DECISION

ON THE ISSUANCE OF REGULATION ON THE ASSETS CLASSIFICATION AND USE OF PROVISIONS TO DEAL WITH RISKS IN THE BANKING ACTIVITIES OF CREDIT INSTITUTIONS

THE GOVERNOR OF THE STATE BANK

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 and the Law on the Credit Institutions No. 02/1997/QH10 dated 12 December, 1997;
Pursuant to the Decree No. 15 CP dated 2 March, 1993 of the Government on the assignment, authority and responsibility for the State management of the ministries, ministerial-level agencies;
Upon the proposal of the Director of Banks and Non-bank credit institutions Department;
In agreement with Minister of Finance,

DECIDES

Article 1.

To issue in conjunction with this Decision the Regulation on the assets classification, the provisioning and use of provisions to deal with risks in the banking activities of Credit Institutions.

Article 2.

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1. The Decision No. 48/1999/QD-NHNN5 dated 08 February, 1999 of the Governor of the State Bank issuing the Regulation on the assets classification, provisions for risks arising from the banking activities of credit institutions;

2. The Official Dispatch No. 582/CV-NHNN5 dated 23 June, 1999 of the Governor of the State Bank on the provisioning and use of provisions to deal with risks of credit institutions.

Article 3.

The Director of the Administration Department, the Director of the Banks and non-bank credit institutions Department, Heads of units in the State Bank, General Managers of State Bank branches in provinces, cities under the central Governments management, Chairman of the Board of Directors, General Directors (Directors) of credit institutions shall be responsible for the implementation of this Decision.

FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR




Tran Minh Tuan

REGULATION

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Chapter 1

GENERAL PROVISIONS

Article 1.

1. Credit institutions operating in Vietnam shall be obliged to carry out the classification of assets, the provisioning and use of provisions to deal with risks in the banking activities of credit institutions.

2. The provisioning and use of provisions for falling prices of inventory, securities, and financial provision Fund shall be carried out in compliance with provisions in the Decree No. 166/1999/ND-CP dated 19 November, 1999 of the Government on the finance regime for credit institutions.

Article 2.

In this Regulation, following terms shall be construed as follows:

1. Risks in the banking activities of credit institutions (hereinafter referred to as risks) are potential losses that may arise in the banking activities.

2. Risk provisions are expenses that are charged to the operational expenditure of a credit institution by making allowance for the value of assets that may not be recovered.

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Article 3.

1. Within the first 15 working days of the third month of each quarter, credit institutions shall carry out the classification of assets that exist as of the last day of the second month and set up risk provisions.

2. In the event the amount to make provisions is greater than the existing provision, credit institutions shall make up for the deficiency.

In the event the amount to make provisions is less than the existing provision, credit institutions shall record the excess to the income in order to reduce the provision that has been made.

Article 4.

1. Risks shall be dealt with once in a quarter after the provisioning is made and only within the existing provision.

2. Credit institutions shall not be entitled to inform their customers of the risks that have been dealt with, except for debts that are written off with Governments permission.

Article 5.

Credit institutions shall not be entitled to reduce the debts stated in the credit file and dealt with by using the provisions. Credit institutions shall be obliged to take measures to recover debts in accordance with current regime in the same manner as they do with the conventional debts that have not yet been dealt with by using the provisions, except for debts that are written off for customers with the Governments permission.

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Any funds recovered from risks that have been dealt with by using the provisions shall be considered as revenues of credit institutions.

Chapter II

DETAILED PROVISIONS

Section 1. CLASSIFICATION OF ASSETS

Article 7.

Assets that are not classified and provisioned for risks:

Lending that are made with funds financed, entrusted for investment under each agreement entered into with foreign organizations, that have been provisioned in accordance with the condition of the Agreement and risks of which, if they arise, shall be dealt with by foreign organizations.

Article 8. Credit institutions shall carry out the classification of assets in their banking activities as follows:

1. Assets in the credit activities shall be classified in following groups:

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- Current loans (including the rescheduled period);

- Current commercial paper and other short-term valuable paper which are discounted, rediscounted;

- Current financial leases.

Group 2:

- Loans secured by assets the payments of which are overdue for a period of less than 181 days; Loans not secured by assets the payments of which are overdue for a period of less than 91 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of less than 31 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of less than 61 days;

- Financial leases the payments of which are overdue for a period of less than 181 days.

Group 3:

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- Commercial paper and other short-term valuable paper that are overdue for a period from 31 days to less than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period from 61 days to less than 181 days;

- Financial leases the payment of which are overdue for a period from 181 days to less than 361 days.

Group 4:

- Loans secured by assets the payments of which are overdue for a period of more than 361 days; Loans not secured by assets the payments of which are overdue for a period of more than 181 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of more than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 181 days;

- Financial leases the payment of which are overdue for a period of more than 361 days.

2. Assets in the payment service

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Section 2. PROVISIONING

Article 9.

1. The provisioning ratio for the assets:

- For the credit activities:

Group 1: 0%;

Group 2: 20%

Group 3: 50%

Group 4: 100%

- For the payment services: 20%

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- Allowance for the credit activities shall be determined on the basis of the provisioning ratio and the assets classified in each group of the credit activities;

- Allowance for the payment services shall be determined on the basis of the provisioning ratio and the assets arising from the payment services.

Article 10.

In the event a State owned credit institution may encounter the business loss in a year due to the provisions made in accordance with this regulation, that credit institution must work out a solution plan to submit to the Ministry of Finance and the State Bank for consideration.

Section 3. USE OF PROVISIONS

Article 11.

Credit institutions shall be entitled to use provisions to deal with risks in following cases:

1. Borrowing customers, guarantors of the borrowers, issuers of commercial paper and other short-term valuable paper, guarantors of a commercial paper, financial lessees, the beneficiaries of payment services are bankrupt organizations, dissolved organizations and the payment of their obligation has been completed. The risk to be dealt with shall be the loss incurred after the assets of the bankrupt, dissolved organizations have been used to pay off their obligations.

2. Assets that have the following overdue periods (including also the cases where a bankrupt, dissolved organization has not completed the payment with its assets):

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- Discounted, rediscounted commercial paper, short-term valuable paper which are overdue for a period of more than 91 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 361 days;

- Payments of financial leases that are overdue for a period of more than 721 days;

- Payments made in lieu of customers, other credit institutions (excluding payments made in lieu of a guaranteed person) that are overdue for a period of more than 181 days.

3. Debt amounts that the Government permits to be written off, but does not finance the allowance, and have not been dealt with by using the provision in accordance with paragraph 1 and 2 of this Article.

Article 12.

Credit institutions must set up the Risks Settlement Committee headed by the Chairman of the Board of Directors (for those with a Board of Directors) or the General Director (Director) and obligatory members consisting of the Head of the Controllers Committee, the Chief Accountant, The Head of the Credit Division, the Head of the Internal Control Division; other members shall be decided upon by the Board of Directors or the General Director (Director).

Article 13.

The duties of the Settlement Committee:

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2. To review the report on the performance of the monitoring, recovering of debts that have been dealt with.

3. To decide on the settlement of risks in the current quarter and the plan of debt recovery in the next quarter for the risks that have been dealt with. In the plan, the time and applicable measures for the debt recovery must be identified.

Article 14.

The file that is used for the risk settlement shall include:

1. The credit file and documents relating to the debt recovery; discount, rediscount of commercial paper and other short-term valuable paper; guarantee; financial lease; payment services and other documents that may be related to the risks in cases provided for in Article 11 of this Regulation.

2. Additional documents:

a. In respect of risks in cases provided for in paragraph 1 Article 11 of this Regulation:

- Courts decision on the bankruptcy or the decision on the dissolution of the competent State Authority in accordance with provisions of applicable laws (the notarized copy);

- Report on the enforcement of the decision on bankruptcy, report on the completion of the enforcement of the decision on the bankruptcy made by the enforcement agency; written documents concerning the settlement of debts of the dissolved organizations (notarized copy).

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Section 4. ACCOUNTING, REPORTING, DEALING WITH VIOLATIONS

Article 15.

Credit institutions shall perform the accounting for the provisioning, the use of provisions and the recovered amounts after the provision has been used in accordance with the stipulation of the State Bank.

Article 16.

Credit institutions shall perform the report on the classification of assets, the provisioning and use of provisions as follows:

1. Report on the classification of assets, the provisioning for risk settlement in the banking activities:

a. Prior to the 10th of the first month of the following quarter, credit institutions shall submit reports on the performance of the classification of assets, the provisioning, in accordance with the Form No.1a (attached), to the State Bank and the finance agency:

- State-owned credit institutions submit reports to the State Bank (the State Bank Inspection), the Ministry of Finance (the banks and financial organizations finance Department) and the Tax Departments in provinces, cities where credit institutions locate their Head-offices;

- Joint-venture credit institutions, 100% foreign owned non-bank credit institutions, foreign banks branches in Vietnam submit reports to the State Bank (the State Bank Inspection), the Ministry of Finance (the banks and financial organizations finance Department), the State Bank branches and the Tax Departments in provinces, cities where credit institutions locate their Head-offices.

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b. Prior to the 20th of the first month of the following quarter, State Bank branches shall consolidate reports of other credit institutions provided for in point a paragraph 1 of this Article to submit to the State Bank (the State Bank Inspection) and the Ministry of Finance (the banks and financial organizations finance Department) in accordance with the Form No.2A (attached).

2. Report on the use of provisions to deal with risks in the banking activities:

a. Prior to the 10th of the first month of the following quarter, credit institutions shall report to the State Bank and the Finance agency the performance of the use of provisions to deal with risks in accordance with the Form No.2A (attached):

- State-owned credit institutions submit reports to the State Bank (the State Bank Inspection), the Ministry of Finance (the banks and financial organizations finance Department) and the Tax Departments in provinces, cities where credit institutions locate their Head-offices;

- Joint-venture credit institutions, 100% foreign owned non-bank credit institutions, foreign banks branches in Vietnam submit reports to the State Bank (the State Bank Inspection), the Ministry of Finance (the banks and financial organizations finance Department), the State Bank branches and the Tax Departments in provinces, cities where credit institutions locate their Head-offices.

- Other credit institutions submit reports to the State Bank branches and the Tax Departments in provinces, cities where credit institutions locate their Head-offices.

b. Prior to the 20th of the first month of the following quarter, State Bank branches shall consolidate reports of other credit institutions provided for in point a paragraph 2 of this Article to submit to the State Bank (the State Bank Inspection) and the Ministry of Finance (the banks and financial organizations finance Department) in accordance with the Form No.2B (attached).

Article 17.

1. The State Bank (The State Bank Inspection) and the Ministry of Finance shall be responsible for the control of the performance of the provisioning and the use of provisions for risks in the banking activities.

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Chapter III

IMPLEMENTING PROVISION

Article 18.

Any amendment, supplement of provisions of this Regulation shall be decided upon by the Governor of the State Bank after agreement with the Minister of Finance.

For the Governor of the State Bank

Form No. 1A

CREDIT INSTITUTION

SOCIALIST REPUBLIC OF VIETNAM
Independence-freedom-happiness

REPORT

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Unit: Million Dong

Item

Value of assets

Total provisions

1. Assets in the credit activities:

Group 1:

- Current loans (including the rescheduled period);

- Current commercial paper and other short-term valuable paper which are discounted, rediscounted;

- Current financial leases.

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- Loans secured by assets the payments of which are overdue for a period of less than 181 days; Loans not secured by assets the payments of which are overdue for a period of less than 91 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of less than 31 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of less than 61 days;

- Financial leases the payments of which are overdue for a period of less than 181 days.

Group 3:

- Loans secured by assets the payments of which are overdue for a period from 181 days to less than 361 days; Loans not secured by assets the payments of which are overdue for a period from 91 days to less than 181 days;

- Commercial paper and other short-term valuable paper that are overdue for a period from 31 days to less than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period from 61 days to less than 181 days;

- Financial leases the payment of which are overdue for a period from 181 days to less than 361 days.

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- Loans secured by assets the payments of which are overdue for a period of more than 361 days; Loans not secured by assets the payments of which are overdue for a period of more than 181 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of more than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 181 days;

- Financial leases the payment of which are overdue for a period of more than 361 days.

2. Assets in the payment service

Payments made in lieu of customers, other credit institutions (not including payments made in lieu of a guaranteed person as provided for in paragraph 1 this Article) that are due for collection.

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Total:

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Date.

DRAWER
(Name in detail)

CONTROLLE
(Name in detail)

GENERAL DIRECTOR (DIRECTOR) OF CREDIT INSTITUTION
(Name in detail)

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Form No. 2A

CREDIT INSTITUTION

SOCIALIST REPUBLIC OF VIETNAM
Independence-freedom-happiness

REPORT

ON THE USE OF PROVISIONS TO DEAL WITH RISKS IN THE BANKING ACTIVITIES
Quarter .......year....

Unit: million Dong

Item

Total provisions

I. Total provision before dealing with risks

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1. Borrowing customers, guarantors of the borrowers, issuers of commercial paper and other short-term valuable paper, guarantors of a commercial paper, financial lessees, the beneficiaries of payment services are bankrupt organizations, dissolved organizations and the payment of their obligation has been completed.

2. Assets that have the following overdue periods (including also the cases where a bankrupt, dissolved organization has not completed the payment with its assets):

- Loans secured by assets the payment of which is overdue for more than 721 days; loans not secured by assets the payment of which is overdue for more than 361 days;

- Discounted, rediscounted commercial paper, short-term valuable paper which are overdue for a period of more than 91 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 361 days;

- Payments of financial leases that are overdue for a period of more than 721 days;

- Payments made in lieu of customers, other credit institutions (excluding payments made in lieu of a guaranteed person) that are overdue for a period of more than 181 days.

3. Debt amounts that the Government permits to be written off, but does not finance the allowance, and have not been dealt with by using the provision in accordance with paragraphs 1 and 2.

III. Remaining provisions after dealing with risks

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V. Total provision that has been used for risk settlement but not yet been recovered by the reporting date (accumulated), not including the debts written off with Government's permission.

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Date.

DRAWER
(Name in detail)

CONTROLLE
(Name in detail)

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Form No. 1B

STATE BANK BRANCH IN PROVINCE, CITY.......

SOCIALIST REPUBLIC OF VIETNAM
Independence-freedom-happiness

REPORT

ON THE ASSETS CLASSIFICATION, PROVISIONING TO DEAL WITH RISKS IN THE BANKING ACTIVITIES
Quarter .......year....

Unit: million Dong

Item

Credit Institutions

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Value of assets

Total provisions

Credit Institution...

Credit Institution...

Value of assets

Total provisions

Value of assets

Total provisions

I. Assets in the credit activities:

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- Current loans (including the rescheduled period);

- Current commercial paper and other short-term valuable paper which are discounted, rediscounted;

- Current financial leases.

Group 2:

- Loans secured by assets the payments of which are overdue for a period of less than 181 days; Loans not secured by assets the payments of which are overdue for a period of less than 91 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of less than 31 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of less than 61 days;

- Financial leases the payments of which are overdue for a period of less than 181 days.

Group 3:

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- Commercial paper and other short-term valuable paper that are overdue for a period from 31 days to less than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period from 61 days to less than 181 days;

- Financial leases the payment of which are overdue for a period from 181 days to less than 361 days.

Group 4:

- Loans secured by assets the payments of which are overdue for a period of more than 361 days; Loans not secured by assets the payments of which are overdue for a period of more than 181 days;

- Commercial paper and other short-term valuable paper that are overdue for a period of more than 61 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 181 days;

- Financial leases the payment of which are overdue for a period of more than 361 days.

2. Assets in the payment service

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Total:

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Date.

DRAWER
(Name in detail)

CONTROLLE
(Name in detail)

GENERAL DIRECTOR (DIRECTOR) OF CREDIT INSTITUTION
(Name in detail)

Form No. 2B

STATE BANK BRANCH IN PROVINCE, CITY.......

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REPORT

ON THE USE OF PROVISIONS TO DEAL WITH RISKS IN THE BANKING ACTIVITIES
Quarter .......year....

Unit: million Dong

Item

Credit Institutions

In which:

Credit Institution

Credit Institution

I. Total provision before dealing with risks

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1. Borrowing customers, guarantors of the borrowers, issuers of commercial paper and other short-term valuable paper, guarantors of a commercial paper, financial lessees, the beneficiaries of payment services are bankrupt organizations, dissolved organizations and the payment of their obligation has been completed.

2. Assets that have the following overdue periods (including also the cases where a bankrupt, dissolved organization has not completed the payment with its assets):

- Loans secured by assets the payment of which is overdue for more than 721 days; loans not secured by assets the payment of which is overdue for more than 361 days;

- Discounted, rediscounted commercial paper, short-term valuable paper which are overdue for a period of more than 91 days;

- Payments made in lieu of a guaranteed person that have not been recovered in a period of more than 361 days;

- Payments of financial leases that are overdue for a period of more than 721 days;

- Payments made in lieu of customers, other credit institutions (excluding payments made in lieu of a guaranteed person) that are overdue for a period of more than 181 days.

3. Debt amounts that the Government permits to be written off, but does not finance the allowance, and have not been dealt with by using the provision in accordance with paragraphs 1 and 2.

III. Remaining provisions after dealing with risks

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V. Total provision that has been used for risk settlement but not yet been recovered by the reporting date (accumulated), not including the debts written of with Government's permission.

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Date.

DRAWER
(Name in detail)

CONTROLLE
(Name in detail)

GENERAL DIRECTOR (DIRECTOR) OF CREDIT INSTITUTION
(Name in detail)