Rules for environmental risk management in extending credit in Vietnam

Rules for environmental risk management in extending credit in Vietnam (Internet image) 

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

1. Rules for environmental risk management in extending credit in Vietnam

Rules for environmental risk management in extending credit in Vietnam according to Article 4 of Circular 17/2022/TT-NHNN are as follows:

- Credit institutions shall be responsible for the environmental risk management in extending credit which must be conformable with regulations of law on credit extension and credit risk management in banking sector.

- Credit institutions shall carry out environmental risk assessment in extending credit to investment projects in order to determine credit risks, determine conditions and manage credit risks for credit amounts extended to clients.

- The credit institution shall organize assessment of environmental risks for every investment project, or use the report on assessment of environmental risks for that investment project given by a qualified environmental risk assessment service provider or by another credit institution under terms and conditions of the signed service contract.

- If the investment project is found to have environmental risks in extending credit according to the assessment report, the credit institution shall reach an agreement with its client on addition of measures to be taken by the client to minimize the environmental risks in extending credit to the credit extension agreement.

- Clients shall provide all information necessary for the environmental risk management in extending credit at the request of credit institutions and assume responsibility for the accuracy of provided information.

2. Information serving environmental risk management in extending credit in Vietnam

According to Article 5 of Circular 17/2022/TT-NHNN, information serving the environmental risk management in extending credit includes:

- Environmental information about the investment project.

- Decision on approval of appraisal results of preliminary environmental impact assessment report or environmental impact assessment report as prescribed by laws, environmental license and environmental registration certificate (if any).

- Reports on inspection of compliance with regulations on environmental protection by the investment project given by competent environmental protection authorities (if any).

- Information on site surveys, information provided by regulatory authorities, social organizations, residential communities and individuals under direct environmental impact of the client’s investment project in respect of the compliance with regulations on environmental protection (if any).

- The environmental protection reports submitted by the client to competent authorities in accordance with regulations of law on environmental protection.

- The reports sent by the client to the credit institution on its commitments to minimize the environmental risks in extending credit specified in the signed credit extension agreement.

- Environmental protection reports of relevant authorities and organizations as prescribed in the law on environmental protection (if any).

- Other information concerning environmental protection activities.

3. Internal regulations on environmental risk management in extending credit in Vietnam

Internal regulations on environmental risk management in extending credit in Vietnam according to Article 6 of Circular 17/2022/TT-NHNN are as follows:

- Each credit institution shall formulate its own internal regulations on environmental risk management in extending credit which may be separated from or included in its internal regulations on credit extension and internal control, and must be conformable with regulations of law on credit extension and credit risk management.

- Internal regulations on environmental risk management in extending credit of a credit institution shall, inter alia, have the following contents:

+ Identification and classification of applications for credit extension which require environmental risk assessment in extending credit;

+ Information to be collected to serve the environmental risk management in extending credit;

+ Environmental risk assessment in extending credit that is carried out in conformity with the provisions of this Circular;

+ Environmental risk management in extending credit during the consideration, appraisal, approval and management of credit amounts extended;

+ Internal reporting on environmental risk management in extending credit.

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