Thông tư 06/2016/TT-NHNN

CIRCULAR

AMENDING AND SUPPLEMENTING CERTAIN ARTICLES OF THE CIRCULAR NO. 36/2014/TT-NHNN OF THE GOVERNOR OF THE STATE BANK OF VIETNAM DATED NOVEMBER 20, 2014 PROVIDING FOR PRUDENTIAL RATIOS AND LIMITS FOR OPERATIONS OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES

Pursuant to the Law on the State Bank of Vietnam No.46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Government's Decree No. 156/2013/ND-CP dated November 11, 2013 on defining the functions, tasks, entitlements and organizational structure of the State Bank of Vietnam;

At the request of the Chief Inspector of Banks;

The Governor of the State Bank of Vietnam hereby adopts the Circular to amend and supplement certain articles of the Circular 36/2014/TT-NHNN dated November 20, 2014 of the State Bank’s Governor on providing for prudential ratios and limits for operations of credit institutions and foreign bank branches (hereinafter referred to as the Circular No. 36/2014/TT-NHNN).

Article 1. Amending and supplementing certain articles of the Circular No. 36/2014/TT-NHNN by:

1. Adding the following sub-points to Point a Clause 15 Article 3:

“(xi) A credit enterprise or institution in which this organization owns at least 5% of its authorized capital or voting shares;

(xii) A credit enterprise or institution of which this organization exercises its authority to appoint managers or members of the Control Board therein;

(xiii) A credit enterprise or institution of which this organization exercises its authority to appoint managers or members of the Control Board in a parent company thereof.”

2. Adding Point i to Clause 18 Article 3 as follows:

“i) Granting a lease of or offer a discount on valuable papers to clients who entrust other natural or legal entities with the purchase of stocks.”

3. Adding Clauses 19, 20, 21, 22, 23 and 24 to Article 3 as follows:

“19. Credit institution, foreign bank branch refers to credit institutions or foreign bank branches established and operated within the territory of Vietnam in accordance with its laws and regulations. 

20. State-run commercial bank refers to commercial banks established and operated in the form of a single-member limited liability company of which the authorized capital is wholly owned by the State.

21. Financial institutions shall be referred to in the anti-money laundering laws.

22. Financial institutions abroad refer to financial institutions established abroad in accordance with laws of host countries.

23. Average short-term fund of a month is calculated by total short-term fund balance at the end of each day in such month divided by total days in such month.

24. Forward purchase or sale of valuable papers refers to the transaction in which valuable papers are acquired or sold in accordance with conditions attached thereto for transfer of ownership of these valuable papers that have not reached maturity and commitments to buy- or sell-back thereof after a specified period.”

4. Amending and supplementing Clause 2 Article 11 as follows:

“2. Credit institutions and foreign bank branches shall not be permitted to extend credit to customers for the purpose of their investments and trades in unlisted corporate bonds.”

5. Amending and supplementing Point a Clause 1 Article 12 as follows:

“a) Auditing organizations (including auditing enterprises, branches of foreign auditing enterprises in the territory of Vietnam), auditors  (including auditors of auditing organizations and public auditors) that currently render auditing services at credit institutions and branches of foreign banks; inspectors that currently provide inspecting services for credit institutions and branches of foreign banks.”

6. Amending and supplementing Point c Clause 3 Article 13 as follows:

“c) Loans fully secured in terms of maturity and value by personal deposits at the lending time;”

7. Amending and supplementing Point h Clause 3 Article 13 as follows:

“h) Guarantees and guarantee issuance commitments made in the form of letters of credit fully secured in terms of maturity and value by VND deposits, foreign currencies, gold, or government bonds of the obligor and/or the third party, at the date upon which a line of credit and/or commitment is granted.   Credit institutions, foreign bank branches shall determine the specific value of the asset put up as collateral but restrict its maximum value under the following rules:

(i) VND deposit: 100% of such deposit put up as collateral for the said guarantees and guarantee commitments;

(ii) Foreign currency deposit: 95% of such deposit put up as collateral for the said guarantees and guarantee commitments;

(iii) Gold bullion, except as referred to in paragraph (iv) of this Point: 95% of its value calculated based on the buying price quoted at the main head office of credit enterprises or institutions legally owning the trademark of such gold bullion at the end of the day immediately prior to the value determination; 

(iv) Gold bullion of which the buying price is not quoted or other gold: 30% of its value calculated based on the price determined by a competent valuation organization at the latest date preceding the date upon which value of the collateralized asset is determined, or based on the price determined under internal rules of the credit institutions or foreign bank branches unless otherwise determined by a competent valuation organization;

(v) Government bond: 95% of value of the government bond of which the remaining maturity period is less than 1 year, or 85% of value of the government bond of which the remaining maturity period ranges from 1 year to under 5 years, or 80% of value of the government bond of which the remaining maturity period is at least 5 years. The value of a government bond is its par value published on the value determination date."

8. Amending and supplementing Clause 4 Article 14 as follows:

“4. Commercial banks are not entitled to extend credit to or entrust their subsidiaries and associate companies to:

a) Invest and trade stocks;

b) Offer loans for the purpose of investments and trades in stocks.”

9. Amending and supplementing Clause 6 Article 14 as follows:

“6. Commercial banks are not entitled to extend credit to customers to serve their stock investment and trading purposes, except to the extent that state-owned commercial banks grant loans to their employees to purchase IPO stocks upon the transformation of such state-owned commercial banks into joint-stock commercial banks.”

10. Amending and supplementing Point b Clause 2 Article 15 as follows:

“b) The calculation of liquid reserve ratio is based on the following formula:

Where:

(i) Highly liquid assets are determined according to the Appendix 3 hereof;

(ii) Total liability denotes total liability entries on a balance sheet minus loans made by the State Bank (including forward sale of valuable papers through open market operations; discount on and pledging of valuable papers, overnight borrowing in interbank electronic payment system) and loans made by other credit institutions or foreign bank branches in the form of discount or re-discount on valuable papers used in the State Bank's trading transactions.

11. Amending and supplementing Point d Clause 2 Article 15 as follows:

“d) Credit institutions, foreign bank branches must maintain the statutory liquidity reserve ratios as follows:

(i) Commercial banks: 10%; 

(ii) Foreign bank branches: 10%;

(iii) Non-bank credit institutions: 1%;

(iv) Cooperative banks: 10%.”

12. Amending and supplementing Point b, Point c, Point d Clause 3 Article 15 as follows:

“b) The 30-day solvency ratio shall be calculated according to the following formula:

Where:

(i) Assets of high liquidity are referred to in the Appendix 3 hereof;

(ii) Net cash outflow within 30 successive days refers to the difference between the cash outflow within 30 successive days after the following day and the cash inflow within 30 successive days after the following day as stated in Appendix 3 hereof.

c) Where their net VND cash outflow within 30 successive days is positive, credit institutions or foreign bank branches are required to maintain the statutory VND solvency ratio within these 30 days as stated in Point b of this Clause as follows:

(i) Commercial banks: 50%; 

(ii) Foreign bank branches: 50%;

(iii) Non-bank credit institutions: 20%;

(iv) Cooperative banks: 50%.”

d) Where their net foreign-currency cash outflow within 30 successive days is positive, credit institutions or foreign bank branches are required to maintain the statutory foreign-currency solvency ratio within these 30 days as stated in Point b of this Clause as follows:

(i) Commercial banks: 10%; 

(ii) Foreign bank branches: 5%;

(iii) Non-bank credit institutions: 5%;

(iv) Cooperative banks: 5%.”

13. Amending and supplementing Clause 2 Article 16 as follows:

“2. Where the result of calculation of 30-day solvency ratio of credit institutions or foreign bank branches in the following day does not conform to regulations laid down in Point c, Point d Clause 3 Article 15 hereof, the State Bank must consider or impose stipulated penalties for administrative violations in the currency and banking sector and supervise their solvency. Credit institutions and foreign bank branches must take their own remedial actions, including taking out loans from other credit institutions or foreign bank branches, foreign financial organizations or entering into irrevocable time deposit agreements and other measures with other credit institutions or foreign bank branches, foreign financial organizations to meet the statutory solvency ratio.  Where credit institutions and foreign bank branches are obliged to take the aforesaid remedial actions at the rate of at least 20% of assets of high liquidity, the State Bank shall apply additional supervisory measures and impose additional penalties whenever necessary in accordance with laws and regulations.”

14. Amending and supplementing Clause 2 Article 17 as follows:

“2. Total outstanding medium and long term debt shall be composed of the followings:

a) The following debts for which the remaining repayment period is more than 01 (one) year:

(i) Loans and financial leases (including those granted to other credit institutions and foreign bank branches in Vietnam), except for outstanding debts incurred from loans or financial leases made by the entrusted fund of the Government, other individuals and organizations (including other credit institutions and foreign bank branches in Vietnam; parent banks, parent banks’ overseas branches) with which risks associated shall be incurred by such Government, individuals and organizations; 

(ii) Entrustments used as loans or financial leases of other credit institutions or foreign bank branches whereby the risk associated therewith shall be incurred by the entrusting credit institutions or foreign bank branches;

(iii) Purchases of or investments in valuable papers, except those used in the State Bank's transactions (exclusive of bonds issued by Vietnam Asset Management Companies (VAMC) of credit institutions).”    

b) Outstanding debts resulting from loans, financial leases, the excess amount of purchases of and investments in medium and long-term valuable papers of which the maturity period has expired.”

15. Amending and supplementing Clause 3 Article 17 as follows:

“3. Medium and long-term fund comprises the excess amount of the followings of which the maturity period is more than 01 (one) year:

a) Deposits made by foreign and domestic entities, except the followings:

(i) All types of the State Treasury’s deposits;

(ii) Deposits of other credit institutions or foreign bank branches in Vietnam;

b) Borrowings obtained from domestic and foreign financial institutions (exclusive of borrowings obtained from other credit institutions or foreign bank branches in Vietnam); 

c) Personal deposits;

d) Funds raised from the issuance of promissory notes, treasury bills, certificates of deposit and bonds;

dd) Authorized capital, allocated fund, reserve fund for authorized capital complementation, investment fund for professional development, and the remaining amount of financial reserve fund from which the original value of purchases of or investments in fixed assets, or equity participations or share acquisitions have been taken away in accordance with laws and regulations; 

e) Share premiums and undistributed profits remaining after purchase of treasury stocks;

g) Deposits or borrowings obtained from other credit institutions or foreign bank branches in Vietnam with respect to non-bank credit institutions;

h) Deposits of people's credit funds with respect to cooperative banks.”

16. Amending and supplementing Clause 4 Article 17 as follows:

“4. Short-term source of finance includes the excess amount of the followings of which the maturity period is up to 01 (one) year (including demand deposits):

a) Deposits made by foreign and domestic entities, except the followings:

(i) All types of the State Treasury’s deposits;

(ii) Deposits of other credit institutions or foreign bank branches in Vietnam;

(iii) Margin and special deposits of customers.

b) Borrowings obtained from domestic and foreign financial institutions (exclusive of borrowings obtained from other credit institutions or foreign bank branches in Vietnam); 

c) Personal deposits other than margin and special deposits;

d) Funds raised from the issuance of promissory notes, treasury bills, certificates of deposit and bonds;

dd) Deposits or borrowings obtained from other credit institutions or foreign bank branches in Vietnam with respect to non-bank credit institutions;

e) Deposits of people's credit funds with respect to cooperative banks.”

17. Amending and supplementing Clause 5 Article 17 as follows:

“5. Credit institutions, foreign bank branches are entitled to use short-term capital sources as medium and long term loans under the following maximum rate schedule: 

a) From July 1, 2016 to December 31, 2016:

(i) Commercial banks: 60%; 

(ii) Foreign bank branches: 60%;

(iii) Non-bank credit institutions: 100%;

(iv) Cooperative banks: 60%;

b) From January 1, 2017 to December 31, 2017:

(i) Commercial banks: 50%; 

(ii) Foreign bank branches: 50%;

(iii) Non-bank credit institutions: 90%;

(iv) Cooperative banks: 50%;

c) From January 01, 2018:

i) Commercial banks: 40%; 

ii) Foreign bank branches: 40%;

iii) Non-bank credit institutions: 80%;

iv) Cooperative banks: 40%.”

18. Amending and supplementing Clause 6 Article 17 as follows:

“6. Credit institutions and foreign bank branches may purchase and invest in Government bonds in comparison to their average short-term funds of the immediately preceding month as follows:

a) The ratio thereof is restricted to:

(i) State-owned commercial banks: 25%;

(ii) Joint-stock commercial banks, joint venture banks and wholly foreign-owned banks: 35%;

(iii) Foreign bank branches: 35%;

(iv) Non-bank credit institutions: 5%;

(v) Cooperative banks: 35%.

b) The excess amount of purchases of or investments in Government bonds for determination of the maximum ratios referred to in Point a of this Clause includes that of Government bonds owned by credit institutions or foreign bank branches, and entrustments to other organizations to purchase and invest in Government bonds, but excludes purchases of or investments in Government bonds financed by entrusted funds of other individuals or organizations to which any risk is not incurred by such credit institutions or foreign bank branches;

c) Short-term funds are defined in Clause 4 of this Article;

d) Credit institutions and foreign bank branches which do not have short-term funds may purchase or invest in Government bonds by conforming to the respective maximum ratios stipulated in Point a of this Clause of such Government bonds to their authorized capital or allocated funds.”

19. Amending and supplementing Point a, b Clause 4 Article 21 as follows:

“a) Deposits made by foreign and domestic entities, except the followings:

(i) All types of the State Treasury’s deposits;

(ii) Margin and special deposits of customers;

b) Personal deposits other than margin and special deposits.”

Article 2.Repeal Clause 5 Article 16 of the Circular No. 36/2014/TT-NHNN.

Article 3. Substitute annexure to the Circular No. 36/2014/TT-NHNN by Annex 1, Annex 2 and Annex 3 hereto.

Article 4. Transition provisions

1. General transition provisions:

a) As at the entry into force of this Circular, credit institutions and foreign bank branches that have yet to comply with the prudential ratios and limits stated in the Circular No. 36/2014/TT-NHNN on grounds of any amendment or supplementation of provisions of Annex 2, Point a Clause 15, Point i Clause 18 Article 3, Clause 2, Clause 5, and Clause 6 Article 17 of the Circular No. 36/2014/TT-NHNN must develop treatment plans and take initiative in applying controlling measures to ensure the compliance with laws and regulations;

b) Within a maximum of 30 days from the entry into force of this Circular, credit institutions and foreign bank branches must send their treatment plans, as referred to in Point a of this Clause, directly or by post to the State Bank (Bank Supervision and Inspection Agency).

In case the State Bank makes requests for revision, supplementation or adjustment of such treatment plans, plan execution schedule or time limit, credit institutions and foreign bank branches must be responsible for making necessary arrangements for complying with these requests;

c) Credit institutions and foreign bank branches shall take responsibility for further providing other treatment plans as referred to in Clause a, b of this Clause and plan execution schedule for restructuring of organization and operation thereof (wherever applicable) in order to ensure consistency in execution of such plans upon the State Bank’s request.

2. Transition provisions applied to the prudential ratio

Transitional treatment plans applied to the prudential ratio must include at least the following contents:

a) Specific ratios which are in breach of regulations;

b) Treatment measures and plans that ensure compliance by 01/01/2017.

3. Transitional provisions applied to extension of a line of credit

a) As at the entry into force of this Circular, credit institutions and foreign bank branches whose credit source extended to a customer and associated person fails to stay within the statutory limits on credit extension under Article 13 of the Circular No. 36/2014/TT-NHNN on grounds of any amendment to Point a Clause 15 Article 3 of the Circular No. 36/2014/TT-NHNN credit institutions or foreign bank branches and customers may continue to keep to agreements in the contract that they have signed till this contract expires. Any modification, supplementation or renewal of the above-mentioned contract shall be allowed only to the extent that such amendment, supplementation or renewal conforms to regulations set out in Article 13 of the Circular No. 36/2014/TT-NHNN and applicable laws and regulations;

b) As at the entry into force of this Circular, commercial banks or foreign bank branches whose credit source extended for customers’ investments or trades in stocks is in violation of regulations on conditions and ratios stated in Article 14 of the Circular No. 36/2014/TT-NHNN on grounds of the amendment to or supplementation of Point a Clause 15 and Point I Clause 18 Article 3 of the Circular No. 36/2014/TT-NHNN shall not be allowed to extend any additional credit source for investments or trades in stocks as long as they meet all conditions referred to in Clause 1 Article 14, undertake to comply with the ratios stated in Clause 3 Article 14 of the Circular No. 36/2014/TT-NHNN and must develop treatment plans in which at least the following contents must be included:

(i) List of customers and outstanding debts for single customer’s investments and trades in stocks; failure to adhere to predetermined limits;

(ii) Detailed treatment measures and plans, including the debt recovery, increase in the authorized capital or allocated funds.

4. Transition provisions applied to the prudential ratio of short-term capital sources used for granting medium and long-term loans

a) As at the entry into force of this Circular, credit institutions or foreign bank branches of which the maximum ratio of short-term financing source used for granting medium and long-term loans to customers is in violation of regulations set out in Clause 17 Article 1 of this Circular on grounds of the amendment to or supplementation of Clause 2 Article 17 of the Circular No. 36/2014/TT-NHNN shall not be allowed to extend any additional medium and long-term credit products as long as they meet the statutory ratios referred to in Clause 5 Article 17 of the Circular No. 36/2014/TT-NHNN and must develop treatment plans in which at least the followings must be included:

(i) Specific ratio that does not conform to regulations;

(ii) Treatment measures and plans that ensure compliance with laws and regulations after a maximum of 3 months from the entry into force of this Circular.

b) As at the entry into force of this Circular, non-bank credit institutions of which the maximum ratio of short-term financing source used as medium and short-term loans does not meet regulations set out in Clause 5 Article 17 of the Circular No. 36/2014/TT-NHNN shall not be allowed to extend any additional medium and long-term credit products as long as they meet the statutory ratios, and must develop treatment plans in which at least the followings must be included:

(i) Specific ratio that does not conform to regulations;

(ii) Treatment measures and plans that ensure compliance with laws and regulations after a maximum of 3 months from the entry into force of this Circular.

5. Transition provisions applied to the ratio of investments in Government bonds to short-term capital sources

As at the entry into force of this Circular, credit institutions or foreign bank branches of which the ratio of investments in Government bonds to short-term funds does not meet regulations set out in Clause 6 Article 17 of the Circular No. 36/2014/TT-NHNN shall not be allowed to further purchase or invest in Government bonds as long as they meet the statutory ratios referred to in Clause 6 Article 17 of the Circular No. 36/2014/TT-NHNN and must develop treatment plans in which at least the followings must be included:

a) Specific ratios which are in breach of regulations;

b) Treatment measures and plans that ensure compliance with laws and regulations after a maximum of 3 months from the entry into force of this Circular.

6. Post-transitional treatment

After the maximum period of transition included in treatment plans referred to in Clause 2 and 4 of this Article, credit institutions or foreign bank branches fail to remedy violations, the State Bank shall, by taking into consideration the severity and impact of risks, apply necessary treatment measures, including legitimate restructuring or revocation of their licenses.

Article 5. Implementation provisions

This Circular shall enter into force from July 1, 2016.

Article 6. Implementation

The Chief of the Office, Chief Inspector and Supervisor of banks, Heads of affiliated entities of the State Bank, Directors of the State Bank branches located at centrally-affiliated cities and provinces, Chairpersons of the Board of Directors, Chairpersons of the Board of Members, and General Director (Director) of credit institutions and foreign bank branches, shall be responsible for implementing this Circular./.

ANNEX 1

COMPONENTS AND METHODS FOR CALCULATION OF THE EQUITY CAPITAL
(Issued together with the Circular No. 06 of the State Bank’s Governor dated May 27, 2016 on amending and supplementing several Articles of the Circular No. 36/2014/TT-NHNN of the State Bank’s Governor dated November 20, 2014 on providing for prudential limits or ratios for operations of credit institutions or foreign bank branches)

A. COMPONENTS AND METHODS FOR CALCULATION OF THE EQUITY CAPITAL OF CREDIT INSTITUTIONS:

I. Private equity:

II. Consolidated equity capital

1. General principle:

a. Consolidation equity capital is determined by components stated in Point 2 hereunder, imported from the Consolidated Balance Sheet in which subsidiary companies that are enterprises operating under the Law on Insurance Business shall not be subject to consolidation.

b. Where the Consolidated Financial Statement stated in Point a does not have specific accounts or items to calculate the consolidated tier-I and tier-II capital, credit institutions are required to establish statistical data collected from the separate balance sheets of consolidated entities to ensure a full and accurate calculation of tier-I and tier-II capital accounts or items.

2. Components and methods for determining the consolidated equity capital

B. Components and methods for calculation of the equity capital of foreign bank branches:

Foreign bank branches shall refer to components stipulated hereunder or in the laws on financial regime of foreign bank branches and their own asset accounts or items to determine their equity capital in a proper manner.

ANNEX 2

INSTRUCTIONS ON CLASSIFICATION AND METHOD FOR CALCULATION OF TOTAL RISK ASSET
(Inclusive of on-balance sheet credited assets and off-balance sheet commitments)
(Issued together with the Circular No. 06 of the State Bank’s Governor dated May 27, 2016 on amending and supplementing several Articles of the Circular No. 36/2014/TT-NHNN of the State Bank’s Governor dated November 20, 2014 on providing for prudential limits or ratios for operations of credit institutions or foreign bank branches)

Section I. Instructions on calculation of on-balance-sheet credited assets and their respective value under off-balance-sheet commitments which is determined by risk levels

A. General instructions:

1. Credit institutions, foreign bank branches shall, subject to related balance sheets, databases and documents of their own and their subsidiaries, and regulations laid down in this Circular, determine on-balance-sheet credited assets and their respective value under off-balance-sheet commitments which is determined by risk levels as provided for in Section II hereof.    

Databases must provide depository and stocktaking of accounts receivable arranged by the following criteria: subjects of accounts receivable, currency type, security measures, assets put up as collateral and purposes of credit extensions.

2. Principles for determining risk coefficient of credited assets:

- 1^st principle: Each on-balance-sheet credited asset must be classified into a risk coefficient group.   If a credited asset concurrently meets criteria to be classified in multiple risk coefficients, the highest risk coefficient shall prevail.

This principle shall not be applied to accounts receivable that concurrently meet the following conditions: (i) they are fully secured in terms of payment due date and value by cash, valuable papers issued or secured under payment guarantees by the Government or State Bank of Vietnam; time deposits, savings cards, valuable papers issued by credit institutions or foreign bank branches themselves; valuable papers issued or secured under payment guarantees by the Central Governments, Central Banks of OECD member states; valuable papers issued or secured under payment guarantees by international financial organizations; (ii) accounts receivable which are not used for real estate business, investments or trades in securities; (iii) accounts receivable which are not allocated to such entities as subsidiaries or associate companies of credit institutions; securities corporations; fund management companies.

- 2^nd principle: Credit institutions or foreign bank branches must compile a list of accounts receivable itemized by security measures, collateralized assets and prudential ratios of respective security measures, types of collateralized assets in relation to such accounts receivable as specified in guarantee agreements. On such basis, credit institutions or foreign bank branches shall determine value of risk assets credited to accounts receivable by taking into consideration risk coefficients referred to in this Annex with respect to respective securities measures or collateralized assets.

Situation 1: As for credited assets (receivables), whether absolutely secured by one type of collateralized asset or not secured, the 1^st principle shall be applied.

Example 1: A loan granted to Bank A is worth VND 100 billion which is totally secured by VND 150-billion Government bonds.  Subject to the 1^st principle stated above, this loan shall be classified into the group that has the risk coefficient 0% (receivables totally secured by valuable papers issued by the Government of Vietnam).

Example 2: A loan granted to Customer A is worth VND 100 billion for real estate business (risk coefficient 200%) which is totally secured by valuable papers issued by other credit institutions (risk coefficient 20%).   Pursuant to the 1^st principle stated above, this loan shall be classified into the group that has the risk coefficient 200%.

Example 3: Bank A agrees to grant a loan worth VND 100 billion to a customer for his/her investments or trades in stocks which is totally secured by VND 150-billion Government bonds.  Pursuant to the 1^st principle stated above, this loan shall be classified into the group that has the risk coefficient 150% (receivables for investments or trades in securities).

Situation 2: As for credited assets (receivables) partially secured by collateralized assets, the 2^nd principle shall be applied.

Example: A loan granted to Bank A is worth VND 100 billion of which VND 50 billion is secured by Government bonds.

Subject to the 2^nd principle stated above, this loan shall be classified into groups that have the following risk coefficients: (i) receivables worth VND 50 billion secured by valuable papers issued by the Government of Vietnam are classified into the group that has the risk coefficient 0%; (ii) the remaining VND 50 billion shall be classified into the group that has the risk coefficient 20% (receivables denominated in VND with respect to other domestic credit institutions).  

Situation 3: As for credited assets (receivables) secured by different collateralized assets, the 2^nd principle shall be applied.

Example: A loan granted for commercial purposes to Enterprise A is worth VND 100 billion of which VND 50 billion is secured by Government bonds and the remaining VND 50 billion is secured by rights to use land.

Subject to the 2^nd principle stated above, this loan shall be classified into groups that have the following risk coefficients: (i) receivables worth VND 50 billion secured by valuable papers issued by the Government of Vietnam are classified into the group that has the risk coefficient 0%; (ii) the remaining VND 50 billion secured by rights to use land shall be classified into the group that has the risk coefficient 50%.  

Situation 4: As for credited assets (receivables) secured by gold; used for one of the following purposes: real estate business, investment or trade in securities; or allocated to the following entities: subsidiaries, associate companies of the said credit institutions, securities or fund management companies, both 1^st and 2^nd shall be applied.

Example: A loan granted to Securities Company A is worth VND 100 billion of which VND 50 billion is secured by Government bonds and the remaining VND 50 billion is secured by rights to use land.

As provided for in this Annex, the VND-50-billion loan secured by Government bonds shall be categorized into the group that has the risk coefficient 0%, VND 50 billion secured by rights to use land shall be included in the group that has the risk coefficient 50% and receivables from such securities company shall be classified into the group that has the risk coefficient 150%.

By application of both principles stated above, this loan shall be classified into the group that has the maximum risk coefficient 150% (receivables of securities and fund management companies).

3. Method for determining the risk coefficient of off-balance sheet commitments:

3.1. Value of respective on-balance sheet credited assets of off-balance sheet commitments which is determined by levels of risk shall be calculated by taking two following steps:

(1) Step 1: Determining value of respective on-balance sheet credited assets of off-balance sheet commitments.

Determination method: Multiplying value of off-balance sheet commitments by respective conversion coefficient referred to in this Annex.

(ii) Step 2: Determining value of respective on-balance-sheet credited risk assets of off-balance sheet commitments.

Determination method: Multiplying respective on-balance sheet credited assets of each off-balance sheet commitment referred to in Step 1 by the respective risk coefficient stipulated in this Annex.

3.2. Off-balance sheet commitments shall, after conversion undertaken under the abovementioned instructions, be deemed as on-balance sheet credited assets and be classified into the group that has the similar risk coefficients to those referred to in regulations on on-balance sheet credited assets in order to determine value of respective on-balance sheet credited assets of off-balance sheet commitments as follows:

(i) Off-balance sheet commitments secured under payment guarantees by the Government or State Bank of Vietnam, or fully secured in terms of both their maturity period and value by cash, savings books, margin deposits, or valuable papers issued by the Government or State Bank, shall be classified into the group that has the risk coefficient 0%.  

(ii) Off-balance sheet commitments arising in Vietnam dong or foreign currency totally secured by valuable papers issued by state-owned financial institutions, or other credit institutions or foreign bank branches, shall be classified into the group that has the risk coefficient 20%. 

(iii) Off-balance sheet commitments secured by real estate shall be classified into the asset group that has the risk coefficient 50%.

3.3. Interest rate contracts, foreign currency contracts and other off-balance sheet commitments which are not elsewhere classified shall be included in the group that has the risk coefficient 100%.

Example:

Bank A issues a payment guarantee certificate worth USD 100,000 to Company B for its loan granted by Bank C. That guarantee certificate of Bank A is totally secured by valuable papers issued by Bank A itself and currently held by Company B.  In this case,

- Value of respective on-balance sheet credited assets shall be determined according to the formula: USD 100,000 (value of off-balance sheet commitments) x 100% (the conversion coefficient referred to in Item 31 Point 2 Section II of this Annex) = USD 100,000);

- Value of respective on-balance-sheet credited risk assets shall be determined according to the formula: USD 100,000 (value of respective on-balance sheet credited assets) x 20% (the risk coefficient referred to in Item 14 Point 1 Section II of this Annex) = USD 20,000).

B. Instructions on calculation of credited risk assets subject to consolidation:

Calculation principle:

1. This calculation is based on data obtained from the Consolidated Balance Sheet in which subsidiary companies that are enterprises operating under the Law on Insurance Business shall not be subject to consolidation in accordance with laws and regulations.

2. Value of credited risk assets subject to consolidation (including on-balance sheet credited assets subject to consolidation and value of respective on-balance sheet credited assets subject to consolidation of off-balance sheet commitments subject to consolidation) shall be determined as provided for in Sub-section A Section I of this Annex.

Section II. Classification and determination of credited risk assets

1. On-balance sheet credited assets determined by levels of risk:

2. Off-balance sheet commitments

ANNEX 3

INSTRUCTION ON CALCULATION OF SOLVENCY OR LIQUIDITY RATIOS
(Issued together with the Circular No. 06 of the State Bank’s Governor dated May 27, 2016 on amending and supplementing several Articles of the Circular No. 36/2014/TT-NHNN of the State Bank’s Governor dated November 20, 2014 on providing for prudential limits or ratios for operations of credit institutions or foreign bank branches)

Section I. Assets of high liquidity:

1. Forms used for calculating “assets of high liquidity”:

2. Instructions on using data:

Item 1: Balances of cash or value of gold recorded on the Balance Sheet at the end of a day.

Item 2: Balances of demand deposits and margin deposits in the State Bank recorded on the Balance Sheet at the end of a day.

Item 3: Book value of valuable papers used in the State Bank’s transactions in accordance with its regulations at the end of a day.

Within the period of forward purchase of valuable papers agreed upon in repurchase contracts, credit institutions or foreign bank branches may include forward-purchased valuable papers in assets of high liquidity.

Within the period of forward sale of valuable papers, credit institutions or foreign bank branches shall not include forward-sold valuable papers in assets of high liquidity.

Item 4: Balances of demand deposits in bank agents (including overnight deposits in other credit institutions or bank branches) recorded on the Balance Sheet at the end of a day minus accounts committed for a particular payment purpose.

Item 5: Balances of non-term deposits in other credit institutions or foreign bank branches within or outside Vietnam recorded on the Balance Sheet at the end of a day.

Item 6: Book value of bonds or bills issued or secured under payment guarantees by the Government or Central Banks of countries which are rated at least AA or equivalent by international credit rating organizations (Standard & Poor’s, Moody’s, Fitch Group, etc.) at the end of a day.

3. Principle of calculation of “assets of high liquidity”:

(i) Accounts listed in Item 3 and Item 6 must meet the following requirements:

- Ensure that they may be immediately used for payment purposes or have high liquidity with low transactional expenses;

- Do not use them to secure other financial obligations;

- Do not include discounted or pledged valuable papers;

- Do not include valuable papers from which outstanding principal or interest obligations arising have been breached by issuing entities;

- Do not include bonds (inclusive of special bonds) issued by Vietnam Asset Management Company;

 (ii) Assets of high liquidity refer to valuable papers used in the State Bank's transactions (except bonds issued by VAMC), bonds or bills issued or secured under payment guarantees of the Governments, Central Banks of countries rated at least AA by credit rating organizations (Standard & Poor’s; Moody’s; Fitch Group, etc.) with their face value denominated in VND and freely-convertible currencies.

Section II. Cash inflow:

1. Form used for calculation of "cash inflow":

2. Instructions on getting “cash inflow” data:

Item 1.1: Demand deposits: Import balances of demand deposits from the Balance Sheet in the column “Following day” and keep other day columns blank.

Item 1.2: Time deposits: Fill balances of time deposits of which payment is due as specified in deposit agreements in the relevant columns corresponding to their maturity dates.

Item 1.3: Loans granted to credit institutions, foreign bank branches or foreign credit institutions: Fill the amount of outstanding debts incurred from such loans of which repayment is due as specified in loan agreements in the relevant columns corresponding to their maturity dates.

Item 2: Loans granted to customers: Fill the amount of outstanding debts incurred from such loans of which repayment is due on the date specified in loan agreements in the relevant columns corresponding to their maturity dates.

Item 3: Trading securities:

- Listed trading securities: Fill the book value minus provisions for devaluation in securities required by laws in the column “Following day” and keep other day columns blank.

- Unlisted trading securities: Fill the book value of trading securities in the relevant columns corresponding to their maturity dates.

Item 4: Trading securities:

- Listed available-for-sale trading securities: Fill the book value minus provisions for devaluation in securities required by laws in the column “Following day” and keep other day columns blank.

- Listed held-to-maturity trading securities: Fill the book value of held-to-maturity trading securities minus provisions for devaluation in securities required by laws in the relevant columns corresponding to their maturity dates.

- Unlisted available-for-sale trading securities: Fill the book value of available-for-sale trading securities in the relevant columns corresponding to their maturity dates.

- Unlisted held-to-maturity trading securities: Fill the book value of held-to-maturity trading securities in the relevant columns corresponding to their maturity dates.

Item 5: Derivatives and other financial assets: Fill the sum certainly collected from implementation of derivative instruments and other financial assets in the relevant columns corresponding to the dates of cash flows arising.

Item 6: Interest or expenses receivable: Fill the monetary amount of interest, expenses receivable at maturity or certainly collected arising from loans, deposits, trading securities, derivative instruments and other financial assets that meet conditions for being included as a "cash inflow" entry at Item 1, 2, 3, 4 and 5 as mentioned above in the relevant columns corresponding to their maturity dates.

Item 7: Other credited assets: Fill the sum certainly collected arising from implementation of “other credited assets” under instructions set out in the Decision No. 16/2007/QD-NHNN of the State Bank dated April 18, 2007 on adoption of financial reporting regime in credit institutions and other relevant instruments (excluding cash flows arising as referred to in Item 1 through Item 6 in the cash inflow table) in the relevant columns corresponding to the dates of cash flows arising.

3. Principle of calculation of "cash inflow":

“Cash inflow” must adhere to the following principles:

- Accounts or items already included in Assets of high liquidity shall not be recorded in the “cash inflow”.

- Where credit institutions or foreign bank branches have not established determination of monetary amounts likely to be collected as planned, such amounts shall not be included in the "cash inflow".

- Loans granted to other credit institutions, foreign bank branches, foreign credit institutions and those granted to individual economic entities shall, if exceeding their maturity and/or classified into the 2^nd debt group or further (based on the latest result of debt classification), be excluded from the “cash inflow”. 

- Listed trading securities and available-for-sale trading securities: Value included in the "cash inflow" is the book value minus provisions for devaluation in securities required by laws and is included in the “cash inflow” of the column “Following day” and is not filled in the rest of day columns.

- Listed available-for-sale trading securities: Value included in the "cash inflow" is the book value minus provisions for devaluation in securities required by laws and is included in the “cash inflow” at maturity.

- Unlisted securities (unlisted trading securities, unlisted available-for-sale investment securities and unlisted held-to-maturity investment securities): Fill the book value of unlisted securities classified into the 1^st debt group in the relevant columns corresponding to their maturity dates.

Section III. Cash outflow:

1. Form used for calculation of "cash inflow":

2. Instructions on getting “cash outflow” data:

Item 1: Debts owed to the Government and the State Bank: Fill the amount of outstanding debts owed to the Government and the State Bank in relevant columns corresponding to their payment due dates.

Item 2.1: Demand deposits: Import balances of demand deposits of credit institutions, foreign bank branches and foreign credit institutions from the Balance Sheet in the column “Following day” and keep the rest of day columns blank.

Item 2.2: Time deposits: Fill balances of time deposits made by credit institutions, foreign bank branches and foreign credit institutions of which payment is due in the relevant columns corresponding to their maturity dates.

Item 2.3: Loans granted by credit institutions, foreign bank branches or foreign credit institutions: Fill the amount of outstanding debts incurred from loans of which repayment is due in the relevant columns corresponding to their maturity dates specified in loan agreements.

Item 3.1: Demand deposits: Credit institutions, foreign bank branches shall list and calculate balances of demand deposits of which the average amounts are withdrawn within 30 days immediately preceding the date of calculation in order to determine the amount of demand deposits likely to be withdrawn and fill these amounts in the column "Following day". Where it is impossible to determine the said average amounts, demand deposits likely to be withdrawn in the column “following day” are not less than 15% of the average balance of demand deposits of customs made within 30 days immediately preceding the calculation date.

Item 3.2: Time deposits and saving deposits: Fill balances of time deposits and saving deposits of which repayment is due in the relevant columns corresponding to their maturity dates.

Item 4: Derivatives and other financial liabilities: Fill the sum proposed to arise from implementation of derivative instruments and other financial liabilities in the relevant columns corresponding to the date of cash flow arising.

Item 5: Fund derived from financing, investment entrustments, lending entrustments from which any risk arising is incurred by credit institutions or foreign bank branches in accordance with laws: Fill the monetary amount arising from implementation of financing, investment entrustments and lending entrustments by risk-taking credit institutions or foreign bank branches as defined in financing, investment entrustment and lending entrustment agreements in the relevant columns corresponding to the agreed period of such implementation.  

Item 6: Issues of valuable papers: Fill the monetary amount payable arising from implementation of obligations to pay issued valuable papers in the relevant columns corresponding to their maturity dates.

Item 7: Interest, expenses payable: Fill the monetary amount of interest and expenses payable in the relevant columns corresponding to their payment due dates.

Item 8: Other liabilities: Fill the sum arising from implementation of “other liabilities” under instructions set out in the Decision No. 16/2007/QD-NHNN of the State Bank dated April 18, 2007 on adoption of financial reporting regime in credit institutions and other relevant instruments (excluding cash flows arising as referred to in Item 1 through Item 7 in the cash outflow table) in the relevant columns corresponding to their maturity dates.

Item 9: Irrevocable commitments to customers: Fill balances of irrevocable commitments in the relevant columns corresponding to the time limits for implementation of such commitments as specified in credit facility agreements, contracts, payment documents and other equivalents.

Item 10: Overdue payment obligations: Fill all of the overdue obligatory payments in the column “Following day” and keep other day columns blank.

3. Principle of calculation of "cash outflow":

“Cash outflow” refers to the amount of cash arising from obligations to make due payments, fulfill commitments, and proposed obligations arising as well as adhere to the following principles:

- Where it is unlikely to determine time limits for payments of obligations, the sum used for paying obligations must be included in the column "cash outflow" of the "following day";

- Obligations of which payments are overdue must be included in the column “cash outflow” of the “following day.

- Irrevocable commitments must be fully obeyed in terms of maturity and value by (i) VND or foreign-currency cash or deposits, (ii) bonds of Governments, credit institutions or foreign bank branches of which value of commitments are not entered in the “cash outflow”.

- With regard to loans obtained from the State Bank (including forward sale of valuable papers through open market operations; discount on and pledging of valuable papers, overnight borrowing in interbank electronic payment system) and loans granted by other credit institutions or foreign bank branches in the form of discount or re-discount on valuable papers used in the State Bank's trading transactions, credit institutions or foreign bank branches shall not enter these loans in the “cash outflow”.