Mechanism for handling credit risk at the Vietnam Development Bank from March 1, 2025

Mechanism for handling credit risk at the Vietnam Development Bank from March 1, 2025​ (Image from Internet)

On January 6, 2025, the Prime Minister of the Government of Vietnam issued Decision 02/2025/QD-TTg regarding the Credit Risk Management Mechanism at the Vietnam Development Bank.

Mechanism for handling credit risk at the Vietnam Development Bank from March 1, 2025

The credit risk management at the Vietnam Development Bank must ensure the following principles:

- The handling of credit risks by the Vietnam Development Bank must comply with the law; ensure full conditions, files, and documentation as prescribed in Decision 02/2025/QD-TTg and related legal regulations.

- The handling of credit risks by the Vietnam Development Bank must associate the responsibility of the Vietnam Development Bank, borrowers, and related organizations and individuals in lending, recovering, and handling loan debts.

- Organizations and individuals who commit legal violations leading to credit risks or violate regulations during the process of handling debts with credit risks must bear responsibility as specified in Decision 02/2025/QD-TTg and related legal regulations.

- The Vietnam Development Bank utilizes credit risk reserves to handle risks in accordance with the provisions of Decision 02/2025/QD-TTg and related legal regulations.

Regarding the authority to decide on credit risk management at the Vietnam Development Bank, the Board of Directors of the Vietnam Development Bank considers and decides on the following matters:

- Approving the comprehensive system report on the recovery results of debts utilizing provisions to handle credit risks, clearly reporting the results of debt recovery from handling secured assets and determining the basis for approval.

- Approving the classification of debts for which provisions were used to handle credit risks.

- Approving measures to recover debts using provisions to handle credit risks across the system, including the handling of secured assets.

- Utilizing credit risk reserves to shift off-balance-sheet monitoring of debts.

- Writing off the debts from off-balance sheet and selling debts valued lower than the remaining unrecovered principal balance as per the regulations in Decision 02/2025/QD-TTg.

- Selling debts being accounted for both on-balance-sheet and off-balance-sheet with a sale price equal to or higher than the remaining unrecovered principal balance and selling written-off debts from off-balance-sheet.

- Writing off uncollectable interest debts from off-balance-sheet for loan debts with no remaining principal, in cases where the customer is an organization that has gone bankrupt, dissolved according to legal regulations, and after all assets have been liquidated, processed, or the customer is an individual confirmed as deceased or missing according to the law and all properties, obligations from this person have been settled as prescribed by the law.

More details can be found in Decision 02/2025/QD-TTg effective from March 1, 2025.

For debts transferred to off-balance-sheet monitoring at the direction of the Prime Minister of the Government of Vietnam before Decision 02/2025/QD-TTg comes into effect: The Vietnam Development Bank shall implement related regulations on handling credit risks after transferring to off-balance-sheet monitoring as stipulated in Decision 02/2025/QD-TTg.

The file transfer to off-balance sheet monitoring, and the interest calculation for these debts is implemented according to the decision of the competent authority at the time of transfer to off-balance-sheet monitoring.

For investment lending debts, export credit, and mandatory guarantee loans that the Vietnam Development Bank has sold according to the directive of the Prime Minister of the Government of Vietnam before Decision 02/2025/QD-TTg becomes effective: The Vietnam Development Bank shall handle the financial aspects of the sold debt (principal, interest) and related contents as regulated in Article 7 and Clause 3 of Article 13 of Decision 02/2025/QD-TTg.

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