Internal regulations on management of capital adequacy ratio of people's credit funds in Vietnam

Internal regulations on management of capital adequacy ratio of people's credit funds in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is people's credit fund?

According to Clause 6, Article 4 of the Law on Credit Institutions 2010, people's credit fund means a credit institution established voluntarily by legal entities, individuals and households as a cooperative to conduct some banking operations under Law on Credit Institutions 2010 and the Law on Cooperatives for the main purpose of mutual assistance in production and business development and life.

2. Internal regulations on management of capital adequacy ratio of people's credit funds in Vietnam

Internal regulations on management of capital adequacy ratio of people's credit funds in Vietnam according to Article 4 of Circular 32/2015/TT-NHNN (amended in Circular 21/2019/TT-NHNN) are as follows:

(1) People's credit funds must have internal regulations on capital adequacy ratio management and liquidity management (solvency ratio, maximum ratio of short-term capital used for medium and long-term loans), lending, and loan management as prescribed in Circular 32/2015/TT-NHNN and related documents.

Internal regulations and documents amending and supplementing internal regulations must be issued or approved by the Board of Directors of the people's credit fund.

(2) Internal regulations on the minimum capital adequacy ratio include the following main contents:

- Process and method of monitoring the capital adequacy ratio;

- Early warning methods for risks that reduce the capital adequacy ratio;

- When the capital adequacy ratio is less than the minimum level, the solution plan must include at least: measures to increase the capital adequacy ratio; responsibility, authority, and coordination of departments and individuals in the handling plan's implementation.

(3) Internal regulations on liquidity management include at least the following:

- Regulations on decentralization, authorization, functions, and tasks of individuals and departments involved in monitoring; and measures to ensure the maintenance of the solvency ratio, the maximum ratio of short-term funds used for medium- and long-term loans;

Processes, procedures, liquidity management limits, and a contingency plan to maintain the solvency ratio and the maximum ratio of short-term funds used for medium- and long-term loans as prescribed in Circular 32/2015/TT-NHNN

- Regulations on fund management, daily revenue, expenditures, and capital sources

(4) Internal regulations on management of lending activities and loan management include at least the following contents:

- The criteria used to identify customers and people related to customers must include at least the information specified in Clause 2 and Article 2 of Circular 32/2015/TT-NHNN.

- Loan limits applicable to customers, customers, and related persons; decentralization mechanism and principles; lending authorization for customers, customers, and related persons

- maximum loan limit in total loan balance for each type of customer: members, non-members, and credit-using poor households;

- Loans that exceed 5% of the borrower's credit fund's own capital are subject to a follow-up process.

- Regulations on reporting loans to subjects who are members of the Board of Directors, Supervisory Board, and Directors of people's credit funds in accordance with regulations of the State Bank
on the people's credit fund.

(5) Periodically at least once a year, and when necessary, people's credit funds must review, re-evaluate, amend, and supplement internal regulations to suit the requirements of ensuring safety in the operation of the people's credit funds.

(6) Within 10 (ten) working days from the date of issuance, amendment, and supplementation of internal regulations, the people's credit fund shall send (directly or by post) to the State Bank's branch in the province or city a set of documents including:

- Written report on the promulgation, amendment, and supplement of internal regulations In the case of amending or supplementing internal regulations, clearly state the amended and supplemented contents.

- Internal regulations in the case of new issuance; internal regulations amending and supplementing documents in the case of amendments and supplements

(7) If the contents of internal documents and regulations are inconsistent with the provisions of Circular 32/2015/TT-NHNN and relevant legal regulations, the State Bank branches in provinces and cities request the people's credit funds to amend and supplement accordingly.

Quoc Dat

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