Maximum ratios of short-term capital for provision of medium-term and long-term loans in Vietnam

According to Article 16 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam, maximum ratios of short-term capital for provision of medium-term and long-term loans are 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/C x 100%

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:

** 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.

** 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:

- 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;

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

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

- 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;

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

- 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;

- 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;

- 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:

- 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;

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

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

- 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;

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

Note: 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%.

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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