Vietnam: 02 cases in which credit institutions, foreign banks’ branches may use risk provision against credit risk

According to Article 16 of Circular No. 02/2013/TT-NHNN of the State Bank of Vietnam, credit institutions, foreign banks’ branches may use risk provision against credit risk in the following cases:

- Customer is an organization which is dissolved, goes bankrupt as prescribed by law, or an individual who dies or is missing;

- Debts which are classified to Group 5.

Concurrently, Circular No. 02/2013/TT-NHNN stipulates that credit institutions, foreign banks’ branches may use provision against credit risks under the following principles:

- Using specific provision set up according to clause 1 Article 12 of this Circular in order to deal with risks for such debts;

- To dispose of the security assets for debt recovery:  If specific provision is insufficient to deal with a debt, credit institutions, foreign banks’ branches must promptly put on sale the security assets according to the agreement with customers and in accordance with provisions of laws for debt recovery;

- In case where both the specific provision and the amounts from disposal of asset are not sufficient to cover the credit risks of the debt, the general provisions can be used for the full settlement;

- Credit institutions, foreign banks’ branches implement off-balance sheet accounting for debt balance which is dealt with risks.

Dossier of risk settlement includes:

- Dossier of credit extension and dossier of debt recovery for debts which are dealt with risks;

- Dossier of security assets and other relevant papers;

- Decision or approval of the Risk Settlement Committee regarding result of classification of debts, setting up of provision against credit risks;

- Decision or approval of the Risk Settlement Committee regarding risk settlement;

- For customer being organization, or enterprise which is dissolved, goes bankrupt, apart from dossier stated in point a, point b, point c and point d this clause, it is required for an authenticated copy of decision on bankruptcy declaration of court or decision on dissolution of enterprise as prescribed by law; 

- For a customer being an individual who dies or is missing, apart from dossier stated in point a, point b, point c and point d this clause, it is required for an authenticated copy of the Death Certificate, Certificate of or decision on missing declaration as prescribed by law.

View full text at Circular No. 02/2013/TT-NHNN of the State Bank of Vietnam, effective from June 01, 2014.

Thu Ba

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