Vietnam: 04 principles of formulation of an internal credit ranking system

According to Vietnam’s current regulations, internal credit ranking system means a system including financial and non-financial criteria, processes for assessing customers on the basis of financial qualitative and quantitative, business and administration situation, and prestige of customers. The internal credit ranking system must be formulated for each subject of various customers, including subjects restrained from credit extension and related persons of these subjects.

Specifically, according to Article 5 of Circular No. 02/2013/TT-NHNN of the State Bank of Vietnam, the internal credit ranking system must be formulated under the following 04 principles:

- Being formulated on the basis of data and information of all customers which have been collected within at least 01 (one) year preceding year of its formulation. 

- At least each year one time, the internal credit ranking system must be considered, amended and supplemented on the basis of data and information of customers which have been collected during the year.

- Having regulation on ranking levels corresponding to risk extents from low up high.

- Being approved by the Board of Directors (for credit institutions being joint-stock companies), the Members' Council (for credit institutions being limited liability companies), General Director or Director (for foreign banks’ branches). 

Credit institutions, foreign banks’ branches must formulate the internal credit ranking system in order to rank customers periodically or as necessary, doing as basis for approval of credit extension, management of credit quality, formulation of policy on risk provisions in conformity with operational scope and actual situation of credit institutions, foreign banks’ branches.

Non-bank credit institutions are not forced to have an internal credit ranking system.

Also according to Circular No. 02/2013/TT-NHNN, within 10 (ten) days after issuing, amending and supplementing the internal credit ranking system, credit institutions, foreign banks’ branches must send directly or via post to the State bank (the banking inspection and supervision agency) the following documents:

Firstly, for new issuance:

- A written report on issuance and application of an internal credit ranking system;

- An internal credit ranking system, documents which describe internal credit ranking system, process of collecting customers' information and data, ranking customers;

- Guidance for use of internal credit ranking system, including division of duty, authorization in collecting customers' information and data, ranking customers;

Secondly, for amendments and supplementations :

- A written report on amendments and supplementations to internal credit ranking system, clarifying reason of amendments and supplementations;

- Documents amending and supplementing internal credit ranking system and guidance for use of internal credit ranking system.

View details at Circular No. 02/2013/TT-NHNN of the State Bank of Vietnam, effective from June 01, 2014.

Thu Ba

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