Guidance on Implementing regulations on setting up risk provisions in Vietnam under Circular 02/2023/TT-NHNN

Guidance on Implementing regulations on setting up risk provisions in Vietnam under Circular 02/2023/TT-NHNN (Image from Internet)

Regarding this matter, LawNet would like to answer as follows: 

On August 09, 2023, the State Bank of Vietnam issued Official Dispatch 6248/NHNN-TD guiding the implementation of Circular 02/2023/TT-NHNN on the restructuring of loan repayment terms and maintaining the loan group to support customers facing difficulties.

Guidance on implementing the regulations on debt rescheduling in Vietnam under Circular 02/2023/TT-NHNN

To ensure the unified implementation of Circular 02/2023/TT-NHNN across the entire system of credit institutions and branches of foreign banks, the State Bank of Vietnam guides the implementation of regulations on setting up risk provisions from Clause 17 to Clause 19 in Official Dispatch 6248/NHNN-TD as follows:

- Clause 17: How is Clause 1 of Article 6 of Circular 02 interpreted according to the following understandings:

Understanding 1: Applicable only to customers who currently have loan balances with rescheduled repayment terms under the provisions of Circular 02.

Understanding 2: Applicable to both customers who have previously rescheduled loans under Circular 02 and currently have completely settled loan accounts with rescheduled loan balances under Circular 02.

Answer:

Clause 1 of Article 6 of Circular 02 applies to all outstanding loans of customers with rescheduled repayment terms and maintained loan groups according to the provisions of Circular 02 and currently customers have loans that are being maintained in the same loan group according to the provisions of Circular 02 (the outstanding loan balances with rescheduled repayment terms under Circular 02 may still be or have been fully settled).

- Clause 18: After a loan has been rescheduled under Circular 02 and the repayment is made on schedule according to the rescheduled terms, can the credit institution reclaim the specific risk provisioning costs that were allocated and the accrued interest?

Answer:

Article 3 of Circular 02 stipulates: "...the contents related to rescheduling loan repayment terms, loan classification, provisioning, and use of provisions for risk handling are not regulated in this Circular but are implemented according to other relevant Legislative Documents."

Clause 1 of Article 6 of Circular 02 stipulates the risk provisioning for customers with rescheduled loan balances under the provisions of Circular 02 and the method of determining the specific amount of provisions to be additionally allocated, with no provisions for reclaiming risk provisions.

Therefore, the credit institution bases on the provisions of Clause 2 of Article 14 of Circular 11/2021/TT-NHNN of the Governor of the State Bank of Vietnam, stipulating on classifying assets, provisioning rates, methods of making provisions for risks and using provisions for risk handling in the activities of credit institutions and branches of foreign banks to perform, specifically:

"In cases where the remaining balance of specific and general provisions from the previous accounting period exceeds the specific and general provisions to be made during the current accounting period, credit institutions, branches of foreign banks must reclaim the excess difference."

- The accounting of accrued interest of the loans with rescheduled repayment terms and maintained standard loan groups (Group 1) is performed according to Clause 4 of Article 5 of Circular 02, specifically:

"For accrued interest of loans with rescheduled repayment terms and maintained standard loan groups (Group 1) under the provisions of this Circular, from the day of rescheduling, the credit institution, branch of the foreign bank should not account for the income (accrued interest) but instead keep it in off-balance sheet to monitor collection; recognize it as income when collected according to the provisions of the law on financial policies applicable to credit institutions, branches of foreign banks."

- Clause 19: Requesting the State Bank of Vietnam for guidance on calculating the amount to be provisioned specifically for customers who have been or are being rescheduled at the credit institution (including rescheduling according to Circular 39 and according to Circular 01) and continue to be rescheduled according to Circular 02?

Answer:

Clause 3 of Article 156 of the Law on Promulgation of Legislative Documents stipulates: "In case the Legislative Documents promulgated by the same agency have different provisions on the same issue, the provisions of the later-promulgated legal document shall apply."

Thus, in case the customer concurrently has outstanding loans rescheduled and maintained in the same loan group according to the provisions of Circular 01 and Circular 02, the credit institution should make specific provisions for risks according to the provisions of Circular 02.

More details can be found in Official Dispatch 6248/NHNN-TD dated August 09, 2023.

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