Management and handling of failure to maintain solvency ratios in Vietnam

According to Article 15 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam (SBV), management and handling of failure to maintain solvency ratios are prescribed as following:

1. A non-bank credit institution shall establish a department (or equivalent) at its headquarter in charge of liabilities and assets to monitor and manage solvency on a daily basis. The department shall be managed by the General Director (Director) or Deputy General Director (Deputy Director).

2. In case the 30-day solvency ratio of a non-bank credit institution is below the rate specified in Point c and Point d Clause 3 Article 14 of this Circular, SBV shall consider whether administrative penalties for offenses arising in currency and banking activities are imposed, and carry out solvency supervision. The non-bank credit institution shall promptly implement the corrective measure, including: taking out a loan from another credit institution or foreign bank branch; taking out a loan from an overseas financial institution; concluding an irrevocable term deposit agreement, irrevocable loan agreement and other irrevocable approaches with other credit institutions, foreign bank branches or overseas financial institutions in other to maintain the solvency ratio. If any of the corrective measures mentioned above involves at least 20% of the liquid assets, SBV shall implement additional supervision measures and take actions as prescribed by law.

3. Non-bank credit institutions shall submit solvency ratio reports to SBV in accordance with regulations on statistical reporting applicable to credit institutions and foreign bank branches. Before 10 a.m. of the next day, the non-bank credit institution shall submit a written report on the temporarily inadequate solvency ratio (if any) and implement measures, send it to SBV (Bank Supervision and Inspection Agency) directly or by post.

4. A non-bank credit institution may only grant loans and enter into such irrevocable term deposit agreements, irrevocable loan agreements with other credit institutions and foreign bank branches to offset such inadequacy if its 30-day solvency ratio is still conformable with Article 14 of this Circular after taking these measures.

5. After taking the corrective measures mentioned in Clause 2 of this Article, if the non-bank credit institution remains in a difficult solvency situation, it shall promptly notify SBV (Bank Supervision and Inspection Agency).

More details at the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam, effective from February 14, 2021.

Thuy Tram

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