Chỉ thị 04/2004/CT-NHNN

DIRECTIVE

ON THE ENHANCEMENT OF MANAGEMENT, SUPERVISION TO ENSURE THE PRUDENCE - EFFICIENCY - SUSTAINABILITY IN THE CREDIT ACTIVITY

Credit Institutions have, in recent time, taken practical measures in the enhancement of the credit quality and have gained positive achievements. There are, however, still potential risks contained in the credit activities, signs of the return of subsidies, bad debts continue occurring. This situation has mainly resulted from the inadequate compliance with the lending regulation, provisions on the examination, supervision of credit institutions' activities; Many Credit Institutions have not yet satisfied prudential ratios for the credit activities, not paid adequate attention to the demand and supply issue in the credit market.

In order to minimize the risks in banking activities, to continuously enhance the prudence - efficiency - sustainability in credit activities, the State Bank's Governor requires the Board of Directors, General Directors (Directors) of Credit Institutions, Heads of units of the State Bank of Vietnam to implement the followings:

I. IN RESPECT OF CREDIT INSTITUTIONS

1. To fully and seriously comply with provisions of applicable laws on lending, guarantee and finance leasing. Each Credit Institution shall review its guidance of the State Bank's provisions on each form of credit extension to timely supplement, amend and make them in line with practical banking activities and ensure, at the same time, the compliance with provisions of applicable laws, enhance the examination, supervision of credit activities in order to minimize credit risks.

2. To take measures to efficiently implement the guidance of the State Bank's Governor on the enhancement of the credit quality in accordance with the Directive No. 08/2003/CT-NHNN dated 24 December, 2003 of the State Bank's Governor.

3. To seriously comply with provisions stated in the Regulation on lending by credit institutions to customers issued in conjunction with the Decision No. 1627/2001/QD-NHNN dated 31 December, 2001 of the Governor of the State Bank. Credit Institutions should base on provisions of the Regulation on lending by credit institutions to customers to provide guidance to units of their system on the assessment of the lending in the principle of initiative and flexibility and in line with their actual conditions, but the prudence and sound legality must be ensured for settlement in the event of disputes. In the consideration of credit extension to projects, plans, the efficient use of funds should be assessed, specifically as follows:

3.1. To actively approach the development strategies, schemes, plans of the industry, the province, which have been approved by the competent authorities; policies, guidelines of the social economic development of the Party and State, from time to time, to analyze, assess and determine funds requirements, including credit funds to determine the orientation of credit extension activity, the credit limit for each goods item, industry or investment sector in order to ensure the prudence and the diversification of credit risks.

On the basis of the determined credit extension orientation, credit institutions need to cooperate with each other to select investment projects, production and business plans with high efficiency to extend credits; especially to projects, which required a substantial amounts of funds and the co-financing of several credit institutions.

3.2. In respect of the funds commercial banks invest in projects with the participation in lending by organizations, which are not credit institutions: banks must ensure the prudence and efficiency of investment funds, the full recovery of funds and the compliance with current provisions of the laws on lending, loan security, provisions on prudential ratios, minimization of the maturity risks.

3.3. Credit Institutions shall seriously comply with provisions on the provision, exploitation and use of credit information, prevent the situation where a customer borrows funds from several credit institutions without any examination, assessment of the risk levels.

4. To comply with provisions on the prudence relating to credit activities, take self responsibility for the prudence and efficiency of credit activities.

4.1. Credit Institutions must actively set up a plan for the mobilization and use of funds in order to secure the safety of general activities as well as of the reasonable structure of the fund sources and their uses in terms of their maturity in the credit activities. Carry out the regular supervision and examination of the compliance with provisions on the maximum ratio of short-term funds, which can be used for extending medium, long term loans.

4.2. To carry out the classification of Assets by level of risks and make provisions for risks in accordance with applicable provisions, actively and timely deal with risks arising in credit activities under current provisions. To avoid the lingering of debts that reduces the credit quality.

4.3. To take positive measures to actively increase the ratio of capital adequacy. Credit institutions, which do not achieve the capital adequacy ratio of 8%, must have specific solutions to increase the ratio of their own capital over the risk-based assets to and more than 8%.

4.4. To strictly comply with provisions on the lending limit, the maximum guarantee for a single customer, to actively recommend solutions to timely satisfy the loan requirements of customers and secure, at the same time, the prudence, quality and efficiency of credit activities.

4.5. To strictly comply with provisions on loan security of credit institutions in accordance with provisions of Government and the guidance of the State Bank. To pay attention to measures for securing the safety of credit funds, especially for cases where the lending is made without security or with security assets created from borrowed funds.

5. To perform the verification, assessment, and classification of debts by reasons, which make their collection difficult in order to work out appropriate measures for the management, supervision and settlement of debts for the minimization of rescheduled debts and overdue debts.

5.1. To classify, assess the potential recovery of the total debts which have been rescheduled, adjusted in respect of the term and overdue debts. To concentrate officers, on this basis, to collect debts, to avoid the lingering of debts and the situation where repayable customers are not adequately pressed for repayment of bank debts; To take measures for the collection of debts, including the deduction of deposit account for debt recovery. There should be the determination to prevent new overdue debts from arising due to subjective reasons.

5.2. In respect of debts which customers, who are financially capable or have assets but intentionally refuses to repay debts of banks:

a. To complete procedures to initiate a court suit against customers, who violate the credit agreement in accordance with provisions of applicable laws;

b. To closely coordinate with the court judgment execution authority in the locality to collect debts. In case where credit institutions manage assets but do not yet put them on sale, they should complete files, documents to sell them for debt recovery.

c. To consolidate and report to the State Bank's Governor on the settlement result for deferred debt on the six-month basis.

6. To enhance the coordination, combination between units within a credit institution and between credit institutions in their credit activity to strictly control the compliance with the credit extension procedure, to ensure the strict monitoring of loans from their origination to the complete collection.

II. IN RESPECT OF UNITS OF THE STATE BANK OF VIETNAM

1. For units at the Head office of the State Bank of Vietnam

1.1. Within the scope of their function and assignment, units at the Head office of the State Bank of Vietnam should well perform the supervisory function, assignment of the Central Bank vis--vis credit institutions to early discover and timely deal with obstacles, recommendations of credit institutions and related units, facilitate the credit activity on the principle of prudence- efficiency - sustainability, to enhance the supervisory and managerial role of the State Bank of Vietnam.

1.2. The Credit Information Center should take specific measures to intensify its organization and apparatus in terms of the capacity and professional knowledge, to increase, step by step, the quality of customer information, which are to provide to credit institutions, to specifically and strictly stipulate the coordination in the provision, use, exploitation of information between the Credit Information Center and credit institutions, where the increase of the quality of customer assessment information, both in terms of the number of customer quantity and the content of information, which are provided, should be focused on.

1.3. The Banks Department should study and submit to the State Bank's Governor on the expansion of debts, which could be written down or off with the risk provisions in the direction of the increase of the autonomy and self-responsibility of credit institutions, to facilitate credit institutions' active dealing with lingering debts, which can not be collected due to objective reasons, and are not within those debts, which can be settled in accordance with current provisions of the State.

2. Branches of the State Bank of Vietnam in provinces, cities under the central Government's management

2.1. General Managers of branches of the State Bank of Vietnam in provinces, cities under the central Government's management should regularly follow up and coordinate with local credit institutions to have specific measures to enhance the autonomy, the self-responsibility in the business activity of credit institutions and to prevent unhealthy competition between credit institutions.

2.2. To carry out the verification, supervision of the compliance with provisions of the applicable laws on the lending and the regime of loan security, on the guarantee and finance leasing made by credit institutions.

2.3. To consolidate and fully, specifically and timely report to the State Bank of Vietnam (Credit Department) on the performance by local credit institutions of the implementation of the directive of the State Bank's Governor stated in this Directive on monthly basis.

III. ORGANIZATION OF THE IMPLEMENTATION

1. Heads of related units at the Head office of the State Bank of Vietnam, the Board of Directors, General Directors (Directors) of Credit Institutions, General Managers of branches of the State Bank of Vietnam in provinces, cities under the central Government's management and related units shall be responsible for the serious implementation of this Directive.

2. This Directive shall be effective after 15 days from its publication in the Official Gazette.

Any obstacle which may arise during the implementation shall be reported by units to the State Bank's Governor for consideration and solution.