Change in Principles for Provisioning and Accounting Risk Reserves by the SBV

04:43, 11/07/2024

On December 25, 2018, the State Bank of Vietnam issued Circular 37/2018/TT-NHNN amending and supplementing Circular 39/2013/TT-NHNN stipulating the determination, setting aside, management, and utilization of risk provisioning by the State Bank of Vietnam.

Circular 37 has amended and supplemented the principles of provisioning, accounting, and using the risk provisions, specifically the new regulations are as follows:

- Annually, the State Bank of Vietnam sets aside a risk provision and accounts for it as an expense at 10% of the income-expenditure difference, excluding the risk provision expenses. The risk provision balance after provisioning does not exceed the required risk provision.- The provisioning and accounting for the risk provision are centralized at the State Bank of Vietnam.- The risk provision is commonly used to offset losses and damages to assets incurred during operations, after deducting the recovery value of the assets and compensation amounts from the responsible organizations or individuals and the insurance organizations.- The unused risk provision at the end of the year is carried over to the following year for continued use.- In case the risk provision is insufficient to cover the losses, the handling of the shortfall will be carried out according to the current financial regime of the State Bank of Vietnam.- If the required risk provision is less than the risk provision balance before provisioning, the State Bank of Vietnam shall reverse the difference into the income of the State Bank of Vietnam.

Review the new regulations at Circular 37/2018/TT-NHNN effective from February 15, 2019.

- Thanh Lam -

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