Principles of using provisions for treatment of risks of credit institutions and foreign bank branches in Vietnam

Principles of using provisions for treatment of risks of credit institutions and foreign bank branches in Vietnam are specified in Clause 2, Article 16 of Circular 11/2021/TT-NHNN, specifically as follows:

2. Credit institutions and foreign bank branches may use provisions for treatment of risks according to the following principles:

a) In case where they have disposed of collateral or security property to recover debts as agreed upon by the parties, in accordance with the provisions of law, they may use specific provisions to deal with risks from the remaining outstanding balance of debt; In case where the specific provision is not enough to compensate for the risks of debt, the general provision must be used for risk treatment;

b) In case where they have not yet disposed of collateral or security property for recovery of debts, they can use provisions for treatment of risks according to the following principles:

(i) Use the specific provision set up according to Article 12 herein for treatment of risks to these debts;

(ii) Promptly dispose of collateral or security property as agreed upon with the borrower and according to the provisions of law to recover debts;

(iii) In case where the specific provision is used and the proceeds from the disposal of collateral or security property are not enough to compensate for the risks of debts, the general provision shall be used to treat the risks.

c) Credit institutions, foreign bank branches shall record the outstanding debts subject to risk controls by using specific and general provisions as off-balance sheet items or entries as provided in point a and b of this clause.

Best Regards!