Vietnam: Non-bank credit institutions must issue rules and regulations on credit extension and loan management

According to Article 4 of the Circular No. 23/2020/TT-NHNN of the State Bank of Vietnam (SBV), non-bank credit institutions shall issue their own rules and regulations on credit extension and loan management to ensure proper use of loans in accordance with this Circular and relevant documents. The rules and regulations must include but not limited to the followings:

- Criteria for identification of a customer, or a customer and related persons of that customer defined in Clause 2 and 13 of Article 3 of this Circular; credit policies for a customer, or a customer and related persons of that customer; regulations on principles of decentralization and delegation of the powers to decide or approve credit extension; debt restructuring for a customer, or a customer and related persons of that customer;

- Regulations on spreading or diversification of risks arising in credit offering activities; methods for monitoring, managing, approving and deciding the offering of credit to a customer, or a customer and related persons of that customer if the credit extended is worth at least 1% of the equity of the non-bank credit institution. These regulations shall be made public and transparent, especially those on appraisal, credit extension, debt restructuring, prevention of conflict of interest between the appraiser, the credit extension decision maker and the customer who is related to these persons;

- Rules and criteria for assessment and leveling of risks of credit extension for prioritized or restricted customers and sectors, which serve as a basis for formulation and development of annual business plans and strategies;

- Regulations under which consideration prior to approval of credit extension and debt restructuring (including debt deferment and rescheduling) must be transparent, free of conflict of interest, and must not conceal information about credit quality. In this pre-approval process, the maker of the decision on debt restructuring must be different from the maker of the decision to offer such credit, unless the credit extension is approved by the Governing Board or the Board of Directors. In case the consideration prior to approval of credit extension and debt restructuring is carried out according to the council-based mechanism, at least two thirds of the members of the Debt Restructuring Review Council must be different from members of the Credit Review Council;

- Regulations on management of risks incurred from extending credit for investment and trade in shares, corporate bonds; real estate business; implementation of PPP projects;

- Regulations on extending credit that are binding on directors (deputy directors) of branches, affiliated units and holders of equivalent positions of non-bank credit institutions according to the rules specified in Point a, b, c, d and dd Clause 1 Article 4 of the Circular No. 23/2020/TT-NHNN. Equivalent positions shall be determined according to internal rules and regulations of non-bank credit institutions.

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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