Bad Debt Ratio and Capital Loss Risk Ratio of Credit Institutions with State Capital Investment

Accordingly, the bad debt ratio and the ratio of potentially irrecoverable debts are specifically stipulated by Circular 12 as follows:

- The bad debt ratio as defined by the State Bank of Vietnam regarding the classification of assets, provisioning levels, methods of setting up risk provisions, and the use of provisions to handle risks in the operations of credit institutions and branches of foreign banks;- The ratio of potentially irrecoverable debts is the ratio of the balance of potentially irrecoverable debts (Group 5 debts) to the total outstanding loans as defined by the State Bank of Vietnam regarding the classification of assets, provisioning levels, methods of setting up risk provisions, and the use of provisions to handle risks in the operations of credit institutions and branches of foreign banks.

Additionally, the compliance with laws by credit institutions with state capital investment is also regulated by Circular 12 as follows:

- The legal policies and regulations include areas of investment, management and use of state capital at credit institutions, taxes (excluding personal income tax), other contributions to the state budget, financial reporting regulations, and reports for financial supervision;- The administrative penalty level as a basis for evaluation is the amount to be paid as recorded in the administrative penalty decision for violations detected in the financial year being evaluated, excluding the amount to be paid for implementing measures to remedy consequences.

Furthermore, Circular 12 also stipulates the implementation of public utility products and services as directly carrying out national defense and security tasks or providing public services according to state policies through bidding or accepting orders or state-assigned tasks. The evaluation of this criterion is based on the level of completion in terms of quantity and quality of services. Based on the field of operation, specialization, and specific characteristics, the representative body of the state owner sets appropriate evaluation criteria.

See details Circular 12/2018/TT-BTC effective from March 19, 2018.

- Thao Uyen -

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