Credit rating process in Vietnam

 Credit rating process in Vietnam (Internet image)

1. Credit rating process in Vietnam

The credit rating process according to Article 26 Decree 88/2014/ND-CP is as follows:

- The credit rating enterprise must establish a credit rating process, including the following basic steps:

+ Negotiate and sign a credit rating contract with the entity to be rated;

+ Select and assign tasks to analysis experts participating in the credit rating contract as regulated in Article 29 Decree 88/2014/ND-CP;

+ Establish a Credit Rating Council to execute the credit rating contract as regulated in Article 30 Decree 88/2014/ND-CP;

+ Collect information, analyze, assess, and rate the ability to fully and timely meet the debt obligations of the rated entity;

+ Approve the credit rating results;

+ Publish the credit rating report results;

+ Monitor, update, and periodically evaluate the credit rating report results as stipulated in the credit rating contract until the contract ends;

+ Conclude the credit rating contract.

- The credit rating enterprise must adhere to the credit rating procedure as prescribed in Clause 1, Article 26 Decree 88/2014/ND-CP.

- The credit rating enterprise must publish the credit rating process and any updates to these procedures (if any) on the enterprise's electronic information page.

2. Credit rating methodologies in Vietnam

The credit rating methodologies according to Article 32 Decree 88/2014/ND-CP are as follows:

- The credit rating enterprise must develop a credit rating methodology to analyze and evaluate the ability to fully and timely meet the debt obligations of the rated entity. The credit rating methodology must include both quantitative and qualitative assessment methods.

- The credit rating methodology must evaluate the fundamental risk factors and their impact on the ability to fully and timely meet the debt obligations of the rated entity, including the following basic contents:

+ Macro risks;

+ Market and business environment risks;

+ Strategic risks;

+ Governance risks;

+ Personnel risks;

+ Financial risks;

+ Other risks as assessed by the credit rating enterprise.

- The credit rating enterprise must use a systematic and consistent rating methodology for each type of debt obligation and each industry, field of production, and business.

- Periodically, the credit rating enterprise is responsible for reviewing the credit rating methodology and the assumptions used to make adjustments if necessary.

- The credit rating enterprise must publish the basic contents of the credit rating methodology on the enterprise's electronic information page.

3. Regulations on reports on credit rating results in Vietnam

The regulations on the reports on credit rating results in Vietnam according to Article 35 Decree 88/2014/ND-CP are as follows:

- The credit rating enterprise must publish the credit rating report results on the enterprise's electronic information page within twenty-four (24) hours after officially deciding the credit rating level.

- The credit rating report results must include the following basic contents:

+ The credit rating level;

+ General assessment of the rated entity;

+ Basic factors positively and negatively affecting the ability to fully and timely meet the debt obligations of the rated entity;

+ Statistics of all past credit rating results of the rated entity (if any);

+ Names and titles of the analysis experts, members of the Credit Rating Council participating in the credit rating contract;

+ Cases where analysis experts, members of the Credit Rating Council stop participating in the credit rating contract before it ends and the reasons therefor;

+ Ownership ratio of the credit rating enterprise by the rated entity;

+ Ownership ratio of the rated entity by the employees of the credit rating enterprise;

+ Commitment to perform the credit rating independently and objectively;

+ Clearly stating that the credit rating report is for reference only and is not an investment advisory or capital contribution recommendation regarding the debt instruments or financial instruments issued by the rated entity.

- The credit rating report results must be signed by the legal representative or an authorized person of the credit rating enterprise.

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