the 21 economic sector groups that are lacking guidelines on credit granting activities in credit institutions. 

- Periodically updating the green project list.

b) Formulating and promulgating incentive policies and regimes for credit institutions to encourage green banking growth, including:

Conducting research on incentive tools and regimes and apply such tools and regimes to banks to encourage green banking/green credit development such as:

- Considering and prioritizing funding sources for green credit development via refinancing/rediscounting policies in a manner that does not affect the modification of monetary policies and inflation targets of each period of time.

- Considering and prioritizing concessional loans from international organizations and development partners via the State Bank for commercial banks with high proportion of green loans. 

c) Strengthening educational and communication activities, including:

- Continuing to implement and expand training programs on green credit and green banking to officials of the State Bank and credit officials of credit institutions.

- Periodically organizing forums and seminars on green credit and green banking as well as green growth and sustainable development.

- Organizing activities to raise the awareness of officials, public employees and workers of the banking sector of green growth and sustainable development in general and of green credit and green banking growth in specific.

- Adding to annual reports of the State Bank activities of the banking sector that aim towards sustainable development and contribute to green economy and green growth.

d) Researching and deploying a number of incentive solutions concerning economic interest (combining with administrative measures) to develop non-cash payment methods via utilization of 4.0 technological and scientific advancements for the purpose of green banking activities.

2. For credit institutions

a) Focusing on formulating green banking strategic frameworks. To be specific:

Depending on its business direction, market segments, products and target customers as well as capacity and strengths, each credit institution shall formulate a suitable strategic framework for and a roadmap to green banking growth with reference to the 5 following levels:

Level 1: Supporting and sponsoring “green” events and participating in communal activities.

Level 2: Separating project development from business operation, in which, banks shall develop separate green services and products in addition to traditional banking services and products.

Level 3: Systematic business operation in which most banking procedures, products and services follow green principles, and organizational structure of banks is designed to support green operating targets, operating principles, personnel and operating procedures.

Level 4: Devising ideas for ecological stabilization on a strategic level. Green banking activities are not restricted to individual professional operations but expanded into community or ecological networks, alliances and dialogues to ensure social, environmental and financial sustainability.

Level 5: Devising ideas for proactive ecological stabilization in which green banking activities, similar to that of level 4, are target-oriented instead of mere responses to external changes like level 4.

b) Developing and establishing comprehensive systems for environmental and social risk management which include internal guidelines on environmental and social risk management in credit granting activities; organizational structure for environmental and social risk management and assessment; task assignment, decentralization, allocation and use of resources to implement the systems; a reporting system for environmental and social risk management; and programs to build institutional capacity for environmental and social risk management of banks.

c) Complying with guidelines of the State Bank on environmental and social risk assessment; incorporating environmental risk assessment into credit risk assessment of banks. Adding environmental and social risk assessment to internal audit guidelines and compiled reports of banks; Developing plans for environmental and social risk management after assessing and supervising completed projects and loans.

d) Researching and establishing units in charge of carrying out environmental and social risk management, and managing and supervising the implementation of green banking and green credit in banks.

dd) Gradually transforming internal management procedures, modernizing infrastructure and information technology towards supporting mitigation of adverse environmental impacts; enabling credit and payment services in eco-friendly areas; Proactively developing internal guidelines on an eco-friendly working environment that incorporate measures for saving and utilization of water, printing paper, electricity, fuel, etc. in each branch and transaction office of every bank’s system.

e) Formulating specific loan policies for environmentally sensitive industries such as agriculture, leather manufacturing, renewable energy, and textile and apparel; Closely monitoring and producing solutions for gradually decreasing loans for activities that cause damage to the environment.

g) Cooperating with authorities affiliated to the State Bank in formulating and implementing their green banking/green credit strategies and action plans, and evaluating and reporting such implementation.

h) Organizing training courses to raise the awareness of their employees towards sustainable development, green growth, green credit and green banking and the importance of environmental and social risk management; carrying out promotion and organizing events to help customers understand more about green banking products and services; and introducing eco-friendly products.

Closely cooperating with authorities affiliated to the State Bank in assessing needs and developing training programs to be deployed in credit institutions and/or in the banking sector.

i) Closely cooperating with authorities affiliated to the State Bank and the environmental sector in establishing and developing a database system of environmental requirement compliance and violation of enterprises, forming the grounds for commercial banks to appraise and determine the level of environmental risks upon borrower assessment so as to limit/reduce loans for activities that cause damage to the environment.   

III. ROADMAP

1. Phase 1 (2018-2020):

a) The State Bank shall:

- Promulgate guidelines on green banking and green credit activities.

- Promulgate guidelines on preparing green banking/green credit reports.

- Continue to conduct research and complete a manual on environmental and social risk management for the remaining 11 economic sectors among the 21 economic sector groups that are lacking guidelines on credit granting activities in credit institutions. 

- Periodically update the green project list.

- Consider and prioritize funding sources for green credit development via refinancing/rediscounting policies.

- Consider and prioritize concessional loans from international organizations and development partners via the State Bank for commercial banks with high proportion of green loans. 

- Research and deploy a number of incentive solutions concerning economic interest (combining with administrative measures) to promote non-cash payment by utilizing 4.0 technological and scientific advancements for the purpose of green banking activities.

- Continue to implement and expand training programs on green credit and green banking to officials of the State Bank and credit officials of credit institutions.

- Periodically organize forums and seminars on green credit and green banking as well as green growth and sustainable development.

- Organize activities to raise the awareness of officials, public employees and workers of the banking sector of green growth and sustainable development in general and on green credit and green banking development in specific.

b) Credit institutions shall:

- Formulate strategic frameworks and roadmaps for green banking growth.

- Develop and establish comprehensive systems for environmental and social risk management which include internal guidelines on environmental and social risk management in credit granting activities; a reporting system for environmental and social risk management; and programs to build institutional capacity for environmental and social risk management of banks. 

- Comply with guidelines of the State Bank on environmental and social risk assessment; Incorporate environmental risk assessment into credit risk assessment of banks. Add environmental and social risk assessment to internal audit guidelines and compiled reports of banks; Develop plans for environmental and social risk management after assessing and supervising completed projects and loans.

- Develop internal guidelines on green working environment.

- Formulate specific loan policies for environmentally sensitive industries.

- Organize training courses to improve capacity for environmental and social risk management, raise the awareness of employees towards sustainable development, green growth, green credit and green banking; carry out promotion and organize events to help customers understand more about green banking products and services; and introduce eco-friendly products.

2. Phase 2 (2021-2025):

a) The State Bank shall:

- Announce the targets for green credit proportion in investment portfolios of banks for the 2021 - 2025 period according to the initial results of green credit proportion in investment portfolios and results of formulation of strategic frameworks for green banking growth of banks in phase 1.

- Continue to conduct research and complete a manual on environmental and social risk assessment.

- Continue to complete the green project list.

- Add to annual reports of the State Bank activities of the banking sector that aim towards sustainable development and contribute to green economy and green growth.

b) Credit institutions shall:

- Report green credit proportion in investment portfolios of banks in phase 1; propose the targets for phase 2 (2021-2025).

- Continue to complete comprehensive systems for environmental and social risk management which include the organizational structure for environmental and social risk management and assessment, and supervision of green banking and green credit activities in banks.

- Closely cooperate with authorities affiliated to the State Bank and the environmental sector in establishing and developing a database system of environmental requirement compliance and violation of enterprises, forming the grounds for credit institutions to appraise and determine the level of environmental risks upon borrower assessment so as to limit/reduce loans for activities that cause damage to the environment.  

- Continue to organize training courses to improve capacity for environmental and social risk management, raise the awareness of employees towards sustainable development, green growth, green credit and green banking.

- Establish and develop a database system of environmental requirement compliance and violation of enterprises.

Article 2. Implementation

1. Implementation

a) The Banking Strategy Institute shall take charge and cooperate with relevant units in organizing forums and seminars on green banking, green credit, green growth and sustainable development; organizing inspection, survey and collection of data of credit institutions serving assessment of green banking and green credit activities.

b) The Department of Credit for Economic Sectors shall take charge and cooperate with relevant units in providing consultancy and formulating and promulgating guidelines to form the direction for green banking growth in credit institutions, including promulgating guidelines on green banking and gray service activities; and promulgating guidelines on preparing green banking/green credit reports; researching and completing the manual on environmental and social risk assessment for the remaining 11 economic sectors among the 21 economic sector groups that are lacking guidelines on credit granting activities in credit institutions.

c) The Monetary Policy Department shall conduct research and provide consultancy on funding via monetary policy tools for green banking and green credit as prescribed by law and the Government’s directives in a manner that meets monetary policy targets of each period of time; include activities of the banking sector that aim towards green economy, green growth and sustainable development in annual reports of the State Bank.

d) The Human Resources Department shall take charge and cooperate with relevant affiliates of the State Bank and international technical assistance in developing supporting policies for training the workforce, raising the awareness of banks and improving the capacity of banking officials to generate green banking growth.

dd) The Banking Inspection and Supervision Agency shall conduct research and provide consultancy on regimes for environmental and social risk inspection and supervision of banks and credit institutions; incorporate regulations on environmental and social risk management into internal management regulations of credit institutions.

e) The Payment Department shall take charge and cooperate with the Information Technology Department in providing consultancy on formulation of incentive regimes and policies for application of science and technology in banking products and services, development of e-payment and medical payment networks, and eco-friendly technological applications; conducting research and implementing a number of incentive solutions concerning economic interest (combining with administrative measures) to develop payment methods via utilization of 4.0 technological and scientific advancements for the purpose of green banking activities.

g) Managing bodies of ODA projects shall take charge and cooperate with relevant units in periodically updating the green project list; considering and prioritizing concessional loans from international organizations and development partners via the State Bank for commercial banks with high proportion of green loans.

h) The Communication Department and Office of the State Bank shall organize activities to raise the awareness of officials, public employees and workers of the banking sector on green growth and sustainable development in general and on green credit and green banking development in specific.

i) The Finance and Accounting Department shall balance and allocate appropriate financial resources to development and implementation of green banking and green credit activities.

k) Credit institutions shall proactively formulate and submit strategic frameworks for green banking growth to the State Bank and perform the tasks of the roadmap specified in Section III herein.

2. Supervision and evaluation of implementation results

a) Evaluation shall be carried out on an annual basis.

b) Affiliates of the State Bank and credit institutions shall, according to their assigned tasks, submit task performance reports, recommendations and proposals to the in-charge unit (the Banking Strategy Institute) for compilation; concurrently, submit reports on the tasks corresponding with those specified in the Decision No. 1552/QD-NHNN dated August 6, 2015 by the Governor of the State Bank to the Department of Credit for Economic Sectors; The reports shall be submitted before December 31 of every year.

c) The Banking Strategy Institute shall take charge of preparing a compiled report on evaluation of implementation of the Scheme and submitting such report to the Governor of the State Bank before January 01 of every year.

Article 3.This Decision takes effect from the date on which it is signed.

Article 4.Head of Office of the State Bank, Director of the Banking Strategy Institute, heads of affiliates of the State Bank, Directors of State Bank branches of provinces and central-affiliated cities, Chairpersons of Boards of Directors, Chairpersons of Members’ Councils, general directors (directors) of credit institutions and foreign bank branches shall implement this Decision./.