Quyết định 297/1999/QD-NHNN5

DECISION

ON THE PROMULGATION OF THE REGULATION ON PRUDENTIAL RATIOS IN THE ACTIVITIES OF CREDIT INSTITUTIONS

THE GOVERNOR OF THE STATE BANK OF VIETNAM

- Pursuant to the Law on the State Bank No.01/1997/QH10 and the Law on the Credit Institutions No.02/1997/QH10 dated 12 December, 1997;
- Pursuant to the Decree No. 15/CP dated 2 March, 1993 of the Government on the assignment, authority and responsibility for the State management of Ministries, ministerial-level agencies;
- Upon the proposal of the Director of the Banks & Non-Bank Credit Institutions Department,

DECIDES

Article 1. To promulgate in conjunction with this Decision "the Regulation on prudential ratios in the activities of credit institutions.

Article 2.

This Decision shall be effective 15 days after the date of signing. Provisions in following legal documents relating to the " Regulation on prudential ratios in the activities of credit institutions" promulgated in conjunction with this Decision shall hereby repealed:

1. The "Regulation on the prudence in the monetary-credit business for credit institutions" issued under the Decision No. 107 QD-NH5 dated 9 June, 1992 of the Governor of the State Bank of Vietnam;

2. The Circular No.10/TT-NH5 dated 6 July, 1992 of the Governor of the State Bank guiding the implementation of the " Regulation on the prudence in the monetary-credit business for credit institutions".

Article 3.

The Director of the Administration Department, the Director of the Banks and Non-Bank Credit Institutions, Heads of related Departments of the State Bank, General Managers of State Bank branches in provinces and cities, Chairman of the Board of Directors, Directors General (Directors) of credit institutions shall be responsible for the implementation of this Decision.

REGULATION

ON PRUDENTIAL RATIOS IN THE ACTIVITIES OF CREDIT INSTITUTIONS
(promulgated in conjunction with the Decision No.297/1999/QD-NHNN5 dated 25 August, 1999 of the Governor of the State Bank)

I. GENERAL PROVISION

Article 1. Credit institutions operating in Vietnam must maintain at all times prudential ratios in accordance with this Decision, including:

1. The maximum ratio of the short-term funds which are permitted to be used to extend medium and long-term loans;

2. The liquidity ratio;

3. The minimum capital adequacy ratio.

II. DETAIL PROVISIONS

Section I. The maximum ratio of the short-term funds which are permitted to be used to extend medium and long-term loans

Article 2.

1. The maximum ratio of the short-term funds which are permitted to be used to extend medium and long-term loans for credit institutions shall be as follows:

a. State-owned credit institutions: 25%

b. Joint-venture credit institutions: 25%

c. Foreign bank branches: 25%

d. 100% foreign owned non-bank credit institutions: 25%

e. Joint-stock credit institutions owned by the State and People:20%

f. Cooperative credit institutions: 10%

2. The short-term funds which credit institutions can use to extend medium and long-term loans shall include:

a. Demand deposits, deposits with term of less than 12 months due to other credit institutions;

b. Demand deposits, deposits with term of less than 12 months due to organisations, individuals;

c. Non-term savings deposits and savings deposits with term of less than 12 months of individuals;

d. Funds mobilized domestically through issuance of short-term valuable paper.

Article 3.

Credit institutions whose short-term funds ratio used for medium and long-term loans after the effectiveness of this Decision is higher than the maximum ratio provided for in paragraph 1 Article 2 of this Decision shall not continue to use short-term funds to finance medium and long-term loans and have to take measures to increase funds mobilization within the provisions of applicable laws, to collect medium and long-term debts at repayment dates of the respective loans in order to gradually reduce this ratio in compliance with this provision within a period of 3 years.

In the event that a credit institution uses short-term funds to finance medium and long-term loans under the direction of the Government, separate provisions of the State Bank shall be applied.

Section II. The liquidity ratio

Article 4.

1. At the end of a business day, credit institutions shall maintain for the next business day a minimum ratio of 1 between the current Assets and different categories of current Liabilities.

2. Current Assets shall include:

a. Cash;

b. State Bank Drafts which are still valid for circulation;

c. Gold, specious metal, stones which can be sold immediately;

d. Deposits with the State Bank (excluding required reserve deposits);

dd. Demand deposits (principal and interests) at other credit institutions in Vietnam and foreign countries;

e. Term deposits (principal and interests) at other credit institutions in Vietnam and foreign countries which have been due;

f. Loans outstanding which have been due from other credit institutions at a maximum ratio of 95%;

g. Loans outstanding which have been due from organisations and individuals at a maximum ratio of 90%;

h. Valuable paper which have been due for payment or which can be disposed immediately or which are discountable, rediscountable at the State Bank;

i. Receipts under commitments for buy and sale of foreign currency in a forward transaction which have been due ;

j. Other receivables due.

3. Current Liabilities shall include:

a. 15% of the demand deposits of organisations, individuals at the minimum;

b. Term deposits of organisations, individuals which have been due for payment (principal and interest);

c. 15% of non-term savings deposits of individuals at the minimum;

d. Term savings deposits of individuals which have been due for payment (principal and interest);

e. dd. Loans borrowed from other credit institutions which have been due for payment (principal and interest);

f. Valuable paper issued by the credit institution concerned which have become due for payment (principal and interest);

g. Payables due under commitments for buy and sale of foreign currency in a forward transaction;

h. Payments to be made in lieu of customers under a guarantee, L/c obligation;

i. Loan to be made under a stand-by credit line;

j. Other payables.

Article 5. Credit institutions which encounter difficulties in the compliance with the liquidity ratio as provided for in Article 4 of this Regulation must present a solution to the Governor of the State Bank for consideration and decision.

Section III. THE MINIMUM CAPITAL ADEQUACY

Article 6.

1. Credit institutions (except for foreign bank branches) must maintain a minimum ratio of 8% of the own capital to the risk weighted Assets, including off-balance commitments. The own capital and the risk weighted assets shall be determined in accordance with provisions of Article 7 and 8 of this Regulation.

2. Credit institutions whose minimum capital adequacy as of the effective time of this Decision is less than the level provided for in paragraph 1 of this Article, shall have to increase their capital adequacy ratio to the stipulated level within 3 years since the effective date of this Decision. The annual increase shall be at least 1/3 of the discrepancy.

Article 7.

1. The own capital of credit institutions shall include: the Charter Capital ( provided capital, paid-in share capital) and the reserve fund for supplementing the Charter Capital

2. The provision of paragraph 1 of this Article shall be adjusted in accordance with the performance of activities of credit institutions and the respective provision of Article 20 of the Law on credit institutions.

3. The total capital invested by a credit institution in other credit institutions in form of capital participation, shares acquisition shall be excluded from the own capital when calculating prudential ratios stated in this Regulation.

Article 8.

Risk weighted assets, including off-balance sheet commitments (hereinafter referred to as risk assets) shall include risk weighted values of on-balance sheet assets (hereinafter referred to as on-balance sheet risk assets) and risk weighted values of off balance sheet commitments (hereinafter referred to as off balance sheet risk assets).

The on-balance sheet risk assets shall be determined on the basis of the value of each on-balance sheet asset and (multiplied by) the risk weight of the respective asset provided for in Article 10.

An off-balance sheet asset shall be determined by, in the first instance, converting off-balance sheet commitments to corresponding on-balance sheet asset using the conversion factor provided for in Article 9 of this Decision, and then determining its risk weight as provided for in Article 10 of this Decision.

Article 9. The conversion factors of off-balance sheet commitments:

1. Off-balance sheet commitments which have the conversion factor of 100%:

a. Loan guarantee;

b. Payment guarantee.

2. Off-balance sheet commitments which have the conversion factor of 50%:

a. Contract performance guarantee;

b. Bid guarantee;

c. Other form of guarantee for organisations, individuals;

d. Commitment under a L/C payment.

3. Off-balance sheet commitments which have the conversion factor of 20%

Commitments for purchase and sale of foreign exchange in a forward transaction

Article 10. On-balance sheet assets and values of corresponding on-balance sheet assets of off-balance sheet commitments shall be classified under following risk weights:

1. The group of assets which have the risk weight of 0% includes:

a. Cash, valid State Bank Drafts;

b. Gold;

c. Deposits at the State Bank of Vietnam;

d. Valuable papers issued, guaranteed by the State Bank of Vietnam, the Government of Vietnam;

e. Loans secured by savings deposits placed with lending credit institutions;

f. Loans secured by valuable papers issued by lending credit institutions;

g. Loans secured by valuable papers issued, guaranteed by the State Bank of Vietnam, the Government of Vietnam;

h. Loans guaranteed by the Government of Vietnam.

2. The group of assets which have the risk weight of 20% includes:

a. Deposits with other credit institutions in Vietnam and in foreign countries;

b. Valuable papers guaranteed by local Governments in provinces, cities, issued by other credit institutions;

c. Loans financed by funds entrusted;

d. Loans secured by valuable papers guaranteed by Government in provinces, cities, issued by other credit institutions;

e. Secured, unsecured loans extended to other credit institutions;

f. Loans guaranteed by other credit institutions;

g. Finance leases to other credit institutions.

3. The group of assets which have the risk weight of 50%

4. The group of assets which have the risk weight of 100% includes:

a. Loans secured by the mortgage of immovable assets, pledge of other movable assets, guarantees of other organisations, individuals in accordance with applicable laws;

b. Unsecured loans;

c. Finance leases to individuals;

d. Finance leases to organisations;

e. Capital participation to, shares acquisition in enterprises;

f. Values of corresponding on-balance sheet assets of guarantees, commitments in L/c payment, commitments for purchase, sale of foreign exchange in a forward transaction;

g. Other assets (excluding capital participation, shares acquisition in other credit institutions).

III. IMPLEMENTING PROVISIONS

Article 11. Credit institutions shall report the compliance with the prudential ratios in their activities provided for in this Regulation in accordance with the information and reporting regime of the State Bank.

Article 12. Credit institutions violating provisions of this Regulation shall, depending on the seriousness of the violation, be punished for administrative violation.

Article 13. The amendment, supplement of the provisions of this Regulation shall be decided upon by the Governor.