Thông tư 36/2014/TT-NHNN

CIRCULAR

STIPULATING MINIMUM SAFETY LIMITS AND RATIOS FOR TRANSACTIONS PERFORMED BY CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

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 for Banking Supervision,

The Governor of the State Bank of Vietnam hereby promulgates the Circular on stipulating minimum safety limits and ratios for transactions performed by credit institutions and branches of foreign banks.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application

1. This Circular shall provide for minimum safety limits and ratios for transactions performed by credit institutions and branches of foreign banks that must be constantly maintained, including:

a) Minimum capital safety ratio;

b) Credit limit;

c) Solvency ratio;

d) Maximum ratio of short-term capital sources used as the medium and long term loans;

dd) Limit on capital contribution and stock purchase;

e) Loan-to-deposit ratio.

2. Based on the final report on supervision, examination and inspection of transactions throughout credit institutions and branches of foreign banks, delivered by the State Bank of Vietnam (hereinafter referred to as the State Bank), when there comes a need to ensure the safety for all transactions carried out by credit institutions and branches of foreign banks, depending the nature and level of risks, the State Bank shall require such credit institutions and branches of foreign banks to impose one or several lower limit(s) and tighter control over the safety ratio stipulated in this Circular.

3. As for credit institutions and branches of foreign banks that implement the approved restructuring plan, under certain circumstances, the State Bank’s Governor shall make a rational decision to determine the safety limit and ratio for transactions performed by each credit institution or branch of foreign banks.

Article 2. Applicable entities

1. Credit institutions defined herein include:

a) Banks: State-owned commercial banks, cooperative banks, joint-stock commercial banks, joint venture banks and wholly foreign-owned banks;

b) Non-bank credit institutions: Financial companies and financial leasing companies.

2. Branches of foreign banks.

Article 3. Interpretation of terms

In this Circular, the terms mentioned herein is construed as follows:

1. Accounts receivable shall encompass deposits made at other credit institutions, branches of foreign banks, or overseas credit institutions; investments used for purchasing valuable papers; sums used as loans, financial leases or factoring accounts; discounts, re-discounts of negotiable instruments or valuable papers; extensions of credit by means of issuing credit cards; sums used as debt repayments on behalf of other debtors as agreed upon in off-balance sheet commitments.

2. Clients who enter into a credit transaction with credit institutions and branches of foreign banks (hereinafter referred to as clients) refer to organizations (inclusive of credit institutions or branches of foreign banks), individuals or other entities enshrined in the civil law.

A client is a different organization, individual, or entity stipulated by the civil law.

3. Real estate business refers to the investment made to create, purchase, act as a transferee of, lease and hire-purchase real property which will be then used for sale, transfer, lease, sub-let and hire-purchase for the purpose of earning profits.

4. Interest rate derivatives refer to interest rate swaps, forwards, options and others as stipulated by the State Bank.

5. Foreign currency derivatives refer to foreign currency swaps, forwards, futures, options and others as stipulated by the State Bank.

6. Retained earnings of credit institutions and branches of foreign banks refer to the undistributed profit determined after their annual financial statements’ being independently audited and retained for the purpose of providing supplementary funds for credit institutions and branches of foreign banks under the decision made by Shareholders’ General Council, The Management Board, Members’ General Meeting, owners, foreign banks (parent banks).

7. Trade benefits refer to the positive differential between the cost of financial assets purchased and the book value of these financial assets payable by a credit institution derived from business transactions in the form of a contract to buy other businesses or credit institutions in accordance with laws. Such financial assets shall be fully recorded in the balance sheet of a credit institution.

8. OECD refers to Organization for Economic Cooperation and Development.

9. International financial institutions include:

a) Group of international banks consists of The International Bank for Reconstruction and Development – IBRD, the International Financial Company – IFC, the International Development Association – IDA, the Multilateral Investment Guarantee Agency – MIGA;

b) The Asian Development Bank – ADB;

c) The African Development Bank - AfDB;

d) The European Bank for Reconstruction and Development - EBRD;

dd) The Inter-American Development Bank-IADB;

e) The European Investment Bank - EIB

g) The European Investment Fund – EIF;

h) The Nordic Investment Bank – NIB;

i) The Caribbean Development Bank - CDB;

k) The Islamic Development Bank - IDB;

l) The Council of Europe Development Bank - CEDB;

m) Other financial institutions with their charter capital contributed by different countries.

10. Holding corporate refers to:

a) The company that directly or indirectly holds more than 20% of charter capital, voting or control stocks of a commercial bank or financial institution;

b) Commercial banks or financial companies with their subsidiaries or associate firms.

11. Valuable papers refer to the proof of debt repayment obligation, granted by the issuer of valuable papers to the holder of such valuable papers in a specified time, and interest payment conditions as well as other requirements. Valuable papers comprise bonds, treasury bills, deposit certificates, promissory notes and others.

12. Credit extension refers to different transactions such as lending, guaranteeing, discounting, rediscounting, financial leasing, factoring, investing in enterprise bonds, granting credit cards and other credit extension tasks in accordance with regulations laid down by the State Bank.

13. Total amount of outstanding debts incurred from the credit extension consist of total outstanding loans, discounts, re-discounts, sums used for financial leases, factoring and investment in enterprise bonds, credit cards and other credit extension tasks as prescribed by the State Bank, guaranteed balance and trusted credits extended by other credit institutions or branches of foreign banks.

14. Bond investment refers to the transaction such as selling or trusting other organization (inclusive of other credit institutions or branches of foreign banks) to purchase bonds.

15. Associated entities of an organization or individual refer to the organization or individual who have direct or indirect relationship with that organization or individual.

a) Associated entities of an organization (including credit institution) are those identified in the following cases:

(i) Parent companies or credit institutions considered as parent companies (hereinafter referred to as parent credit institutions) of the aforementioned organization;

(ii) Subsidiaries of the aforementioned organization;

(iii) Companies that have the same parent company or credit institution of the aforementioned organization;

(iv) Managers or members of the Control Board of a parent company or credit institution of the aforementioned organization;

(v) Individuals or organizations who exercise their authority to appoint managers or members of the Control Board of a parent company or credit institution of the aforementioned organization;

(vi) Managers or members of the Control Board of the aforementioned organization;

(vii) Companies or organizations who exercise their authority to appoint managers or members of the Control Board of the aforementioned organization;

(viii) Wives, husbands, fathers, mothers, sons or daughters (including foster fathers, mothers, sons or daughters, fathers-in-law, mothers-in-law, step fathers, step mothers, or sons or daughters of husband or wife), siblings (including half siblings), siblings-in-law of managers or members of the Control Board, capital contributors or stockholders, all of whom must own 5% or higher rate of charter capital or voting stocks of the aforementioned organization;

(ix) Organizations or individuals that own 5% or higher rate of charter capital or voting stocks of the aforementioned organization;

(x) Individuals who are authorized to act as representatives for the aforementioned organization’s paid-in capital and stocks.

b) Associated entities of an individual are those identified in the following cases:

(i) Wives, husbands, fathers, mothers, sons or daughters (including foster fathers, mothers, sons or daughters, fathers-in-law, mothers-in-law, step fathers, step mothers, or sons or daughters of husband or wife), siblings (including half siblings), siblings-in-law of the aforementioned individual;

(ii) Companies or credit institutions of which the aforementioned individual owns 5% or higher rate of charter capital or voting stocks;

(iii) Subsidiaries of parent companies or credit institutions of which the aforementioned individual is the manager or member of the Control Board;

(iv) Subsidiaries of parent companies or credit institutions of which the aforementioned individual exercises the authority to appoint managers or members of the Control Board;

(V) Companies or credit institutions of which the aforementioned individual is the manager or member of the Control Board;

(vi) Companies or credit institutions of which the aforementioned individual is the wife, husband, father, mother, son or daughter (including foster father, mother, son or daughter, father-in-law, mother-in-law, step father, step mother, or son or daughter of a husband or wife), sibling (including half sibling), sibling-in-law of the manager or member of the Control Board, capital contributors or stockholders who own 5% or higher rate of charter capital or voting stocks;

(vii) Organizations or individuals who are authorized to act as representatives for the aforementioned individual’s paid-in capital and stocks;

(viii) Individuals together with the aforementioned individual who are authorized by an organization to act as representatives for their paid-in capital and stocks in other organizations;

(ix) Individuals who are authorized by the aforementioned individual to act as representatives for his/her paid-in capital and stocks.

c) In order to manage credit concentration risks for banking activities, credit institutions and branches of foreign banks are entitled to integrate supplementary cases in which associated entities are identified, other than those stipulated at Point a and b of this Clause, into internal rules of these credit institutions and branches of foreign banks.

16. Capital contribution or stock purchase refers to the investment that a credit institution makes to contribute its paid-in capital to the charter capital, purchase stocks and other investment types in order to become the stockholder and capital contributor of other enterprises and credit institutions, including the capital allocation and contribution to its subsidiaries and associate firms; contribute capital to the investment fund or entrust its capital to other organizations to serve the purpose of capital contribution or stock purchase in the same form mentioned above.

17. Irrevocability refers to no waiver or change, in any form, of binding commitments that contracting parties have agreed upon, except for the case in which such commitments must be waived or changed in accordance with laws.

18. Extension of credits used for stock investment and business includes the following activities:

a) Granting loans or discounts of valuable papers to securities companies for their stock investment and business;

b) Granting loans used for the purchase of stocks;

c) Granting loans in the form of a cash advance to clients who have already sold their securities and use their loans to purchase stocks;

d) Granting loans to clients with the intent of adding the amount so deficient to the sums of money used for the placement of satisfied stock buy order;

dd) Granting loans to employees to enable them to buy initial public offering stocks during the transformation of a state-owned company into a joint-stock company;

e) Granting loans used for the purpose of contributing capital to or purchase stocks of joint-stock companies;

g) Granting discounts of valuable papers to clients used for the purchase of stocks;

h) Granting loans and discounts of valuable papers in any other forms to enable clients to use such sums for the purchase of stocks.

Article 4. Internal rules

1. Credit institutions and branches of foreign banks must set out their internal rules for their credit extension and loan management in order to use their loans to the right purpose as stipulated in this Circular and other relevant documents, which must enclose the following requirements:

a) Criteria for assessing a single client, or a client and an associated entity in accordance with Clause 15 Article 3 hereof; credit policy applied to a single client, or a client and an associated entity; statutory principles of decentralization and authorization to grant a credit extension decision and approval; debt rescheduling of a single client, or a client and an associated entity;

b) Regulations on risk diversification for the credit extension; methods for supervising, managing, approving and deciding the grant of credits to a single client, or a client and an associated entity at the rate ranging from 1% of the owner's equity fund of credit institutions or branches of foreign banks or over, and ensuring public disclosure and transparency for stages such as assessment and extension of credits, debt rescheduling, and preventing interest conflicts between assessors, decision-makers of credit extension and clients associated with these persons.

c) Rules and criteria for assessing and determining levels of risks of extending credits to different clients and those working in sectors likely to have access to preferential policies or subject to certain restraints on credit extension, decided by credit institutions or branches of foreign banks, which serve as a basis for their preparation and development of annual business plan;

d) Consideration, approval and extension of credits, decision to reschedule debts (including debt extension and adjustment to debt repayment term) must stick to the principle that the decision-maker of debt rescheduling is not the decision-maker who extends such credit, except for the case in which the credit extension is approved by the Management Board, Board of Members or General Director (branches of foreign banks);

dd) Regulations on requirements and processes for risk management to which transactions in the extension of credits used for stock investment and business must conform.

2. Credit institutions and branches of foreign banks are obliged to set their internal rules for assessment of asset quality and conformance with minimum capital safety ratio which stick to principles of asset risk management, adhere to the needs, characteristics and risk levels during their transactions, refer to the business cycle, competence in coping with risks and business strategies of these credit institutions and branches of foreign banks. Contents encompassed in these internal rules must align with regulations laid down in this Circular and other relevant documents, including at least the followings:

a) Regulations on organizational structure, decentralization and authorization system, and duties and responsibilities of each managerial staff in charge of capital safety ratio;

b) Principles, policies and processes of identifying, measuring, tracking, monitoring, controlling, reporting and exchanging information about risks to ensure the conformance with the capital safety ratio;

c) Regulations on management of equity and asset structure must help to assess level and trend of risks and impacts of risks on requirements of equity funds for risk compensation; scale and quality of equity funds, tolerance of risks from macro elements, approachability to supplementary source of equity funds, and even financial supports from shareholders when required in order to ensure the conformance with the minimum capital safety ratio; obligations to finance their subsidiaries and associate firms; objectives of equity funds that must be achieved in a short or long term, estimated expenses used to provide supplementary fund for the equity, and approaches to reach such equity objectives. Management of equity and asset structure is regulated to include:

(i) Processes and methods for supervising and assessing scale, composition and quality of equity funds and asset portfolios;

(ii) Managerial system of minimum capital safety;

(iii) Early warning system by which doubtful signs must be clearly specified to facilitate the early detection of risks or threats to a reduction in the capital safety ratio, as well as regulated supervision and reporting system;

(iv) Separate and consolidated plans for risk management to keep the minimum capital safety ratio constant, consisting of the following regulations:

- Measures to manage and develop the equity fund and asset in response to any reduction in or breach of regulations on the minimum capital safety ratio;

- Rights, duties, obligations of and cooperation among relevant divisions or individuals in preparing plans and measures to deal with, or respond to any possible reduction in or violation against the minimum capital safety ratio.

3. Credit institutions and branches of foreign banks must set out the internal rules for their liquidity management in accordance with this Circular and other relevant documents, including at least the followings:

a) Regulations on decentralization, authorization, duties and responsibilities of relevant units for the management of asset accounts (Credit or Debit), and stabilization of solvency and liquidity ratio;

b) Processes, procedures for and limits pertaining to liquidity management, or restrictions pertaining to control over the difference in the term of asset accounts (Credit or Debit) on the basis of cash inflows or outflows in accordance with Appendix 3 enclosed herewith;

c) Principles, policies and processes for identifying, measuring, tracking, monitoring, controlling, reporting and exchanging information about risks to solvency and liquidity; criteria for early warnings of risks from a decline in solvency, liquidity; problem-solving plans;

d) Proposals and measures to take possession of highly liquid valuable papers;

dd) Internal guidance, examination, control and audit that must be conducted to maintain the stability of solvency and liquidity ratios;

e) Model of assessment and testing of solvency and liquidity, which must consist of analyses of different situations where solvency or liquidity is likely to take place. Situation analysis must take the followings into consideration:

(i) Situation analysis is required to consider at least two cases below:

- Cash flow from business transactions that take place under a normal operating condition;

- Cash flow from business transactions that take place in a condition under which the business is faced with difficult solvency and liquidity.

(ii) Situation analysis must represent the following contents:

- Competence in fulfilling daily obligations and commitments;

- Control measures to be applied to ensure the conformity with regulatory solvency requirements.

4. Internal regulations enshrined in Clause 1, 2 and 3 of this Article must be revised or modified at least once a year.

5. Within a period of 10 days after the date on which internal rules stipulated in Clause 1, 2 and 3 of this Article are adopted, amended and replaced, credit institutions and branches of foreign banks must send such internal rules after being adopted, amended and replaced directly or by post to the State Bank (c/o Bank Supervision and Inspection Agency).

Article 5. Information technology

Credit institutions and branches of foreign banks are obligated to operate a comprehensive information technology network in order to enforce the regulations laid down in this Circular and this network must meet minimum requirements mentioned below:

1. Storing, accessing and supplementing clients’ database, markets, and matching regulatory requirements for risk management in accordance with regulations laid down by the State Bank as well as internal regulations set out by credit institutions and branches of foreign banks.

2. Tallying, tracking and managing cash flows, equity, asset and liability items; calculating, managing and monitoring safety limits and ratio for their transactions.

3. Complying with statistical reporting regime as stipulated or requested by the State Bank.

Chapter II

SPECIFIC PROVISIONS

Section 1. ACTUAL VALUE OF CHARTER CAPITAL, ALLOCATED FUNDS, AND CONTROLLING MEASURES AGAINST THE SITUATION WHEN THE ACTUAL VALUE OF CHARTER CAPITAL, ALLOCATIONS BECOMES LOWER THAN THE VALUE OF LEGAL CAPITAL

Article 6. Actual value of charter capital and allocated funds

1. Actual value of charter capital and allocated funds of credit institutions and branches of foreign banks dictates the residual value of charter capital and allocated funds determined behind the principle regulated in Clause 2 and calculation method stipulated in Clause 3 of this Article.

2. Principles for determination of actual value of charter capital and allocated funds:

Credit institutions and branches of foreign banks shall calculate the residual value of charter capital and allocated funds whenever:

a) Provisions for risks that may happen have been set up in accordance with laws;

b) Income and expense accounts have been entirely posted on the income statement in accordance with laws.

3. Method for calculating the actual value of charter capital and allocated funds:

The actual value of charter capital and allocated funds is calculated by addition (subtraction) of undistributed earnings accrued (unrealized losses), and funds set up from post-tax gains (exclusive of reward and welfare fund, or reward fund for the executive board) to (from) actually contributed charter capital and allocated funds.

4. Credit institutions and branches of foreign banks dictates must closely monitor, assess and send periodic reports to the State Bank (c/o Bank Supervision and Inspection Agency) on the actual value of charter capital and allocated funds, which follows the regulations hereunder:

a) In respect of credit institutions and branches of foreign banks whose term of annual financial statement preparation expires on December 31:

No later than July 15 and January 15 every year, credit institutions and branches of foreign banks shall report the actual value of charter capital and allocated funds which are consolidated by the end of June 30 and December 31 respectively;

b) In respect of credit institutions and branches of foreign banks whose term of annual financial statements does not expire on December 31 under the approval from competent State agencies:

No later than the 15^th day of the first month of the first and third accounting period, credit institutions and branches of foreign banks shall report the actual value of charter capital and allocated funds which are consolidated by the last day of the immediately preceding accounting quarter;

c) Where actual value of charter capital and allocated funds consolidated right at the reporting time specified at Point a and b of this Clause has not yet recorded any adjustment to the accounting entries made by independent auditors (if any), credit institutions and branches of foreign banks shall provide such supplement at the successive term of financial statement preparation.

Article 7. Controlling measures against the situation when the actual value of charter capital and allocated funds becomes lower than the value of legal capital

1. If the actual value of charter capital and allocations of credit institutions and branches of foreign banks is reduced below the value of legal capital, credit institutions and branches of foreign banks are obliged to:

a) Prepare and take approaches to keeping the actual value of charter capital and allocated funds at least equal to the value of legal capital;

b) Within a maximum of 30 days over which the actual value of charter capital and allocated funds is reduced below the value of legal capital, a report on controlling measures and commitments to taking such approaches must be sent to the State Bank (c/o Bank Supervision and Inspection Agency), including at least the followings:

(i) Actual value of charter capital and allocated funds in accordance with regulations laid down in Article 6 hereof;

(ii) Reasons for that reduction;

(iii) Measures to prevent the actual value of charter capital and allocated funds from being reduced below the value of legal capital, and maintain safety ratios for their business transactions;

c) All arrangements for the application of such measures must be made at the request of the State Bank (if any).

2. Measures that the State Bank shall apply to deal with the situation when the actual value of charter capital and allocated funds of credit institutions and branches of foreign banks is reduced below the value of legal capital:

a) Assessing, examining, inspecting or requesting credit institutions and branches of foreign banks to conduct the independent auditing work with the intent of determining the actual value of charter capital and allocated funds through the approaches mentioned in Clause 1 of this Article;

b) Requiring any amendment and supplement to approaches that credit institutions and branches of foreign banks shall take to the situation when the actual value of charter capital and allocated funds becomes lower than the value of legal capital as stipulated in Clause 1 of this Article when necessary;

c) All arrangements for the application of such controlling measures must be made at the request of the State Bank (if any).

d) Depending on the level of reduction in the actual value of charter capital and allocated funds in comparison with the value of legal capital, the State Bank shall decide specific measures below that apply to each credit institution and branch of foreign banks:

(i) Measures, regulated in Clause 2 Article 59 of the State Bank Law, shall take effect whenever the actual value of charter capital and allocated funds is reduced to below 80% of legal capital;

(ii) Restructuring measures, stipulated by laws, shall be applied to revoke licenses of credit institutions and branches of foreign banks if the actual value of their charter capital and allocated funds is reduced to below 50% of legal capital, or the actual value of their charter capital and allocated funds is reduced below the value of legal capital for 6 consecutive months despite all controlling measures stipulated in Clause 1 of this Article.

Section 2. EQUITY CAPITAL AND MINIMUM CAPITAL SAFETY RATIO

Article 8. Equity capital

1. Equity capital of credit institutions and branches of foreign banks is the basis for determining safety limits and ratios for business transactions performed by credit institutions and branches of foreign banks as stipulated in this Circular.

2. Equity capital equals total amount of Tier 1 and Tier 2 capital subtracting from deductibles stipulated in Appendix 1 hereof.

3. Credit institutions and branches of foreign banks shall rely on the amount of equity capital recorded at the end of a nearest working day to calculate and maintain safety limits and ratios prescribed in this Circular during their banking transactions.

Article 9. Minimum capital safety ratio

1. Minimum capital safety ratio reflects the capital adequacy that credit institutions and branches of foreign banks gain on the basis of the value of equity capital and risk levels during their business transactions. Credit institutions and branches of foreign banks must constantly maintain the minimum capital safety ratio in accordance with provisions laid down in Clause 2 and 3 of this Article.

2. Minimum capital safety ratio of credit institutions:

a) Minimum capital safety ratio of credit institutions consists of minimum capital safety ratios defined on the separate and consolidated basis.

b) Minimum capital safety ratio defined on the separate basis: Each credit institution is required to maintain its separate ratio of 9%.

The calculation of minimum capital safety ratio on the separate basis is based on the following formula:

Where:

- Separate equity capital is determined according to the Appendix 1 hereof.

- Total separate risk-weighted assets (Credit) means total value of credit assets that appear on the balance sheet and are determined according to risks, and total value of equivalent credit assets that are agreed in the off-balance sheet commitments and determined according to risks as stipulated in Appendix 2 hereof.

c) Minimum capital safety ratio defined on the consolidated basis: Credit institutions with subsidiaries, in addition to maintaining the minimum capital safety ratio defined on the separate basis regulated at Point b of this Clause, must simultaneously maintain the minimum capital safety ratio of 9%.

The calculation of minimum capital safety ratio on the consolidated basis is based on the following formula:

Where:

- Consolidated equity capital is determined according to the Appendix 1 hereof.

- Total consolidated risk-weighted assets (Credit) is determined according to the Appendix 2 hereof.

3. The minimum capital safety rate of branches of foreign banks: Branches of foreign banks must constantly maintain the minimum capital safety ratio of 9%.

The calculation of minimum capital safety ratio is based on the following formula:

Where:

- Equity capital is determined according to the Appendix 1 hereof.

- Total risk-weighted assets (Credit) means total value of credit assets that appear on the balance sheet and are determined according to risks, and total value of equivalent credit assets that are agreed in the off-balance sheet commitments and determined according to risks as stipulated in Appendix 2 hereof.

Section 3. CREDIT LIMITS AND RESTRICTIONS ON CREDIT EXTENSION

Article 10. Management of credit extension

1. Credit institutions and branches of foreign banks must manage credit extension activities in accordance with laws and internal rules on credit extension, and manage their loans in order to ensure the right use purpose of loans as stipulated in Clause 1 Article 4 hereof.

2. Credit institutions and branches of foreign banks must promptly prepare or keep a record of any change to the list of founding shareholders, major shareholders, capital contributors, members of the Management Board, members of Board of Members, members of the Control Board, regulators and those who hold other managerial positions in accordance with laws, credit institution charter, as well as their associated entities. This list must be made publicly known to the entire network of a credit institution and branch of foreign banks and shall be sent directly or by post to the State Bank (c/o Bank Supervision and Inspection Agency).

3. Credit institutions and branches of foreign banks is obligated to prepare a report on their credit transactions with entities regulated in Clause 1 Article 12 hereof which have been performed by the time when figures and data are collected for submission to the General Meeting of Shareholders and Members; report any credit transactions that arise with entities regulated in Clause 1 Article 12 hereof to owners, capital contributors, managers, regulators and the State Bank (c/o Bank Supervision and Inspection Agency).

4. Credits extended to subsidiaries, associate firms and entities specified in the list stipulated in Clause 2 of this Article (except for the exclusion from credit extension regulated in Article 11 hereof) must be permitted by The Management Board, Board of Members, General Director (in respect of branches of foreign banks), apart from credits extended within the authority of Shareholders’ General Council. The Control Board must supervise the approval of credits extended to such entities.

Article 11. Exclusion from credit extension

1. Credit institutions and branches of foreign banks shall not be permitted to extend credits to entities regulated in Article 126 of the Law on credit institutions.

2. Credit institutions and branches of foreign banks shall not be permitted to extend credits to clients that serve the purpose of unlisted corporate bond investment and business.

Article 12. Restrictions on credit extension

1. Credit institutions and branches of foreign banks are not allowed to extend unsecured credits, or concessional credits (incentive policies on interest rate, documentation, procedures and processes relating to the consideration and approval of credit grant, measures to secure the obligations to repay debts and measures to recover debts compared to legal regulations and provisions set out in the internal regulations on credit extension, loan management in order to ensure the right use purpose of loans, which are applicable to clients and associated entities) to the following entities:

a) Auditing organizations and auditors that provide auditing services at credit institutions and branches of foreign banks; inspectors in charge of carrying out the inspection work at credit institutions and branches of foreign banks;

b) Chief accountants working at credit institutions and branches of foreign banks;

c) Major shareholders and founding shareholders;

d) Enterprises that employ one of the entities regulated in Clause 1 Article 126 enshrined in the Law on credit institutions who own more than 10% of charter capital of such enterprises;

dd) Credit appraisal officers or credit approval officers;

e) Subsidiary companies and associate firms of credit institutions, or enterprises over which credit institutions have their controlling influence.

2. The extension of credits to the entities regulated in Clause 1 of this Article must be approved by The Management Board, Board of Members, General Director (in respect of branches of foreign banks), and made widely known in credit institutions and branches of foreign banks in accordance with regulations laid down in Clause 3 Article 10 hereof.

3. Total loans and extensions of credit outstanding to the entities regulated at Point a, b, c, d and dd Clause 1 of this Article are not allowed to exceed 5% of equity capital of credit institutions and branches of foreign banks.

4. Total loans and extensions of credit outstanding to the entities regulated at Point e Clause 1 of this Article are not allowed to exceed 10% of equity capital of credit institutions; to all entities regulated at Point e Clause 1 of this Article are not allowed to exceed 20% of equity capital of credit institutions.

Article 13. Credit limits

1. Total loans and extensions of credit outstanding to clients are not allowed to exceed 15% of equity capital of banks and branches of foreign banks; total loans and extensions of credit outstanding to a client and an associated entity do not exceed 25% of equity capital of banks and branches of foreign banks.

2. Total loans and extensions of credit outstanding to clients are not allowed to exceed 25% of equity capital of non-bank credit institutions; total loans and extensions of credit outstanding to a client and an associated entity do not exceed 50% of equity capital of non-bank credit institutions.

3. Rate of extensions of credit outstanding as prescribed in Clause 1 and 2 of this Article shall not be inclusive of:

a) Entrusted loans granted by the Government, organizations (including other credit institutions and branches of foreign banks in Vietnam) and individuals to which any risk shall be undertaken by the Government, organizations and individuals being trustors;

b) Loans taken out by other credit institutions and branches of foreign banks;

c) Loans fully secured by saving deposits of individuals with reference to deposit term and value;

d) Guarantees offered to obligors being other credit institutions and branches of foreign banks;

dd) Guarantees offered on the basis of a counter guarantee of other credit institutions and branches of foreign banks;

e) Guarantees offered on the basis of standby letters of credit issued by other credit institutions and branches of foreign banks;

g) Loans or extensions of credit used as the guarantee confirmation at the request the guarantors being other credit institutions and branches of foreign banks, if interested parties are all agreed that the guarantee confirmer shall have the right to record a debited entry and request the guarantor to refund the sum of money that the guarantee confirmer acts on behalf of the guarantee to fulfill the guarantee obligations;

h) Loans or extensions of credit put up as a guarantee and guarantee commitment issuance in the form of letters of credit fully secured by deposits in Vietnamese dong; foreign currencies; gold; government bonds of the obligor and/or the third party.

Credit institutions and branches of foreign banks shall of their own free will determine the ratio of deduction imposed on each type of guarantee assets in accordance with regulations set out herein, based on the assessment of debt recovery capability during the process of guarantee asset handling, but not allowed to exceed the maximum ratio of deduction imposed on guarantee assets, in accordance with regulations of the State Bank on classification of credit assets, and also regulate limited amounts and methods for setting up provision for risks as well as decide how to use such provisions to respond to these risks during business transactions performed by credit institutions and branches of foreign banks.

4. Credit limits stipulated in Clause 1, 2 of this Article shall be applied to the case in which credit institutions and branches of foreign banks only invest in corporate bonds and those issued by associated entities of such corporates.

5. If the capital demand of a client, or a client and an associated entity exceeds the credit limits regulated in Clause 1 and 2 of this Article, credit institutions and branches of foreign banks shall be entitled to the extension of syndicated credit in accordance with regulations laid down by the State Bank.

6. In certain particular cases, in order to fulfill the socio-economic tasks in the context when the capital syndication of credit institutions and branches of foreign banks fail to meet the capital demand of clients, the Prime Minister shall decide the maximum credit limit in excess of the limits stipulated in Clause 1, 2 of this Article applicable to each particular case.

7. Total amount of credit extensions of a credit institution and a branch of foreign banks as prescribed in Clause 6 of this Article is not permitted to exceed four times as much total equity capital as credit institutions and branches of foreign banks may own.

8. Based on the result of supervision, examination and inspection that the State Bank has performed towards credit institutions and branches of foreign banks:

a) Whereas credit concentration may pose risks, the State Bank must consider applying or advise credit institutions and branches of foreign banks to stick to discreet principles for the approval and grant of credits or handling of existing credit extensions in order to ensure the safety for their transactions;

b) Whereas any organization or individual who does not belong to the associated entities stipulated in Clause 15 Article 3 hereof has joint interests with borrowers or is able to pose risks to credit institutions and branches of foreign banks, then the State Bank shall consider or request credit institutions and branches of foreign banks to consider that organization or individual as an associated entity of a client, and apply discreet principles for the approval and grant of credits or handling of existing credit extensions in order to ensure the safety for each of their business transactions.

Article 14. Credit extension requirements and limits for stock investment and business

1. Commercial banks and branches of foreign banks are only entitled to extend credits in the form of lending and discounting valuable papers to clients in order to serve the purpose of stock investment and business if they are able to meet the following requirements:

a) Credit extension must conform to other credit limits and safety ratios stipulated in this Circular;

b) Bad debt ratio remains below 3%;

c) All regulations pertaining to risk management must be strictly observed and provisions for risks that may happen must be set up in accordance with laws;

d) Clients are not associated entities as regulated in Article 126 of the Law on Credit Institutions;

dd) Clients and their associated entities are not classified as the entities regulated in Clause 1 Article 12 hereof.

2. Commercial banks and branches of foreign banks are not entitled to extend credits to clients to serve their purpose of stock investment and business, irrespective of any guarantee offered by other credit institutions and branches of foreign banks, or any other credit institutions’ stocks to be put up as collateral, as well as not permitted to extend medium and long term credits to clients to serve their purpose of stock investment and business.

3. Total outstanding credit that commercial banks and branches of foreign banks extend to clients for the purpose of stock investment and business is not allowed to exceed 5% of charter capital and allocated capital of commercial banks and branches of foreign banks.

4. Commercial banks are not entitled to extend credits or entrust credits to their subsidiaries and associate firms of credit institutions to extend credit to subsidiaries and associate firms of commercial banks in order to:

a) Investing in and trading stocks;

b) Granting loans used for stock investment and business;

5. Credits that commercial banks and branches of foreign banks extended to clients for the purpose of stock investment and business shall not be guaranteed by such stocks.

6. Commercial banks are not entitled to extend credits to clients to serve their stock investment and business purposes, except for the case in which state-owned commercial banks grant loans to employees to purchase IPO stocks throughout the transformation of such state-owned commercial banks into joint-stock commercial banks.

Section 4. Solvency ratio

Article 15. Solvency ratio

1. Everyday, credit institutions and branches of foreign banks shall comply with regulations set out in Appendix 3 hereof shall formulate cash inflow and outflow worksheets at the end of working days in order to monitor and manage solvency ratios as prescribed in Clause 2 and 3 of this Article.

2. Reserve ratio:

a) Credit institutions and branches of foreign banks must keep in hand highly liquid assets set aside as reserves to meet the payments due or arising unexpectedly.

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 refers to entries recorded at the side of Total Liability on the Balance sheet.

c) Highly liquid assets and total Liability stipulated at Point b of this Clause are calculated in Vietnamese dong, including Vietnamese dong and other foreign currencies freely converted into Vietnamese dong (based on the inter-bank average exchange rate on a daily basis announced by the State Bank, or based on the exchange rate used in financial statements released by credit institutions and branches of foreign banks in case there is none of such inter-bank average exchange rate).

d) Credit institutions and branches of foreign banks must constantly maintain liquid reserve ratios as follows:

(i) Commercial banks: 10%;

(ii) Branches of foreign banks: 10%;

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

(iv) Cooperative banks: 10%;

3. 30-day solvency ratio

a) Credit institutions and branches of foreign banks must calculate and maintain such solvency ratio applicable to:

(i) Vietnamese dong;

(ii) Foreign currencies (including US dollars and other foreign currencies converted into US dollars according to the inter-bank average exchange rate on a daily basis announced by the State Bank, or based on the exchange rate used in financial statements released by credit institutions and branches of foreign banks in case there is none of such inter-bank average exchange rate);

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

Where:

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

(ii) Net cash outflow within 30 successive days refers to the positive difference between cash outflow within 30 successive days beginning on the immediately subsequent day and cash inflow within 30 successive days beginning on the immediately day as stipulated in Appendix 3 hereof;

c) Credit institutions are required to maintain the 30-day solvency ratio stipulated at Point b of this Clause, applicable to Vietnamese dong as follows:

(i) Commercial banks: 50%;

(ii) Branches of foreign banks: 50%;

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

(iv) Cooperative banks: 50%;

d) Credit institutions are required to maintain 30-day solvency ratio stipulated at Point b of this Clause, applicable to foreign currencies as follows:

(i) Commercial banks: 10%;

(ii) Branches of foreign banks: 5%;

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

(iv) Cooperative banks: 5%;

Article 16. Management and handling of risks of failing to maintain solvency ratios

1. Credit institutions and branches of foreign banks must establish a asset (Credit and Debit) management division or equivalences in charge of monitoring and managing daily payment capability at their main offices, controlled by authorized General Director (Director) or Deputy General Director (Vice Director).

2. Where the result of calculation of 30-day solvency ratio does not conform to the regulatory ratios, credit institutions and branches of foreign banks must take of their own free will necessary actions such as taking out loans from other credit institutions and branches of foreign banks, or entering into contracts for irrevocable term deposits, irrevocable loans and other irrevocable commitments with other credit institutions and branches of foreign banks in order to maintain the regulatory solvency ratios.

3. Credit institutions and branches of foreign banks must send daily reports to the State Bank on their solvency ratios as prescribed in regulations on statistical reports applicable to credit institutions and branches of foreign banks. By 10 a.m. of the subsequent day, credit institutions and branches of foreign banks must send their reports to the State Bank (c/o Bank Supervision and Inspection Agency) on temporarily deficient solvency ratios (if any) and necessary measures that they have applied to make up for such deficit.

4. Credit institutions and branches of foreign banks are only permitted to grant loans and enter into contracts for irrevocable term deposits, irrevocable loans with other credit institutions and branches of foreign banks in order to make up for any deficit on conditions that 30-day solvency is still maintained upon completion of this action as stipulated in Article 15 hereof.

5. The State Bank must stringently supervise and legally control the cases in which credit institutions and branches of foreign banks are obliged to use their controlling measures of their own free will as stipulated in Clause 2 of this Article when the ratio of highly liquid assets stays equal to or greater than 20% in order to keep the 30-day solvency ratio constant.

6. After applying discretionary controlling measures as stipulated in Clause 2 of this Article, if credit institutions and branches of foreign banks continues to face difficulty in their solvency, they must send an immediate report to the State Bank (c/o Bank Supervision and Inspection Agency) and the State Bank Branches of centrally-affiliated cities and provinces where their main offices are located). Where the insolvency may happen, credit institutions must promptly send a report to the State Bank as regulated in Article 145 of the Law on Credit Institutions.

Article 5. MAXIMUM RATIO OF SHORT-TERM CAPITAL SOURCES USED AS THE MEDIUM AND LONG TERM LOANS

Article 17. Maximum ratio of short-term capital sources used as the medium and long term loans

1. Credit institutions and branches of foreign banks shall use short-term capital sources as medium and long term loans in Vietnamese dong, including Vietnamese dong and foreign currencies converted into Vietnamese dong (according to the inter-bank average exchange rate on a daily basis announced by the State Bank, or based on the exchange rate used in financial statements released by credit institutions and branches of foreign banks in case there is none of such inter-bank average exchange rate) at the percentage calculated according to the following formula:

Where:

- A means the maximum ratio of short-term capital sources used as the medium and long term loans.

- B refers to total outstanding medium and long term loans regulated in Clause 2 of this Article subtracted from total amount of medium and long term capital sources regulated in Clause 3 of this Article.

- C refers to the short term capital source regulated in Clause 4 of this Article.

2. Total outstanding medium and long term loan shall include:

a) The following loans with the remaining term which is 12 months or over shall consist of:

(i) Loans and Financial leases (including those granted to other credit institutions and branches of foreign banks in Vietnam), subtracted from loans and financial leases outstanding derived from the entrusted source granted by the Government, other individuals and organizations (including other credit institutions and branches of foreign banks in Vietnam; parent banks, overseas branches of parent banks) to which risks shall be taken by these Government, individuals and organizations;

(ii) Entrusted loans and financial leases granted to other credit institutions and branches of foreign banks to which risk that may incur shall be taken by credit institutions and branches of foreign banks being entrustors;

(iii) Extensions of credit used to purchase and invest in valuable papers, except for valuable papers used in banking transactions of the State Bank;

b) Outstanding loans, financial leases, balance of purchase of and investment in medium and long term valuable papers overdue;

c) Outstanding loans, balances of purchase of and investment in short term valuable papers overdue of which the loan and investment term is added to the overdue term ranging from 12 months.

3. Medium and long term capital source with the remaining term which is 12 months or over shall include:

a) Deposits of organizations (exclusive of deposits of other credit institutions and branches of foreign banks in Vietnam as well as different types of deposit managed by State Treasuries if any), and individuals;

b) Deposits and loans of foreign parent credit institutions, overseas branches of foreign parent credit institutions;

c) Sums mobilized from promissory notes, treasury bills, certificates of deposit, bonds;

d) Loans derived from domestic financial institutions (exclusive of loans managed by other credit institutions and branches of foreign banks in Vietnam) and those derived from foreign credit institutions, except for those regulated at Point b of this Clause;

dd) Remaining charter capital, allocated capital and reserve funds after being subtracted from sums used for fixed asset purchase and investment, capital contribution and stock purchase in accordance with laws;

e) Share premiums and undistributed profits after stock fund purchase.

4. Short term capital source with the remaining term which is below 12 months shall include:

a) Deposits of organizations (exclusive of demand or term deposits of other credit institutions and branches of foreign banks in Vietnam as well as different types of deposit managed by State Treasuries if any), and individuals;

b) Deposits and loans of foreign parent credit institutions, overseas branches of foreign parent credit institutions;

c) Sums mobilized from promissory notes, treasury bills, certificates of deposit, bonds;

d) Loans derived from domestic financial institutions (exclusive of loans managed by other credit institutions and branches of foreign banks in Vietnam) and those derived from foreign credit institutions, except for those regulated at Point b of this Clause.

5. Credit institutions and branches of foreign banks are entitled to use short term capital sources used as medium and long term loans at the maximum rate as follows:

a) Commercial banks: 60%;

b) Branches of foreign banks: 60%;

c) Non-bank credit institutions: 200%;

d) Cooperative banks: 60%;

6. Credit institutions and branches of foreign banks is eligible to purchase and invest in Government bonds (inclusive of entrusted credits granted to other organizations to purchase and invest in Government bonds but exclusive of credits used to purchase and invest in Government bonds by means of entrusted capital derived from other organizations) at the maximum rate as against short term capital source as follows:

a) State-owned commercial banks: 15%;

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

c) Branches of foreign banks: 15%;

d) Non-bank credit institutions: 5%;

dd) Cooperative banks: 40%;

Section 6. LIMITS ON CAPITAL CONTRIBUTION AND STOCK PURCHASE

Article 18. Limit on capital contribution and stock purchase of commercial banks and financial companies

1. The amount of capital contribution and stock purchase of a commercial bank, its subsidiaries and associate firms (except for the case in which these subsidiaries and associate firms are in charge of managing contributed capital funds and using capital sources derived from funds managed by such companies to purchase stocks) into an enterprise working in sectors regulated in Clause 4 Article 103 of the Law on Credit Institutions does not exceed 11% of charter capital of the enterprise that receives contributed capital. 2. Total amount of capital contribution and stock purchase of a commercial bank into enterprises, inclusive of allocated and contributed capital amounts granted to subsidiaries and associate firms of that commercial bank does not exceed 40% of charter capital and reserve funds of that commercial bank.

3. The amount of capital contribution and stock purchase of a financial company and its subsidiaries and associate firms into an enterprise does not exceed 11% of charter capital of that enterprise.

4. Total amount of capital contribution and stock purchase of a financial company into enterprises, inclusive of allocated and contributed capital amounts granted to subsidiaries and associate firms of that financial company does not exceed 60% of charter capital and reserve funds of that financial company.

5. Commercial banks and financial companies are not entitled to contribute capital to and purchase stocks of other enterprises and credit institutions who are shareholders and capital contributors of these commercial banks and financial companies, and of other enterprises and credit institutions who are associated entities of major shareholders, managers of such commercial banks and financial companies.

Article 19. Capital contribution and stock purchase amongst subsidiaries, associate firms and holding corporates of commercial banks and financial companies

1. Subsidiaries and associate firms of the same commercial banks and financial companies are not permitted to carry out the mutual capital contribution and stock purchase. Commercial banks are not allowed to contribute capital to or purchase stocks of subsidiaries and associate firms of bank holding enterprises. Financial companies are not entitled to contribute capital to or purchase stocks of subsidiaries and associate firms of holding enterprises of financial companies.

2. Subsidiaries and associate firms of the same commercial bank and financial company are not entitled to contribute capital to or purchase stocks of that commercial bank and financial company.

3. Commercial banks and financial companies are subsidiaries and associate firms of holding enterprises that are not entitled to contribute capital to or purchase stocks of such holding enterprises.

Article 20. Commercial bank’s purchase and holding of stocks of other credit institutions

1. Commercial banks that purchase or hold stocks (inclusive of entrusted sums granted to other organizations, individuals and shareholders of such commercial banks) of other credit institutions must conform to requirements regulated in Clause 2 and limits stipulated in Clause 3 of this Article.

2. Commercial banks that purchase or hold stocks of other credit institutions must meet all of the following requirements at the time of purchase and holding:

a) Actual value of charter capital is not less than registered charter capital;

b) Limits and safety ratios regulated in this Circular must be strictly observed;

c) Bad debt rate remains below 3%;

d) Consistent processes for considering, appraising, assessing risks to the purchase and holding of stocks of other credit institutions must be formulated;

dd) Each sum used to purchase and holding of stocks of other credit institutions must be approved by The Management Board and Board of Members;

e) Penalties for administrative violations during their banking transactions within a year prior to the date of stock purchase and holding have not been found;

g) President and other members of The Management Board, President and other members of Board of Members, General Director (Director), Head and other members of the Control Board, major shareholders of commercial banks, subsidiaries of commercial banks as well as associated entities of these ones have not purchased and held voting stock funds of these credit institutions;

h) President and other members of The Management Board, President and other members of Board of Members, General Director (Director), Head and other members of the Control Board, major shareholders of commercial banks, subsidiaries of commercial banks as well as associated entities of these ones have not entrusted other credit institutions to purchase and hold voting stock funds of these credit institutions.

3. Limits:

a) Commercial banks are only entitled to purchase or hold stocks of fewer than two (02) other credit institutions, except for the case in which such credit institutions are subsidiaries of these commercial banks;

b) Commercial banks are only entitled to purchase or hold stocks of another credit institution at the rate of below 5% of voting stocks of these credit institutions;

c) Commercial banks are not allowed to delegate their staff to participate in the Management Board of credit institutions whose stocks have been purchased and held by commercial banks, except for the case in which such credit institutions are subsidiaries of commercial banks or those that participate in the restructuring and handling of weak credit institutions in accordance with the State Bank’s designation;

d) Purchase and holding of stocks of another credit institution in excess of the limits stipulated at Point a, b of this Clause, or commercial banks may fail to meet all of requirements stipulated in Clause 2 of this Article shall be carried out as follows:

(i) Purchase or holding of stocks used for the purpose of restructuring or financially supporting credit institutions who are faced with financial difficulties can pose risks to their solvency, affect the safety for credit institution system as well as obtain the consent from the State Bank;

(ii) This action must be designated in accordance with laws.

Section 7. LOAN-TO-DEPOSIT RATIO

Article 21. Loan-to-deposit ratio

1. Commercial banks, cooperative banks and branches of foreign banks shall conform to the maximum outstanding loan-to-deposit ratio in Vietnamese dong, including Vietnamese dong and foreign currencies converted into Vietnamese dong (according to the inter-bank average exchange rate on a daily basis announced by the State Bank, or based on the exchange rate used in financial statements released by credit institutions and branches of foreign banks in case there is none of such inter-bank average exchange rate) at the percentage calculated according to the following formula:

Where:

- LDR refers to outstanding loan-to-deposit ratio.

- L refers to total amount of outstanding loans regulated in Clause 2 and 3 of this Article.

- D refers to total amount of deposits regulated in Clause 4 of this Article.

2. Total outstanding loan includes:

a) Loans taken out by individuals and organizations (exclusive of loans granted to other credit institutions and branches of foreign banks in Vietnam);

b) Entrusted loans granted by other credit institutions and branches of foreign banks.

3. Total outstanding loan has to deduct:

a) Outstanding loan derived from the entrusted fund of the Government, other individuals or organizations (inclusive of credit institutions and branches of foreign banks in Vietnam, parent banks and foreign branches of parent banks);

b) Overseas loans of credit institutions and branches of foreign banks. In respect of branches of foreign banks, overseas loans shall include loans granted by parent banks and foreign branches of parent banks.

4. Total deposits consist of:

a) Deposits of organizations (exclusive of various types of deposits managed by the State Treasuries if any), and individuals, exclusive of client’s margins and special deposits;

b) Sums deposited by foreign parent banks and foreign branches of parent banks;

c) Sums mobilized from the issuance of promissory notes, treasury bills, certificates of deposit, bonds.

5. Credit institutions and branches of foreign banks (exclusive of financial and financial leasing companies) must maintain the loan-to-deposit ratio as follows:

a) State-owned commercial banks: 90%;

b) Cooperative banks: 80%;

c) Joint-stock commercial banks, joint venture banks and wholly foreign-owned banks: 80%;

b) Branches of foreign banks: 90%;

As regards credit institutions and branches of foreign banks that have been newly established, over first 3 years of their operations, the State Bank’s Governor shall determine specific ratio different from the above-mentioned ratios, applicable to each credit institution and branch of foreign banks.

6. Foreign commercial banks, cooperative banks and bank branches shall not have to comply with loan-to-deposit ratio regulated in Clause 5 of this Article if the amount of charter capital, allocated funds retained after making investment in, purchasing fixed assets, contributing capital and buying stocks stays greater than the outstanding loan.

Chapter III

TRANSITIONAL PROVISIONS

Article 22. General provisions

1. Except for the case regulated in Clause 2 of this Article, if the contract is signed before the effective date of this Circular, and comply with legal regulations enforced at the signing date, credit institutions, branches of foreign banks and clients must continue to conform to binding terms and conditions as agreed upon in the contract till the end of the valid contract term. Any amendment, modification and renewal relating to the above-mentioned contract shall be allowed if the content after being modified, amended or renewed shall conform to regulations set out in this Circular and other relevant laws.

2. The transition applied to credit institutions and branches of foreign banks that infringe upon regulations on credit extension, capital contribution and stock purchase must comply with regulations laid down in Article 25 and 26 hereof.

Article 23. Responsibility of credit institutions and branches of foreign banks

1. By the time when this Circular comes into force, credit institutions and branches of foreign banks that have yet to comply with the ratios and limits regulated in this Circular must develop approaches and take initiative in applying controlling measures to ensure the compliance with laws.

2. Within a maximum of 30 days after the date on which this Circular comes into force, credit institutions and branches of foreign banks must send problem-solving plans in accordance with Article 24, 25 and 26 hereof directly or by post to the State Bank (c/o Bank Supervision and Inspection Agency).

In case the State Bank requests such plans to be amended, modified and adjusted in terms of controlling measures, execution progress and schedule, credit institutions and branches of foreign banks must be responsible for carrying out these works upon the State Bank's request.

3. Credit institutions and branches of foreign banks shall be responsible for providing additional controlling measures as mentioned in Clause 1, 2 of this Article and any supplement to the execution progress of plans for organization and operation restructuring for credit institutions and branches of foreign banks in order to ensure the consistent practice of the State Bank.

Article 24. Transitional provisions applied to the maximum capital safety ratio, maximum ratio of short-term capital sources used as medium and long term loans, loan-to-deposit ratio

1. By the time when this Circular comes into force, credit institutions and branches of foreign banks of which minimum capital safety ration and loan-to-deposit ratio do not conform to regulations laid down in Article 9, 21 hereof must draw up problem-solving plans in which the following contents must be provided:

a) Specific ratio that does not conform to regulations;

b) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 6 months from the effective date of this Circular.

2. At the time when this Circular comes into force, credit institutions and branches of foreign banks of which the maximum ratio of short term capital sources used as medium and long term loans, and the ratio of investments in government bonds as against short term capita sources fail to conform to regulations set out in Clause 5 and 6 Article 17 hereof shall be handled as follows:

a) Credit institutions and branches of foreign banks are not permitted to extend any medium and long term credit until the regulations laid down in Clause 5 of Article 17 hereof have been strictly observed;

b) Credit institutions and branches of foreign banks are not permitted to purchase or further invest in government bonds until the ratios stipulated in Clause 6 Article 17 hereof are respected;

c) Credit institutions and branches of foreign banks must sketch out problem-solving plans in which must specify the followings:

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

(ii) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 1 year from the effective date of this Circular.

Article 25. Transitional provisions applied to the credit extension

1. At the time when this Circular comes into force, credit institutions and branches of foreign banks of which their extensions of credit used for stock investment and business fail to fully meet regulations laid down in Clause 1 Article 14 hereof shall be subject to the followings:

a) Commercial banks and branches of foreign banks are not permitted to extend their credits used for stock investment and business until the regulations laid down in Clause 1 Article 14 hereof shall be fully observed;

b) Commercial banks and branches of foreign banks must formulate problem-solving plans in which the following contents must be included:

(i) List of clients and extensions of credit to specific clients for their stock investment and business purposes;

(ii) Measures and plans to fully satisfy requirements set out in Clause 1 Article 14 hereof, measures to be taken to revoke credits used for stock investment and business purposes.

2. At the time when this Circular comes into force, commercial banks and branches of foreign banks of which their extensions of credit used for stock investment and business exceed the ratios stipulated in Clause 3 Article 14 hereof shall be subject to the followings:

a) Commercial banks and branches of foreign banks are not permitted to enter into any contract to extent their credits used for stock investment and business until the regulations laid down in Clause 3 Article 14 hereof shall be fully observed;

b) Commercial banks and branches of foreign banks must formulate problem-solving plans in which the following contents must be included:

(i) List of clients and outstanding loans taken out by specific clients to serve the purpose of stock investment and business; total extensions of credit outstanding to all of clients to serve the purpose of stock investment and business; the amount of charter capital of commercial banks, allocated funds of branches of foreign banks; credit extension ratio applied to all of clients for the purpose of stock investment and business as against the charter capital and allocated funds of commercial banks and branches of foreign banks;

(ii) Problem-solving approaches and plans, including the debt recovery, an increase in charter capital and allocated funds.

Article 26. Transitional provisions applied to sums derived from capital contribution and stock purchase

At the time when this Circular comes into force, credit institutions of which sums derived from capital contribution and stock purchase fail to meet regulations laid down in Article 103, 110, 115, 129 and 135 of the Law on Credit Institutions, and Article 18, 19 and 20 of this Circular shall be subject to the followings:

1. Commercial banks that get directly involved in business transactions as prescribed in Clause 2 Article 103 of the Law on Credit Institutions and Commercial Banks must prepare problem-solving plans in which the following contents are required:

a) Business transactions that commercial banks are directly getting involved in; the number of contracts and total value of each contract;

b) Approaches and problem-solving plans that help these entities to ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

2. Financial companies of which sums derived from capital contribution and stock purchase at other credit institutions must set up problem-solving plans in which at least the following contents must be included:

a) List of credit institutions to/from which financial companies has contributed capital and purchase stocks (name, address, tax code and business registration number); capital contribution and stock purchase amount of financial companies in comparison with the charter capital of credit institutions that receive such contributed capital;

b) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

3. Financial companies whose subsidiaries and associate firms operate in insurance, securities and guarantee asset management sectors in accordance with regulations laid down in Clause 3 Article 110 of the Law on Credit Institutions must set up problem-solving plans in which at least the following contents shall be provided:

a) List of subsidiaries and associate firms that operate outside of insurance, securities and guarantee asset management sectors (name, address, tax code, business registration number and business lines); charter capital amount of each subsidiary, associate firm; amount of capital contribution and stock purchase to/from each subsidiary and associate firm (sums used for capital contribution and stock purchase, capital contribution and stock purchase ratio in comparison to the charter capital of subsidiaries and associate firms);

b) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

4. Financial leasing companies that has already established their subsidiaries and associate firms, or take possession of capital derived from capital contribution and stock purchase must set up the problem-solving plans in which the following contents must be included:

a) List of enterprises to/from which financial leasing companies have contributed capital and purchase stocks (name, address, tax code and business registration number, business lines); capital contribution and stock purchase amount of financial leasing companies to/from each organization and enterprise as against the charter capital of enterprises and organizations that receive such contributed capital;

b) List of subsidiaries and associate firms established by financial leasing companies (name, address, tax code, business registration number and business lines); charter capital amount of each subsidiary, associate firm; amount of capital contribution and stock purchase of financial leasing companies compared with the charter capital of subsidiaries and associate firms;

c) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

5. Commercial banks and financial companies whose sums derived from capital contribution and stock purchase exceed the ratios regulated in Article 129 of the Law on Credit Institutions and Clause 5 Article 18 hereof shall be subject to the followings:

a) Any further capital contribution or stock purchase shall not be allowed until they comply with regulations laid down in Article 129 of the Law on Credit Institutions and Clause 5 Article 18 hereof;

b) Commercial banks and financial companies must formulate problem-solving plans in which at least the following contents must be included:

(i) Detailed list of other enterprises and credit institutions that are shareholders and capital contributors of commercial banks, financial companies, associated entities of major shareholders and managers of these commercial banks and financial companies (name, address, tax code, business registration number, business lines; the charter capital of enterprises and organizations that receive that amount of contributed capital), sums derived from capital contribution and stock purchase carried out by each of these entities, total amount of contributed capital and purchased stocks compared with the charter capital of these enterprises and organizations that receive that amount of contributed capital;

(ii) List of other enterprises and credit institutions that are shareholders, capital contributors and associated entities of major shareholders and managers of commercial banks and financial companies that contribute their capital and purchase stock to/from these enterprises and credit institutions (name, address, tax code, business registration number, business lines; the charter capital of enterprises and organizations that receive that amount of contributed capital), total contributed amount and purchased stocks, capital contribution and stock purchase ratio compared with the charter capital of these enterprises and organizations that receive that amount of contributed capital;

(iii) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

6. d) Commercial banks that purchase and hold stocks of other credit institutions in excess of the limits stipulated at Point a, b Clause 3 Article 20 hereof shall be subject to the followings:

a) Commercial banks shall not be permitted to purchase or hold stocks of these credit institutions until they have complied with regulations laid down at Point a, b Clause 3 Article 20 hereof, except for the case in which they are entitled to receive dividends paid in stocks of such credit institutions;

b) Authorized representatives for the contributed capital of commercial banks who are members of the Management Board of the credit institution that receive the contributed capital are obliged to send a resignation letter to the Management Board of the credit institution that receive contributed capital in order for the Shareholders' General Board to decide resignation and dismissal in the period that is not later than the nearest General Meeting of the Board and begins on the effective date of this Circular;

c) Commercial banks must formulate problem-solving plans in which at least the following contents must be included:

(i) Detailed list of each credit institution of which commercial banks are holding stocks, sums used for stock purchase and holding at each credit institution, stock ownership ratio for each credit institution and amount of stocks that they are holding;

(ii) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

7. Subsidiaries and associate firms of the same commercial bank and financial company that enter into mutual stock purchase, commercial banks, financial companies must establish problem-solving plans in which at least the following contents must be included:

a) Detailed list of subsidiaries and associate firms (name, address, tax code, business registration number and business lines) that have entered into mutual capital contribution and purchase; amount of mutually contributed capital and purchased stocks of subsidiaries and associate firms;

b) Approaches and problem-solving plans to approve rights of shareholders and capital contributors of subsidiaries and associate firms in order to ensure that these subsidiaries and associate firms mutually contribute any further capital and purchase any further stock, and ensure their compliance with legal regulations within a maximum period of 12 months from the effective date of this Circular.

8. Commercial banks and financial companies who contribute their capital to and purchase stocks of subsidiaries and associate firms of the holding corporates of commercial banks, and the holding corporates of financial companies shall be subject to the followings:

a) Commercial banks and financial companies who shall not be permitted to additionally contribute capital to and purchase stocks of subsidiaries and associate firms of holding corporates of commercial banks, and holding corporates of financial companies;

b) Commercial banks and financial companies must formulate problem-solving plans in which at least the following contents must be included:

(i) Detailed list of each subsidiary and associate firm of holding corporate of commercial banks, holding corporate of financial companies to/from which commercial banks and financial companies have involved in contributing capital and purchase stocks (name, address, tax code, business registration number, business lines); amount of contributed capital and purchased stocks of commercial banks and financial companies to/from each subsidiary and associate firms of holding corporates of commercial banks, holding corporates of financial companies compared with the charter capital of subsidiaries and associate firms that receive contributed capital;

(ii) Approaches and plans to withdraw capital from subsidiaries, associate firms in order to ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

9. Subsidiaries and associate firms of the same commercial bank and financial company that have already contributed capital to or purchase stocks of that commercial bank and financial company shall be subject to the followings:

a) Commercial banks and financial companies shall not be permitted to additionally contribute capital to and purchase stocks of subsidiaries and associate firms; subsidiaries and associate firms shall not be permitted to further contribute capital to or purchase stocks of commercial banks and financial companies;

b) Commercial banks and financial companies must formulate problem-solving plans in which at least the following contents must be included:

(i) Detailed list of each subsidiary or associate firm that has contributed capital to and purchase stocks of commercial banks or financial companies (name, address, tax code, business registration number, and business lines); amount of capital contribution and stock purchase of each subsidiary or associate firm into commercial banks or financial companies compared with the charter capital of commercial banks or financial companies;

(ii) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

10. Commercial banks or financial companies who are subsidiaries or associate firms of holding corporates that have contributed capital to or purchase stocks of such holding corporates shall be subject to the followings:

a) Commercial banks or financial companies shall not be permitted to additionally contribute capital to and purchase stocks of holding corporates; holding corporates shall not be permitted to additionally contribute capital to and purchase stocks of such commercial banks or financial companies;

b) Commercial banks and financial companies must formulate problem-solving plans in which at least the following contents must be included:

(i) Detailed list of holding corporates to/from which commercial banks or financial companies have contributed capital or purchased stocks (name, address, tax code, business registration number, business lines); amount of contributed capital and purchased stocks of commercial banks or financial companies compared to the charter capital of such holding corporates;

(ii) Approaches and problem-solving plans that help these entities ensure the compliance with legal regulations after a maximum of 12 months from the effective date of this Circular.

Article 27. Post-transitional measures

After the maximum period of transition mentioned at the problem-solving plans regulated in Article 23, 24, 25 and 26 hereof or after the maximum term requested by the State Bank, if credit institutions and branches of foreign banks fail to take remedial measures against violations, depending on the severity and characteristics of risks, the State Bank shall apply any possible approaches including restructuring required by laws, revocation of licenses held by credit institutions and branches of foreign banks.

Article 28. Responsibility of the State Bank

The State Bank must consider problem-solving plans and request credit institutions and branches of foreign banks to amend and adjust such plans, including execution term (in case it has not yet met the regulatory requirements or to ensure the feasibility), carry out specific steps described in the problem-solving plan on schedule; inspect, examine and supervise credit institutions and branches of foreign banks to ensure their compliance with regulations laid down in Article 24, 25 and 26 hereof during their implementation of problem-solving plans.

Chapter IV

RESPONSIBILITY OF CREDIT INSTITUTIONS, BRANCHES OF FOREIGN BANKS AND AFFILIATES OF THE STATE BANK

Article 29. Responsibility of the affiliates of the State Bank

1. The Bank Supervision and Inspection Agency shall be responsible for:

a) Presiding over cooperation with relevant Departments and Services to request the State Bank’s Governor to consider problem-solving plans, request any adjustment or amendment to such plans recommended by credit institutions and branches of foreign banks (if such plans fail to meet regulatory requirements or guarantee the feasibility) in accordance with regulations laid down in Article 7, 24, 25 and 26 hereof;

b) Presiding over cooperation with relevant Departments and Services to request the State Bank’s Governor to consider determining specific limits and ratios in accordance with regulations laid down in Clause 2 and 3 Article 1, and statutory requirements set out in Clause 8 Article 13 hereof;

c) Supervising, examining and inspecting credit institutions and branches of foreign banks to ensure their compliance with regulations enshrined in this Circular;

d) Cooperating with the Financial Policy Department, Credit Department of economic sectors, Department of Forecast and Statistics and Department of Finance - Accounting in implementing regulations laid down in Clause 2, 3 and 4 of this Article.

2. The Financial Policy Department and Credit Department of economic sectors shall be responsible for cooperating with the Bank Supervision and Inspection Agency in dealing with issues relating to the solvency ratio of credit institutions and branches of foreign banks as prescribed in Article 15 and 16 hereof.

3. Department of Forecast and Statistics shall refer to regulations laid down in this Circular to request the State Bank's Governor to issue regulations on statistical reports for credit institutions and branches of foreign banks in terms of the conformity with safety ratios and limits stipulated in this Circular.

4. Department of Finance – Accounting shall cooperate with Bank Supervision and Inspection Agency in guiding credit institutions and branches of foreign banks to conform to accepted accounting and bookkeeping principles stipulated by laws, concerning ratios and limits stipulated in this Circular.

5. Branches of the State bank located in centrally-affiliated cities and provinces without the presence of the Department of Bank Inspection and Supervision who takes charge of inspecting and supervising operations of credit institutions and branches of foreign banks in the area to ensure the compliance with regulations laid down in this Circular.

Article 30. Responsibility of credit institutions and branches of foreign banks

1. Regularly and continuously maintain safety limits and ratios for banking transactions as stipulated in this Circular.

2. If credit institutions and branches of foreign banks fail to maintain or are faced with risks of failing to achieve regulatory safety limits and ratios for their banking transactions as prescribed in regulations laid down in this Circular, credit institutions and branches of foreign banks must send a report on any remedial plan to the State Bank in order to ensure strict conformity to safety limits and ratios for banking transactions regulated in this Circular.

3. Stringently and promptly comply with problem-solving plans at the request of the State Bank in case credit institutions and branches of foreign banks fail to maintain the safety limits and ratios for their banking transactions.

4. Promptly make a timely and immediate report on the safety limits and ratios for banking transactions in accordance with regulations laid down by the State Bank and upon the request of bank inspectors and supervisors.

Chapter V

IMPLEMENTARY PROVISIONS

Article 31. Effect

1. This Circular shall come into force from December 01, 2015.

2. Documents and regulations below shall become defunct:

- Decision No. 03/2008/QD-NHNN dated February 01, 2008 promulgated by the State Bank’s Governor on lending and discounting valuable papers for securities investment and business;

- Circular No. 15/2009/TT-NHNN dated August 10, 2009 promulgated by the State Bank’s Governor on providing for the maximum ratio of short term capital used for medium and long term loans;

- Circular No. 13/2010/TT-NHNN dated May 20, 2010 promulgated by the State Bank’s Governor on providing for safety ratios for business transactions of credit institutions;

- Circular No. 19/2010/TT-NHNN dated September 27, 2010 promulgated by the State Bank’s Governor on amending and supplementing the Circular 13/2010/TT-NHNN dated May 20, 2010 promulgated by the State Bank’s Governor on providing for safety ratios for business transactions of credit institutions;

- Circular No. 22/2011/TT-NHNN dated August 30, 2011 promulgated by the State Bank’s Governor on amending and supplementing the Circular 13/2010/TT-NHNN dated May 20, 2010 promulgated by the State Bank’s Governor on providing for safety ratios for business transactions of credit institutions;

- Article 1 of the Circular No. 33/2011/TT-NHNN dated October 08, 2011 promulgated by the State Bank’s Governor on amending and supplementing the Circular No. 13/2010/TT-NHNN dated May 20, 2010 promulgated by the State Bank’s Governor on providing statutory provisions on safety ratios for business transactions of credit institutions and regulatory rules for granting loans to clients, issued together with the Decision No. 1627/2001/QD-NHNN dated December 31, 2001 promulgated by the State Bank’s Governor;

- Clause 2 Article 6 of the Circular No. 28/2012/TT-NHNN dated October 03, 2012 promulgated by the State Bank’s Governor on providing for the bank guarantee.

Article 32. Implementation

The Chief Officers, Chief Inspector and Supervisor of banks, Heads of affiliates of the State Bank, Director of the State Bank Branches located at centrally-affiliated cities and provinces, President of the Management Board, President of the Board of Members and General Director (Director) of credit institutions and branches of foreign banks shall be responsible for implementing this Circular./.

APPENDIX 1

COMPONENTS AND MANNER OF DETERMINING OWNER’S EQUITY (Enclosed together with the Circular No. 36 dated November 20, 2014 of the Governor of State Bank of Vietnam defining safety limits and ratios in activities of credit institutions, branches of foreign banks)

A. Components and manner of determining credit institutions’ equity capital:

I. Private owner’s equity:

II Consolidated owner’s equity

1. General principle:

a. Consolidated owner’s equity is determined by components as regulated in the following point 2, extracted from Consolidated Balance Sheet in which subsidiaries operating under the Law on Insurance Business are not consolidated.

b. In case Consolidated Financial Report stated in Point a does not have any particular entry for consolidated tier 1 capital and tier 2 capital, credit institutions shall construct statistical data from private balance sheets of consolidated entities to ensure adequate and accurate calculation for entries of tier 1 and tier 2 capitals.

2. Components and manner of determining consolidated owner’s equity:

B. Components and manner of determining owner’s equity of branches of foreign banks:

Branches of foreign banks shall rely on components as regulated below, provisions of the law on financial regulations with respect to branches of foreign banks and asset entries of their own to determine owner’s equity as appropriate.

APPENDIX 2

GUIDANCE ON GROUPING AND CALCULATION OF TOTAL RISK-WEIGHTED ASSETS

(Including balance sheet assets and off-balance sheet commitments) (Enclosed together with the Circular No. 36 dated November 20, 2014 of the Governor of State Bank of Vietnam defining constraints, capital adequacy ratio in activities of credit institutions, branches of foreign banks)

Part I. Guidance on calculation of balance sheet assets and the corresponding balance-sheet value of off-balance sheet commitments are determined according to level of risks.

A. General guidance:

1. Credit institutions, branches of foreign banks shall rely on balance sheet, database and related documentation of their own and of subsidiaries as well as regulations set out in this Circular to determine balance-sheet assets and the corresponding balance-sheet value of off-balance sheet commitments are determined according to level of risks as regulated in Part II of this Appendix.

Database must ensure retention and enumeration with respect to individual accounts receivable according to the following criteria borrowing entities; types of money, guarantee form; collateral and purposes of extended credits.

2. Credit institutions, branches of foreign banks shall enumerate accounts receivable in the form of guarantee, collateral and level of guarantee for each form, type of collateral with respect to accounts receivable stated in the guarantee contract. Based on that, credit institutions, branches of foreign banks shall determine value of risk-weighted credit entries of accounts receivable according to coefficient of risk as regulated in this Appendix with respect to each form of guarantee, collateral.

Each balance-sheet asset shall be grouped into a certain coefficient of risk. If assets meet various coefficients of variation simultaneously, highest coefficient of risk shall be applied.

3. Determination of coefficient of risk of off-balance sheet commitments:

The corresponding balance-sheet value of off-balance sheet commitments are determined according to level of risks and calculated in two steps below:

(i) Step 1: Determination of the corresponding balance-sheet value of off-balance sheet commitments.

It is determined by multiplying value of off-balance sheet commitment by the corresponding conversion factor as regulated in this Appendix.

(ii) Step 2: Determination of value of risk-weighted balance-sheet assets in off-balance sheet commitments.

It is determined by multiplying the corresponding balance-sheet value of off-balance sheet commitments as determined in Step 1 by the corresponding coefficient of risk as regulated in this Appendix.

3.2. Off-balance sheet commitments after being converted according to Step 1, Point 3.1 mentioned above are considered as balance-sheet assets and similar coefficient of risk shall be applied as in the case of balance-sheet assets to determine the corresponding value of risk-weighted balance-sheet assets in off-balance sheet commitments. Thus:

(i) Off-balance sheet commitments guaranteed by the Government, State Bank of Vietnam or in the form of cash, savings book, deposits, valuable papers issued by the Government and State Bank of Vietnam: Coefficient of risk is 0%.

(ii) Derived off-balance sheet commitments in Vietnam dong or foreign currency guaranteed entirely by valuable papers issued by state financial institutions, credit institutions, branches of foreign banks: Coefficient of risk is 20%.

(iii) Off-balance sheet commitments guaranteed by real estate: Coefficient of risk is 50%

3.3. Interest transaction contracts, foreign currency transaction contracts and other off-balance sheet commitments which are not grouped into coefficient of risk: The coefficient of risk is 100%.

For example:

Bank A issues a guarantee certificate valued US$100,000 to Company B for a loan received from Bank C. Bank A’s guarantee certificate is guaranteed entirely by valuable papers issued by Bank A itself and currently possessed by Company B. In this case:

- The corresponding value of balance-sheet asset is determined by multiplying US$100,000 (value of off-balance sheet commitment) by 100% (conversion factor as regulated in Section 31, Point 2, Part II of this Appendix) = US$100,000);

- The corresponding value of risk-weighted balance-sheet asset is determined by multiplying US$100,000 (corresponding value of balance sheet asset) by 20% (conversion factor as regulated in entry 14, Point 1, Part II of this Appendix) = US$20,000);

B. Guidance on calculation of consolidated risk-weighted credit assets

Calculating principle:

1. Based on figures from the Consolidated Balance Sheet where subsidiaries operating under the Law on Insurance Business are not consolidated.

2. Value of consolidated risk-weighted credit assets (including value of consolidated balance-sheet risky assets and the corresponding value of consolidated balance-sheet asset of consolidate off-balance commitments) are determined according to Section A, Part I of this Appendix.

Part II Grouping and determination of risk-weighted assets

1. Risk-weighted credit assets determined according to level of risks

2. Off-balance sheet commitments

APPENDIX 3

GUIDANCE ON CALCULATION OF SOLVENCY RATIOS (Enclosed together with the Circular No. 36 dated November 20, 2014 of the Governor of State Bank of Vietnam defining constraints, capital adequacy ratios in activities of credit institutions, branches of foreign banks)

Part I. Assets of high liquidity

1. “Assets of high liquidity” forms:

2. Guidance on use of figures

Section 1: Cash balance, value of gold in the balance sheet at the end of day

Section 2: Deposit balance at State Bank of Vietnam in the balance sheet at the end of day

Section 3: Recorded value of valuable papers issued by State Bank of Vietnam under State Bank of Vietnam’s regulations at the end of day

Section 4: Deposit balance at acquirers in the balance sheet at the end of day minus (-) amounts undertaken for specific payment purposes

Section 5: Balance of demand deposits made at other credit institutions, branches of foreign banks at home and host countries in the balance sheet at the end of day

Section 6: Recorded value of bonds, treasury bills issued by governments, central banks from the countries ranked AA and over by Standard & Poor’s; Moody’s; Fitch Group in the balance sheet at the end of day.

3. “Assets of high liquidity” calculation principles:

(i) Sections 3 and 6 must meet the following requirements:

- Can be used immediately for payment or easily convertible into cash with low transaction fee;

- Not permitted to be used as guarantees for other financial obligations;

- Not permitted to include deducted, mortgaged valuable papers;

- Not permitted to include valuable papers, the issuers of which fail to perform obligations to pay interests and principal.

(ii) Assets of high liquidity being valuable papers issued by State Bank of Vietnam, bonds, treasury bills issued by governments, central banks from the countries ranked AA and over by Standard & Poor’s; Moody’s; Fitch Group, or payment guarantees with face value in Vietnam dong and other freely convertible foreign currencies.

(iii) “Assets of high liquidity” are used to calculate solvency ratios not including deposits of all kinds at State Treasuries.

Part II Cash inflows

1. “Cash inflows” calculation form:

2. Guidance on use of figures “Cash inflows”:

Section 1.1: Demand deposits: Take demand deposit balance in the balance sheet to fill in the column “Succeeding day” and not to fill in the other columns.

Section1.2: Term deposits: Take balance of term deposits due under the deposit contract to fill in the column corresponding to the maturity date.

Section 1.3: Loans to credit institutions, branches of foreign banks in Vietnam, and foreign credit institutions: Take balance of loans due under the loan contract to fill in the column corresponding to the maturity date.

Section1.2: Loans to customers: Take balance of loans due under the loan contract to fill in the column corresponding to the maturity date.

Section 3: Trading securities

- Trading securities listed: Take the value obtained by subtracting the provision for devaluation of securities to be built up from recorded value under the provisions of law to fill in the “Succeeding day” column and not to fill in other columns.

- Trading securities unlisted: Take value of book-entry trading securities to fill in the column corresponding to the maturity date.

Section 4: Investment securities

- Available-for-sale investment securities listed: Take the value obtained by subtracting the provision for devaluation of securities to be built up from recorded value under the provisions of law to fill in the “Succeeding day” column and not to fill in other columns.

- Held-to-maturity Investment securities listed: Take the value obtained by subtracting provision for devaluation of securities to be built up from the value of book entry held-to-maturity investment securities under the provisions of law to fill in the column corresponding to the maturity date.

- Available-for-sale investment securities unlisted: Take value of book-entry available-for-sale investment securities to fill in the column corresponding to the maturity date.

- Held-to-maturity investment securities unlisted: Take value of book-entry held-to-maturity investment securities to fill in the column corresponding to the maturity date.

Section 5: Derivatives and financial assets: Take certain receivables derived from the performance of derivatives and financial assets to fill in the column corresponding to the date the cash flow is derived.

Section 6: Interests and fees receivable: Take the amounts of interests, fees possibly receivable derived from loans, deposits, investment securities, derivatives and other financial assets satisfying conditions for “Cash inflows” in sections 1, 2, 3,4, 5 mentioned above to fill in the column corresponding to the maturity date.

Section 7: Other assets: Take amounts possibly receivable derived from the performance of “Other assets” as instructed in the Decision No. 16/2007/QD-NHNN dated April 18, 2007 of the Governor of State Bank of Vietnam on promulgating financial statement regulations in respect of credit institutions and other related documents (not including derived cash flows in Sections 1-6 of "Cash inflows" table) to fill in the column corresponding to the date the cash flow is derived.

3. Principle of calculating “Cash inflows”:

“Cash inflows” must ensure the following principles:

- Entries which have been included in the Assets of high liquidity shall not be recorded in “Cash inflows”.

- If credit institutions, branches of foreign banks do not have adequate foundations to determine the amounts possibly receivable as planned, these amounts shall not be recorded in “Cash inflows”.

- In respect of loans to other credit institutions, branches of foreign banks, foreign credit institutions, economic organizations, individuals which are overdue and/or classified into group 2 and over (according to most recent debt classification) shall not be recorded in “Cash inflows”.

- In respect of listed trading securities and available-for-sale investment securities: The value being included in “Cash inflows” is the value obtained by subtracting the provision for devaluation of securities to be built up from recorded value under the provisions of law and included in “Cash inflows” in the “Succeeding day” column and not in other columns.

- In respect of listed held-to-maturity investment securities: The value being included in “Cash inflows” is the value obtained by subtracting the provision for devaluation of securities to be built up from recorded value under the provisions of law and included in “Cash inflows” on the maturity date of securities.

- In respect of unlisted securities (unlisted trading securities, available-for-sale investment securities and held-to-maturity investment securities): Take value of book-entry unlisted securities classified into group 1 to fill in the column corresponding to the maturity date of securities.

Part III Cash outflows:

1. “Cash outflows” calculation form:

2. Guidance on use of figures “Cash outflows”:

Section 1: Debts owed by the Government and State Bank of Vietnam: Take the outstanding debt owed by the Government and State Bank of Vietnam to fill in the column corresponding to the maturity date.

Section 2.1: Demand deposits: Take demand deposit balance from credit institutions, branches of foreign banks in Vietnam and foreign credit institutions in the balance sheet to fill in the column “Succeeding day” and not to fill in other columns.

Section 2.2: Term deposits: Take balance of demand deposits due to credit institutions, branches of foreign banks in Vietnam, and foreign credit institutions to fill in the column corresponding to the maturity date.

Section 2.3: Loans to credit institutions, branches of foreign banks in Vietnam, and foreign credit institutions: Take balance of loans due under the loan contract to fill in the column corresponding to the maturity date.

Section 3.1: Demand deposits: credit institutions, branches of foreign banks shall work out the average balance of demand deposits of 30 successive days immediately prior to the day of calculation to determine the demand deposits likely to be withdrawn and fill in the column “Succeeding day”. If the average balance above is not identifiable, demand deposits likely to be withdrawn and filled in the “Succeeding day” shall not be less than 15% of average balance of demand deposits of 30 successive days immediately prior to the day of calculation.

Section 3.2: Term deposits and saving deposits: Take balance of term deposits and saving deposits due to fill in the column corresponding to the maturity date.

Section 4: Derivatives and other financial liabilities: Take the amounts expected to be derived from the performance of derivatives and other financial liabilities to fill in the column corresponding to the date the cash flow is derived.

Section 5: Capital assistance, investment trusts and entrusted loans from credit institutions, branches of foreign banks: Take the amounts derived from activities of capital assistance, investment trusts and entrusted loans undertaken by credit institutions, branches of foreign banks under the contracts for such activities to fill in the column corresponding to the performance period specified in the contract.

Section 6: Issue of valuable papers: Take payables derived from the performance of obligations with respect to payment of issued valuable papers to fill in the column corresponding to the maturity date of those valuable papers.

Section 7: Interests and expenses payable: Take interests and expenses payable to fill in the column corresponding to the maturity date.

Section 8: Other liabilities: Take the amounts derived from the performance of obligations with respect to “Other financial liabilities” as instructed in the Decision No. 16/2007/QD-NHNN dated April 18, 2007 of the Governor of State Bank of Vietnam on promulgating financial statement regulations in respect of credit institutions and other related documents (not including derived cash flows in Sections 1-7 of "Cash outflows" table) to fill in the column corresponding to the maturity date.

Section 9: Irrevocable commitments to customers (including commitments of credit extension, capital assistance, entrusted loans and payment guarantee…): Take the amounts specified in the irrevocable commitment to fill in the column corresponding to the term of commitment.

Section 10: Overdue payment obligations: Take all overdue amounts payable under obligations to fill in the column “Succeeding day” and not to fill in other columns.

3. “Cash outflows” calculation principles:

“Cash outflows” is the flow derived from obligations to pay, fulfill commitments and other obligations expected to arise and must ensure the following principles:

- If the term of obligation performance is not identifiable, the amount payable under obligations shall be filled in "Succeeding day" in "Cash outflow” table;

- Overdue payables under obligations should be filled in "Succeeding day" in "Cash outflows" table;