What are regulations on risk provisions of Vietnam Development Bank (VDB)?
What are regulations on risk provisions of Vietnam Development Bank (VDB)? Thank you!
What are regulations on risk provisions of VDB?
Pursuant to Article 5 of the Circular 128/2021/TT-BTC stipulating risk provisions of VDB as follows:
1. VDB shall set aside provision for credit losses and other provisions in accordance with Article 16, Article 17, Article 18 of the Decree No. 46/2021/ND-CP and the provisions of Clause 2 of this Article.
2. Rules and procedures for making risk provisions
a) With regard to provisions of losses on investment credit, export credit and compulsorily guaranteed loans, VDB shall set aside annual provision equaling 0,75% of total outstanding debt of these activities even if the difference between revenues and expenses of VDB is a negative number;
b) VDB shall set aside provisions for credit losses on other loans in accordance with Clause 2 Article 16 of the Decree No. 46/2021/ND-CP;;
c) If, after setting aside provisions for credit losses as prescribed in Points a, b, the difference between revenues and expenses of VDB in the fiscal year is a positive number:
- Based on the demand for use of the provision for credit losses for handling bad debts in the following year, the Board of Directors of VDB shall decide to make additional contributions to the provisions for losses on investment credit, export credit and compulsorily guaranteed loans;
- After setting aside the provisions for losses on investment credit, export credit and compulsorily guaranteed loans as prescribed in Clause 2 Article 15 of the Decree No. 46/2021/ND-CP, if VDB incurs no accumulated losses, it shall make other provisions as prescribed in Article 18 of the Decree No. 46/2021/ND-CP.
3. Capital mobilization cost which is used as the basis for setting aside the risk provision for other loans as prescribed in Point b Clause 2 Article 16 of the Decree No. 46/2021/ND-CP shall be calculated as follows:
a) With regard to loans granted by VDB with funding raised from a specific source, the capital mobilization cost shall equal the interest and capital mobilization fee actually incurred by VDB from raising of funding from that source;
b) With regard to the outstanding debt of other remaining loans granted using general funding of VDB, the capital mobilization cost shall be determined according to the average mobilized capital interest rate as follows:
Capital mobilization cost of the outstanding debt of other remaining loans
=
Average outstanding debt of other remaining loans
x
Average mobilized capital interest rate
Where: The average mobilized capital interest rate shall be determined according to Clause 2 Article 6 of this Circular.
4. VDB shall manage and monitor provisions for losses on investment credit, export credit and compulsorily guaranteed loans, and the risk provision for other loans in accordance with Article 17 of the Decree No. 46/2021/ND-CP.
5. Time of recording risk provisions:
By the 20th of the first month of the following quarter, VDB shall record the amounts temporarily contributed to the risk provisions in the previous quarter in accordance with Article 16 of the Decree No. 46/2021/ND-CP.
With regard to the last quarter of the accounting year, VDB shall determine the amounts of risk provisions set aside in the accounting year as prescribed in Article 16 of the Decree No. 46/2021/ND-CP and do bookkeeping of such amounts at the annual finalization time.
What are regulations on interest rate offsetting of VDB?
Pursuant to Article 6 of the Circular 128/2021/TT-BTC stipulating interest rate offsetting of VDB as follows:
1. Determination of subsidy for interest rate offsetting:
The subsidy for interest rate offsetting granted to VDB shall equal the sum of the subsidy for offsetting difference in interest rates incurred from grant of state loans for investment or export and provision of credit guarantee for small and medium-sized enterprises to get loans from commercial banks under guarantee contracts signed in accordance with regulations of law (hereinafter referred to as “interest rate difference offsetting”) and the post-investment subsidy granted under post-investment support contracts signed before the effective date of the Government’s Decree No. 32/2017/ND-CP dated March 31, 2017 (hereinafter referred to as “post-investment subsidy”). To be specific:
Subsidy for interest rate offsetting
=
Subsidy for interest rate difference offsetting
+
Post-investment subsidy
2. Determination of subsidy for interest rate difference offsetting:
Subsidy for interest rate difference offsetting
=
Total capital mobilization cost offset by subsidy
-
Total revenue earned from use of mobilized capital
Where:
a) Total capital mobilization cost offset by subsidy:
Total capital mobilization cost offset by subsidy is the sum of interests on mobilized capital and costs of issuance of financial instruments (in additional to interests thereof) which is actually incurred by VDB from mobilization of funds for granting loans to investment credit projects, export credit projects, and compulsorily guaranteed loan debts eligible for interest rate difference subsidy (hereinafter referred to as “subsidized projects”), and subsidized budget reserve. Total capital mobilization cost offset by subsidy is calculated adopting the following formula:
Total capital mobilization cost offset by subsidy
=
Mobilized funding offset by subsidy
-
Interest-free funding
x
Average mobilized capital interest rate
Where:
- Mobilized funding offset by subsidy means VDB’s funding used for granting loans to subsidized projects and subsidized budget reserve:
Mobilized funding offset by subsidy
=
Average outstanding debt of loans granted to subsidized projects
+
Subsidized budget reserve
Where:
+ Average outstanding debt of loans granted to subsidized projects as prescribed by law excludes outstanding debts of loans granted to ineligible borrowers or for wrong purposes.
+ Subsidized budget reserve is the average amount of VDB’s cash balances, deposits at SBV and deposits at other credit institutions but shall not exceed 5,3% of the average outstanding debt of loans granted to subsidized projects.
- Interest-free funding includes: VDB’s charter capital; difference from asset revaluation and exchange rate difference; additional reserve fund of charter capital, development investment fund; undistributed incomes of previous quarters and years; capital construction investment funding derived from state budget and funding from other sources of VDB. When calculating the interest-free funding, VDB shall adopt the weighted average method after deducting:
+ The residual value of fixed assets (which is the cost of the fixed assets minus accumulated depreciation thereof) and the actual construction in progress which shall not exceed 25% of the sum of VDB’s charter capital and additional reserve fund of charter capital;
+ Amounts of charter capital actually contributed by Vietnam Infrastructure Development and Finance Investment Joint Stock Company (VIDIFI) and other organizations (if any) as prescribed by law.
- Average mobilized capital interest rate:
Average mobilized capital interest rate
=
Total costs incurred from capital mobilization
Average total mobilized capital
Where:
+ Total costs incurred from capital mobilization are total interests on mobilized capital and costs of issuance of financial instruments (in addition to interests thereof) actually incurred by VDB (excluding costs of getting loans from overseas financial institutions or credit institutions and foreign loans on-lent by the Government for granting loans to programs/projects which are ineligible for interest rate difference subsidy);
+ Mobilized capital shall be determined according to Clause 2 Article 6 of the Decree No. 46/2021/ND-CP, and exclusive of loans granted by overseas financial institutions or credit institutions and foreign loans on-lent by the Government for granting loans to programs/projects which are ineligible for interest rate difference subsidy.
b) Total revenue earned from use of mobilized capital includes:
- Interests on loans granted which are total interests actually received from loans granted to subsidized projects (including due interest payments and penalty interests);
- Deposit interest from subsidized budget reserve which shall be determined as follows:
Deposit interest received
=
Subsidized budget reserve
x
Average deposit interest rate
Where:
Average deposit interest rate
=
Total interests actually received
Average total budget reserve (cash + deposits)
3. Average numbers specified in Clause 2 of this Article are determined as follows:
Monthy average number
=
Beginning balance + Ending balance of the month
2
Quarterly average number
=
Sum of monthly average numbers of the months in the quarter
3
Annual average number
=
Sum of monthly average numbers of the months in the year
12
4. Time of recording interest rate difference subsidy granted to VDB
a) By the 20th of the first month of the following quarter, VDB shall record the temporarily calculated interest rate difference subsidy of the previous quarter as prescribed in Clauses 1, 2 and 3 of this Article;
b) With regard to the last quarter of the accounting year, VDB shall determine the interest rate difference subsidy of the accounting year as prescribed in Clauses 1, 2 and 3 of this Article and do bookkeeping of such subsidy amounts at the annual finalization time.
5. Determination of post-investment subsidy:
Post-investment subsidy
=
Post-investment support amounts granted (quarterly, annual)
-
Recovered post-investment support amounts (quarterly, annual)
Post-investment support amounts granted shall be determined in accordance with regulations of law in each period in respect of post-investment support contracts signed before the effective date of the Government’s Decree No. 32/2017/ND-CP dated March 31, 2017.
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