Circular 31/2024/TT-NHNN on the classification of assets in commercial banking activities, non-bank credit institutions, and foreign bank branches.
Circular 31/2024/TT-NHNN on Asset Classification in Commercial Bank Activities, Non-Bank Credit Institutions, and Foreign Bank Branches
On June 30, 2024, the State Bank of Vietnam issued Circular 31/2024/TT-NHNN, regulating the classification of assets in the activities of commercial banks, non-bank credit institutions, and foreign bank branches.
Circular 31/2024/TT-NHNN https://thuvienphapluat.vn/van-ban/Tien-te-Ngan-hang/Thong-tu-31-2024-TT-NHNN-phan-loai-tai-san-co-trong-hoat-dong-cua-ngan-hang-thuong-mai-616233.aspx?anchor=dieu_1 regulates the classification of receivable assets (hereinafter referred to as "debt") in the activities of commercial banks, non-bank credit institutions, and foreign bank branches arising from the following activities:
- Lending;- Financial leasing;- Discounting and rediscounting transferable instruments and other valuable papers;- Factoring;- Issuing credit cards;- Payments on behalf of customers according to off-balance-sheet commitments (including payments made on behalf of customers in guarantee operations, letter of credit operations (except for cases specified at point n clause 1 Article 1 of Circular 31/2024/TT-NHNN) and other payments on behalf of customers according to off-balance-sheet commitments);- Buying and entrusting the purchase of corporate bonds (including bonds issued by other credit institutions) that are not listed on the stock market or are not registered for trading on the Upcom system (hereinafter referred to as unlisted bonds), not including the purchase of unlisted bonds with entrusted capital where the entrusting party bears the risk;- Entrusting credit grants;- Depositing money (except demand deposits at credit institutions, foreign bank branches; deposits at social policy banks as per the regulations of the State Bank of Vietnam regarding state-owned credit institutions maintaining a deposit balance at social policy banks) at credit institutions, foreign bank branches according to legal provisions and depositing money (except demand deposits) at overseas credit institutions;- Buying and selling debt according to the regulations of the State Bank of Vietnam (hereinafter referred to as the State Bank), except for the purchase of bad debts of credit institutions, foreign bank branches with the Vietnam Credit Institutions Asset Management Company;- Repurchase and resale agreements of government bonds on the stock market according to the regulations on the issuance, registration, depository, listing, and trading of government debt instruments on the stock market;- Purchasing certificates of deposit issued by other credit institutions, foreign bank branches;- Deferred letter of credit issuance operations with clauses that allow the beneficiary to be paid immediately or ahead of the due date for the letter of credit and letter of credit refinancing operations with agreements for customers to settle using the repaying bank's own funds from the repaying bank's payment date to the beneficiary; negotiating payment of the letter of credit;- Purchase of claim-free presentation documents under the letter of credit, except where the commercial bank, foreign bank branch purchases claim-free documents under the letter of credit issued by the same commercial bank, foreign bank branch.
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Principles for Self-Classification of Debt Arising from Letter of Credit Operations
Based on clause 13 Article 9 of Circular 31/2024/TT-NHNN, the principles for self-classification of debt arising from letter of credit operations are regulated as follows:
(1) For letter of credit issuance operations:
- In the case of straight payment or deferred payment letter of credit issuance (except for cases specified at point a(ii) clause 13 Article 9 of Circular 31/2024/TT-NHNN), the issuing bank classifies the payment according to the commitment at the letter of credit under the provisions at point b clause 4 Article 10 of Circular 31/2024/TT-NHNN for the applicant, from the date the issuing bank pays the beneficiary;- In the case of issuing a deferred payment letter of credit with clauses allowing the beneficiary to be paid immediately or ahead of the due date for the letter of credit, the issuing bank classifies the debt arising from the letter of credit operation as a loan to the applicant, from the date the repaying bank pays the beneficiary;
(2) For letter of credit confirmation operations:
The confirming bank classifies the payment according to the commitment at the letter of credit for the issuing bank and the issuing bank classifies the payment according to the commitment at the letter of credit for the applicant under the provisions at point b clause 4 Article 10 of Circular 31/2024/TT-NHNN, from the point the confirming bank pays the beneficiary;
(3) For letter of credit negotiation operations:
The negotiating bank classifies the debt arising from the letter of credit operation for the beneficiary as a discount on transferable instruments and other valuable papers as specified in clause 8 Article 9 of Circular 31/2024/TT-NHNN;
(4) For letter of credit reimbursement operations:
- In the case of letter of credit reimbursement through issuing repayment commitments, the repaying bank classifies the payment according to the commitment at the letter of credit under the provisions at point b clause 4 Article 10 of Circular 31/2024/TT-NHNN for the issuing bank, from the date the repaying bank pays the beneficiary;- In the case of letter of credit reimbursement through agreements with customers for settlement using the repaying bank’s funds (except for cases specified at point d(i) clause 13 Article 9 of Circular 31/2024/TT-NHNN), the repaying bank classifies the debt arising from the letter of credit operation as a loan to the issuing bank, from the date the repaying bank pays the beneficiary;
(5) For outright purchase of claim-free presentation documents under the letter of credit, the bank, non-bank credit institution classifies the purchase amount as a loan to the issuing bank or confirming bank.
What Does the Internal Credit Rating System Include?
Based on clause 1 Article 5 of Circular 31/2024/TT-NHNN, the internal credit rating system includes:
- Financial and non-financial indicators, processes for evaluating customer debt repayment and payment capabilities based on qualitative and quantitative data on financial status, business situation, management, and reputation of customers, including customers who are restricted from being granted credit;Information about related persons of customers who are restricted from being granted credit;- Evaluation and rating methods for different customer groups.
Note: Circular 31/2024/TT-NHNN is effective from July 1, 2024.
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