Vietnam: 05 cases for consideration and handling of risk treatment in lending activities of the Development Investment Fund

According to the Decree No. 147/2020/NĐ-CP of the Vietnam Government, the local development investment fund shall classify debts, set up a risk reserve fund and handle risks in lending activities in accordance with the law applicable to commercial banks. Cases for consideration of risk treatment:

(1) The investor suffers financial and property damage due to natural disasters, crop failure, epidemics, fires, political risks, wars, which affect production and business activities, leading to the investor not being able to pay the debt (interest and principal) on time according to the signed loan contract.

(2) The investor goes bankrupt in accordance with current law.

(3) The State changes policies that affect the investor's production and business activities, leading to the investor's failure to repay the debt (interest and principal) on time according to the signed loan contract.

(4) The investor faces risks due to objective causes that directly affect production and business activities, leading to the investor not being able to repay the debt (interest, principal) on time according to the signed loan contract.

(5) The investor has bad debt according to the results of debt classification of the local development investment fund.

Concurrently, the local development investment fund establishes a Council to handle risks. The composition of the Risk Management Council includes 01 member of the Fund Management Board as Chairman, 01 member is the Fund's Director, 01 member is the Head of the risk management department and at least 02 other members decided by the Fund Management Board.

Note: In case the preliminary is used to deal with risks, at least after 05 years from the date of using the preliminary to deal with risks and all risk treatment measures that have been taken but the debt cannot be collected, the People's Committee of the People's Committee of Vietnam will be entitled to pay off the debt that has been dealt with risks from the off-balance sheet approved by the provincial level on the basis of the proposal of the Management Council.

More details at the Decree No. 147/2020/NĐ-CP of the Vietnam Government, effective from February 05, 2021.

Ty Na

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