Vietnam: When shall banks be entitled to use rating results received from independent credit rating companies?

According to Circular No. 41/2016/TT-NHNN of the State Bank of Vietnam, banks and/or foreign bank branches shall be entitled to use rating results received from independent credit rating companies provided that these companies satisfy the following requirements:

- Objectivity: Credit rating must be stringent, systematic and subject to reassessment based on historical data to ensure that rating results must remain accurate for a period of at least one year; must be performed in a continual and timely manner prior to any change in financial status;

- Independence: Credit rating companies shall not have to withstand any political and economic pressure that can affect credit rating results;

- Transparency: Credit rating must be widely notified to all (domestic and overseas) parties concerned that have relevant legitimate interests; 

- Disclosure: Credit rating companies must disclose information about credit rating methods, insolvency definitions and significance of each credit rating and actual insolvency rate of each credit rating and rating conversion;

- Resources: Credit rating companies must have sufficient resources to carry out credit ratings to meet required quality standards, employ the qualitative and quantitative method of credit rating and keep in frequent and continuous contact with rated objects at all levels to increase the quality of credit ratings;

- Credibility: Credit rating must be trusted by organizations (investors, insurance businesses and commercial partners). Credit rating companies must have their internal processes to avoid misuse of confidential information relating to rated objects.

Circular No. 41/2016/TT-NHNN of the State Bank of Vietnam takes effect from January 01, 2020.

- Thanh Lam -

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