What is maximum ratios of short-term capital for provision of medium-term and long-term loans by non-bank credit institutions in Vietnam?

1. What is maximum ratios of short-term capital for provision of medium-term and long-term loans by non-bank credit institutions in Vietnam?

Pursuant to Article 16 of Circular 23/2020/TT-NHNN, maximum ratios of short-term capital for provision of medium-term and long-term loans by non-bank credit institutions is prescribed as follows:

1. Non-bank credit institutions shall apply the following formula to calculate the maximum ratio of short-term capital for provision of medium-term and long-term loans in VND and other foreign currencies that can be exchanged into VND at the rates specified in Point a Clause 26 Article 3 of this Circular:

A (%) =	B	x 100%
	C

Where:

- A: Maximum ratio of short-term capital for provision of medium-term and long-term loans.

- B: Total medium-term and long-term loan balance specified in Clause 2 of this Article minus (-) total medium-term and long-term capital specified in Clause 3 of this Article.

- C: Short-term capital specified in clause 4 of this Article.

2. Total medium-term and long-term loan balance, including:

a) Balance of the following loans with the remaining term of over 01 (one) year:

(i) Loans, financial leases (including those taken by other credit institutions and foreign bank branches in Vietnam), except:

- Loans, financial leases from trust funds of the Government, individuals and other organizations (including other credit institutions and foreign bank branches in Vietnam), the risks of which are taken by the trustors;

- Loans, financial leases granted to programs and projects refinanced by SBV under decisions of the Government or the Prime Minister.

(ii) Trust funds granted by other credit institutions under a loan or financial lease agreement, the risks of which are borne by the trustors;

(iii) Purchases of and investments in securities, except securities used in transactions of SBV (exclusive of bonds issued by VAMC);

(iv) If the loans, financial leases, trust loans or financial leases mentioned in (i) and (ii) have various repayment terms, the remaining term of debts to be included in the medium-term and long-term loan or financial lease balance shall be determined on the basis of the respective original terms of these loan or financial lease debts.

b) Overdue principal of loans, financial leases, trust loans or financial leases; balance of purchases and investments in securities.

3. Medium-term and long-term capital with the remaining term of over 01 (one) year includes:

a) Deposits of domestic and foreign organizations (including those of other credit institutions or foreign bank branches in Vietnam), except deposits of all kinds of the State Treasury;

b) Loans from domestic and overseas financial institutions (including those from credit institutions and foreign bank branches in Vietnam);

c) Trust funds from the Government, the risks of which are taken by the non-bank credit institution;

d) Loans from lead credit institutions or foreign bank branches that are subsequently on-lent by non-bank credit institutions to projects receiving finances, trusted investments, and the risks of which are borne by non-bank credit institutions;

dd) Funds from issuance of promissory notes, treasury bills, certificates of deposit, bonds;

e) Charter capital, fund for charter capital increase, development investment funds and financial reserve funds that remain after deduction of cumulative loss (according to the balance sheet when calculating the maximum ratio of short-term capital for provision of medium-term and long-term loans), historical costs of fixed assets acquired through purchases or investments, capital contributions, purchases of shares prescribed by law;

g) Share premiums, undistributed profit (according to the balance sheet when calculating the maximum ratio of short-term capital for provision of medium-term and long-term loans) that remains after purchase of treasury stocks;

h) Exchange differences due to reassessment of foreign currency equity on the balance sheet when converting the foreign currency in the financial statement into VND.

4. Short-term capital of which balance has the remaining term of up to 01 (one) year (including demand deposits) includes:

a) Deposits of domestic and foreign organizations (including those of other credit institutions or foreign bank branches in Vietnam), except:

(i) Deposits of all kinds of the State Treasury;

(ii) Escrows and special-purpose deposits of customers;

b) Loans from domestic and overseas financial institutions (including those from credit institutions and foreign bank branches in Vietnam);

c) Trust funds from the Government, the risks of which are taken by the non-bank credit institution;

d) Loans from lead credit institutions or foreign bank branches that are subsequently on-lent by non-bank credit institutions to projects receiving finances, trusted investments, and the risks of which are borne by non-bank credit institutions;

dd) Funds from issuance of promissory notes, treasury bills, certificates of deposit, bonds.

5. Non-bank credit institutions shall comply with the regulatory maximum ratio of short-term capital for provision of medium-term and long-term loans which is 90%.

2. What are regulations on ratios of purchase of and investment in government bonds and government-backed bonds by non-bank credit institutions in Vietnam? 

Pursuant to Article 17 of Circular 23/2020/TT-NHNN, ratios of purchase of and investment in government bonds and government-backed bonds by non-bank credit institutions is regulated as follows:

1. The maximum ratio of a non-bank credit institution’s purchase of or investment in government bonds and government-backed bonds to its previous month’s total liability must be 10%.

2. Government bonds, including:

a) Treasury bills;

b) Treasury bonds;

c) National development bonds.

3. Government-back bonds, including:

a) Government-back corporate bonds;

b) Government-backed bonds issued by policy banks;

c) Government-backed bonds issued financial institutions and credit institutions.

4. Total purchases of and investments in Government bonds and government-backed bonds for determination of the maximum ratio mentioned in Clause 1 of this Article is the buying prices of Government bonds and government-backed bonds under the ownership of the non-bank credit institution, exclusive of purchases of or investments in Government bonds and government-backed bonds from trust funds, the risks of which are not taken by the non-bank credit institution.

5. A newly established non-bank credit institution (excluding non-bank credit institutions that are reorganized under the Law on credit institutions) that has been operating for less than 02 (two) years and has a total liability smaller than its charter capital may purchase or invest in Government bonds and government-backed bonds with a ratio of up to 30% of its charter capital.

Best Regards!