Vietnam: How is the operation mechanism of credit rating councils regulated?

According tothe Decree No. 88/2014/NĐ-CP of Vietnam’s Government, for each credit rating contract, a credit rating agency shall form a credit rating council, select and decide on the number of council numbers based on the scope and characteristics of such contract. The minimum number of council members is three (3). The selection of members of a credit rating council for each credit rating contract must adhere to the following principles:

- At least one (1) member of the credit rating council is an employee of the credit rating agency;

- At least one (1) member of the credit rating council possesses one of the following certificates: Auditor certificate granted by the Ministry of Finance, an internationally recognized certificate for securities investment analysis, accounting or audit;

- These members fully meet the criteria and conditions as prescribed by law;

- These members do not participate in the management of the credit rating agency;

- These members are not analysts for the same credit rating contract;

- These members do not fall into the cases of conflict of interest specified in Clause 2, Article 38 of this Decree when participating in the credit rating contract. In the course of performance of the contract, if there is a conflict of interest of credit rating council members, the credit rating agency shall terminate the participation of such members in the credit rating contract. The agency may replace these members or add new members when necessary.

Thus, a credit rating agency shall issue the operation regulation of a credit rating council, covering the following principal contents:

- Voting mechanism of the credit rating council which requires at least over 60% of council members voting to approve each decision of the council;

- Mechanism for electing the chairperson of the credit rating council to manage its operation;

- Mechanism for settling conflicts of interest (if any) of analysts and council members;

- Mechanism for adding or replacing council members.

When voting to approve credit rating grades, updating credit rating grades and reporting on credit rating results, a credit rating council must ensure independence, impartiality, transparency and no influence from the general director, director, Board of Directors or Members’ Council of the credit rating agency. Credit rating councils disband when credit rating contracts expire.

View more details at the Decree No. 88/2014/NĐ-CP of Vietnam’s Government, effective from November 15, 2014.

Ty Na

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