DECISION

PRESCRIBING ELIGIBILITY AND DOCUMENTATION REQUIREMENTS AND PROCEDURES FOR APPLICATION FOR APPROVAL OF CREDIT OVEREXTENSIONS GRANTED BY CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES

Pursuant to the Law on Government Organization dated June 19, 2015;

Pursuant to the Law on State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010; the Law on Amending and Supplementing certain Articles of the Law on Credit Institutions dated November 20, 2017;

Upon the request of the Governor of the State Bank of Vietnam;

The Prime Minister hereby issues the Decision dealing with eligibility and documentation requirements and procedures for application for approval of credit overextensions granted by credit institutions and foreign bank branches.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Decision prescribes eligibility and documentation requirements and procedures for application for approval of credit overextensions granted by credit institutions and foreign bank branches to a single customer or a customer and his/her related person in accordance with Clause 1, 2 and 7 Article 128 of the 2010 amended and supplemented Law on Credit Institutions.

Article 2. Subjects of application

Credit institutions and foreign bank branches (hereinafter referred to as credit institution), including:

1. Banks: State-owned commercial banks, joint-stock commercial banks, cooperative banks, joint-venture banks and wholly foreign-owned banks.

2. Non-bank credit institutions: Finance companies, finance leasing companies and other non-bank credit institutions.

3. Microfinance institutions.

4. People's credit funds.

5. Foreign bank branches.

6. Borrowing customers, organizations and individuals concerned.

Chapter II

SPECIFIC PROVISIONS

Article 3. Requirements for eligibility to receive credit overextensions

1. Borrowing customs, business projects or plans shall be offered credit overextensions provided they meet the following requirements:

a) Borrowing customers strictly meets lawful credit extension requirements, have not incurred bad debts for 03 years preceding the year of submission of their applications for credit overextensions, have the ratio in which the debt owed is not three times more than the owner’s equity according to their quarterly or annual financial statements prepared at the time preceding the time of application for credit overextensions;

b) Borrowing customers wish to borrow fund to implement business projects or plans with the aim of performing socio-economic development tasks under one of the following circumstances:

- They implement business projects or plans of socio-economic significance and urgent ones in order to perform socio-economic development duties and meet the basic human needs in electricity, coal, oil and gas, petroleum, traffic, public transportation and other industries or sectors under the direction of the Government or the Prime Minister over periods of time.

- They implement investment programs and projects for which investment policies are decided by the National Assembly and the Prime Minister.

- They invest in sectors which are prioritized and encouraged under Resolutions of the National Assembly and the Government on socio-economic development over periods of time.

c) Business projects or plans in need of credit overextensions have already undergone the credit institution’s assessment which ensures that they are feasible and borrowing customers remain solvent, and suggests that the credit extension decision should be made; meet applicable regulations on investment and construction, accord with the planning and business plans, and have been approved or received the Investment Registration Certificate granted by competent authorities.

2. Credit institutions must meet the following requirements:

a) Syndicated credit:

- They have already proposed, and followed legally binding procedures for, extension of syndicated credit that funds business projects and plans in need of credit overextensions but such syndicated credit has not yet met borrowing customer's requirements; or

- They have already sent syndication invitation letters to at least 5 other credit institutions and post them on their official websites and mass media within the minimum period of 30 business days but none of credit institutions agree to participate in that syndication.

b) At the time of application of credit overextension, credit institutions satisfy prudential ratio and limit requirements prescribed by the Law on Credit Institutions and other relevant laws;

c) Credit institutions fulfill requirements concerning responsibilities and obligations aforestated in application documents for credit overextensions and documents stating approval of credit overextension;

d) Credit institutions meet the limits on credit extension provided in Clause 8 Article 128 of the 2010 Law on Credit Institutions even when the amount of credit overextension in demand is included.

Article 4. Documentation requirements for credit overextension

1. Required documents submitted by credit institutions to the State Bank of Vietnam

Application documents for credit overextension to a single customer, a customer and his/her related person which are submitted to the State Bank of Vietnam must be replicas derived from original registers or duplicates attested by credit institutions, including:

a) Credit institution’s written request form submitted to the State Bank of Vietnam for report to the Prime Minister to obtain his permission for credit overextension to a single customer, a customer and his/her related person, using the form given in the Appendix to this Decision;

b) Documents and materials evidencing that credit institutions have already met requirements stated in Point a Clause 2 Article 3 hereof;

c) Written record on credit institution's assessment of borrowing customers, their business projects and plans that need credit overextensions;

d) Written document on approval of credit extension granted by competent authorities which have authority over the requesting credit institutions;

dd) Customer’s application form for credit extension granted by credit institutions;

e) Legal documents related to customers applying for credit extension, including: business registration certificate, audited financial statements for last 3 years preceding the application year, and other relevant materials;

g) Legal documents related to business projects or plans in need of credit extension, including:

- Investment registration certificate or written document stating approval or acceptance of business projects or plans that is issued by competent authorities.

- Other relevant documents.

h) Status report on credit relationship and demands for credit overextension of a single customer or a customer and his/her related person, using the Form No.01 given in the Appendix hereto attached.

2. Documents of the State Bank of Vietnam submitted to the Prime Minister shall include the Report Form of the State Bank of Vietnam, enclosing the following materials:

a) Credit institution’s written request form submitted to the State Bank of Vietnam for report to the Prime Minister to obtain his permission for credit overextension to a single customer, a customer and his/her related person;

b) Written documents recording contributed opinions from Ministries, sectoral administrations and local authorities involved;

c) Written explanations of credit institutions and customers;

d) Other relevant documents.

Article 5. Determination of credit overextension

Credit overextension to a single customer, a customer and his/her related person shall be calculated according to the following formula:

Where:

- MCTDTĐ denotes credit overextension;

- DN denotes total outstanding debt determined as at the reporting time;

- CC denotes the remaining balance of credit determined based on the effective credit agreement;

- ĐN denotes the requested amount of new credit extension that is approved.

In this formula, DN, CC and ĐN shall be determined as follows:

1. Total outstanding debt determined as at the reporting time (DN) which is included in the credit overextension shall be total outstanding credit debt owed by a single customer, a customer and his/her related person at a credit institution at the reporting time, including:

a) Total outstanding debt of credit extension granted within the credit limit under credit institution's jurisdiction;

b) Total outstanding debt of credit overextension granted under the Prime Minister's approval of credit overextension which remains valid as of the reporting time.

2. The remaining balance of credit determined based on the effective credit agreement (CC) which is included in the credit overextension shall be the remaining amount of credit that a credit institution is allowed to continue to extend, including:

a) The remaining balance of credit extension specified in signed credit agreements within the credit limit under credit institution's jurisdiction;

b) The remaining balance of extension of credit lines which are approved by the Prime Minister for credit overextension that remains valid till the reporting time.

3. Request for new credit extension that is approved (ĐN):

The requested amount included in the credit limit shall be total amount of new credit lines which are approved by the Prime Minister for credit overextension.

Article 6. Procedures for application for credit overextension

1. Credit institution sends the State Bank of Vietnam 01 set of documents prescribed in Article 4 hereof, whether directly or by post.

2. Within duration of 15 business days of receipt of all required documents from credit institutions:

- If these documents do not meet requirements specified in Article 3 hereof, the State Bank of Vietnam shall send the requesting credit institution a written notification clarifying which requirements are not satisfied.

- If these documents are valid, the State Bank of Vietnam shall request ministries, sectoral administrations and local authorities in writing for their advice on economic, engineering and legal aspects of business projects and plans, and customers applying for credit overextension.

3. Within duration of 10 business days of receipt of the State Bank’s written request for advice, ministries, sectoral administrations and local authorities shall give their written opinions on issues under their respective jurisdiction to the State Bank of Vietnam. Where necessary, the State Bank of Vietnam shall request credit institutions and customers to explain issues on which ministries, sectoral administrations and local authorities have given their opinions within duration of 07 business days of the State Bank's receipt of all opinions contributed by these entities.

4. Within duration of 10 business days of receipt of opinions from ministries, sectoral administrations and local authorities or explanations from credit institutions and customers, the State Bank of Vietnam shall check rationality and validity of application documents for credit overextension that credit institutions have provided and submit them to the Prime Minister for his review and grant of decision on credit institution's application for credit overextension.

5. Within duration of 05 business days of receipt of the written commanding opinion of the Prime Minister, the State Bank of Vietnam shall inform that opinion to credit institutions for their information and compliance.

Chapter III

IMPLEMENTATION AND IMPLEMENTARY PROVISIONS

Article 7. Implementation

1. The State Bank of Vietnam

a) Take responsibility for assessing documents provided by credit institutions and submitting them to the Prime Minister to seek his decision on application for credit overextension, the amount of credit overextension and ensuring conformance to requirements, processes and procedures prescribed herein;

b) Inspect and oversee compliance of credit institutions with regulations on credit overextension;

c) Submit an annual consolidated report to the Prime Minister on review of credit overextensions approved by the Prime Minister which remains valid; at the same time, forward that report to ministries, sectoral administrations and local authorities involved.

2. Ministries, sectoral administrations and local authorities

a) Cooperate with the State Bank of Vietnam in giving opinions on applications for credit overextension of credit institutions to a single customer, a customer and his/her related person as provided in Clause 3 Article 6 hereof;

b) Assume responsibility for their opinions on business projects, plans and customers applying for credit overextension; other responsibilities under their state management authority over business projects, plans and customers receiving approval of credit overextensions in accordance with laws.

3. Credit institutions

a) Comply with contents of the written notification of the State Bank of Vietnam and only be allowed to extend the approved maximum amount of credit extension to specific business projects and plans for which they have made requests for credit overextension that have been accepted;

b) Be held legally liable for accuracy and sufficiency of information and documents sent to the State Bank of Vietnam that then prepares a consolidated report for submission to the Prime Minister to seek his decision on credit institution's request for credit overextension;

c) Assume responsibility to assess and extend credit, carry out post-lending inspection and control, recover debts and deal with risks (if any) as per regulations on credit overextensions;

d) Strictly oversee and ensure customer’s right use of borrowed funds and, on the 12^th day of each month, prepare a review report on credit overextensions approved by the Prime Minister by completing the Form No. 02 and No. 03 given in the Appendices hereof.

Article 8. Implementary provisions

1. This Decision shall commence on May 1, 2018.

2. Credit overextensions approved by the Prime Minister before the date of entry into force of this Decision shall continue to be subject to approval documents issued before that.

3. Ministers, Heads of Ministry-level agencies, Heads of Governmental bodies, Chairs of Members Boards, Chairs of Management Boards and General Directors (Directors) of credit institutions, organizations and individuals involved shall be responsible for implementing this Decision./.

APPENDIX

(Annexed to the Prime Minister’s Decision No. 13/2018/QD-TTg dated March 6, 2018)

Dear State Bank of Vietnam,

Pursuant to the Prime Minister’s Decision No……/2018/QD-TTg dated (dd/mm/2018)….., dealing with application and documentation requirements and procedures for approval of credit overextensions granted by credit institutions and foreign bank branches; 

(Name of credit institution, foreign bank branch) would like to inform and petition the State Bank’s Governor to kindly consider appealing to the Prime Minister to seek his approval of credit overextensions granted in the following situations:

I. GENERAL INFORMATION ABOUT THE ENTERPRISE APPLYING FOR CREDIT OVEREXTENSION

1. Enterprise's name:……………………………………………………………………………

2. Main office's address:…………………………………………………………………………

3. Telephone:  ………………………………………Fax:.....................................................

4. Business scope:..…………………………………………………………………………

5. Charter capital, information about its ownership relations, administration and major shareholders.

6. Analysis of business performance, financial status, liabilities/equity, credit rating and debt classification.

II. INFORMATION ABOUT THE REQUESTED CREDIT OVEREXTENSION 

1. Clearly state its value, disbursement time, borrowing time, currency type and purposes of the credit to be overextended under the Prime Minister’s approval decision; written authorization for credit extension granted the requesting credit institution from a competent authority.

2. Basic information about the business project and plan funded by the requested credit overextension[1]:   Investment objectives, scale and location, regulatory requirements concerning application documents (e.g. investment certificate, approval decision and relevance to the planning scheme, etc.), total investment outlay, funding sources, sponsoring credit institutions and other related information.

- If a credit institution applies for approval of the working capital loan limit: Giving a summary of the business plan to be implemented in the planning period (including information about revenues, expenses and profits), determining the capital turnover, average working capital demands, capacity to meet such demands by using equity, total overextended credit demands of credit institutions (Detailing capital demands of each credit institution) and other capital.  

- If a credit institution applies for approval of grant of mid-term and long-term credit financing small projects in an enterprise's business plan in a planning year:  Clarifying all of projects that the enterprise intends to implement according to the approved business plan; determining total demands for mid-term and long-term funds that the enterprise borrows from credit institutions in order to implement each project and detailing the demand for fund borrowed from each credit institution and the borrowed fund for each project.  

3. Relevance to the planning scheme, significance and importance of business projects and plans for the socio-economic development; significance of a credit extension to a business and customer expansion plan and strategy of the requesting credit institution.

4. Loan syndication arrangements for a credit extension.

5. Assessment opinions of the requesting credit institution about the business capabilities of a borrowing customer, feasibility and efficiency of a business project and proposal, loan security, potential risks, plans for risk prevention and treatment, and assessment of customer's solvency. 

III. CURRENT CONDITIONS OF CREDIT RELATIONSHIPS

- Clearly describe the current state of credit relationships in terms of borrowing commitments, disbursement of borrowed funds, recovery of debts owed and history of  borrowing of funds for debt repayment; the current conditions of credit relationships with other credit institutions.

- Fill out and attach the form of the status report on credit relationships and demands for credit overextension to a single borrowing customer or a borrowing customer and their related persons by using the Form No.01 given in the Appendix to this Decision.

IV. INFORMATION ABOUT THE REQUESTING CREDIT INSTITUTION

- Latest updates on equity conditions.

- Latest updates on implementation of applicable regulations on prudential ratios; assessment of impacts of the credit overextension on these ratios.

- Latest updates on implementation of credit overextensions to borrowing customers which have been approved by the Prime Minister (if any).

- Latest updates on compliance with laws on foreign exchanges with respect to credit extensions related to the demands for foreign currency capital.

- Latest updates on implementation of regulations prescribing that total credit overextensions shall not be four times higher than total equity.

V. RECOMMENDATIONS AND COMMITMENTS OF THE REQUESTING CREDIT INSTITUTION

1. Give a clear recommendation on the form of credit overextension that the credit institution proposes to seek the Prime Minister's approval and the corresponding maximum limit on credit overextension under one of three circumstances:

a) If the requesting credit institution is a commercial bank, foreign bank branch, people's credit fund or microfinance institution:

- A credit overextension which is 15% more than a borrowing customer’s equity may be granted to the borrowing customer applying for such credit overextension which equals …(1)…for…(2)…    

- A credit overextension which is 25% more than a borrowing customer’s equity may be granted to the borrowing customer applying for such credit overextension which equals …(1)…for…(2)…   

- A credit overextension which is 15% and 25% more than a borrowing customer’s equity and a borrowing customer and their related persons, respectively, may be granted to the borrowing customer, and both the borrowing customer and their related persons, applying for the first and latter credit overextension which equals …(1)… and …(1)…, respectively, used for …(2)… 

b) If the requesting credit institution is a non-bank credit institution:

- A credit overextension which is 25% more than a borrowing customer’s equity may be granted to the borrowing customer applying for such credit overextension which equals …(1)…used for…(2)…   

- A credit overextension which is 50% more than the equity of a borrowing customer and their related persons may be granted to the borrowing customer and their related persons applying for such credit overextension which equals …(1)…used for…(2)…   

- A credit overextension which is 15% and 25% more than a borrowing customer’s equity and a borrowing customer and their related persons, respectively, may be granted to the borrowing customer, and both the borrowing customer and their related persons, applying for the first and latter credit overextension which equals …(1)… and …(1)…, respectively, used for …(2)… 

2. Make a commitment to exercising the responsible autonomy over credit overextensions.

(Name of the requesting credit institution or foreign bank branch) is hereby committed to exercising the responsible autonomy on credit overextension and loan recovery; being held legally liable for authenticity and accuracy of information included in the application form and attached documents, and strictly complying with the Prime Minister’s Decision No. …../2018/QD-TTg dated (dd/mm/2018)…… and other provisions of relevant laws./.

Notes:

 (1) Specify the monetary amount denominated in the base currency or the percentage ratio of the credit overextension to the equity;

(2) Purposes of the credit overextension.

Form No. 01

NAME OF THE CREDIT INSTITUTION AND FOREIGN BANK BRANCH

REVIEW REPORT ON CREDIT RELATIONSHIPS AND DEMANDS FOR CREDIT EXTENSIONS TO CUSTOMERS AND THEIR RELATED PERSONS

Date (dd/mm/yyyy)…….

Equity determined on (dd/mm/yyyy)……

Unit: Billion dong, USD, EURO, JPY, etc.

Exchange rate quoted as at...: USD/VND...

Form No. 02

NAME OF THE CREDIT INSTITUTION AND FOREIGN BANK BRANCH

REVIEW REPORT ON CURRENT STATE OF CREDIT OVEREXTENSIONS

(mm/yyyy)……………

Unit: Billion dong, base currency

Notes:

1. Foreign exchange rate:………quoted on date (dd/mm/yyyy)……

2. Equity of the credit institution determined as at date (dd/mm/yyyy)……

1. Subjects of application: Credit institutions with approved credit overextensions that remain valid.

2. Reporting data requirements: Main offices of credit institutions must collect and combine data about the entire system, and then must send them to the State Bank of Vietnam.

3. Reporting deadline: No later than the 12^th day of the month immediately following the reporting month.

4. Instructions for preparation of reports:

- Credit institutions make review reports on current conditions of overextension of credit extended under this Decision and overextended credit approved prior to the effective date of this Decision. 

- As for each loan and customer granted approval of credit overextension: At Column (5), clearly specifying the approved overextension limit of each loan and the maximum limit of credit of customers that has already been approved by the State Bank; at Column (16), clearly stating the number of an official document and issue date of an approval document on credit overextension.  

- Column (9) = Column (6) + Column (7) + Column (8).

- Column (12): Specifying the debt class of each customer and entering one of the following values: 1, 2, 3, 4, 5.

- Column (14): Clearly providing information about loan security form, including pledge, hypothecation, guarantee, margin deposit and trust.

- Column (17) Notes: Clarifying purposes of borrowed funds and maturity period of credit overextensions (if any), etc.

- Recipients: The reporting credit institution shall make this report into 2 copies, including one copy sent to the Department of Economic Sector Credit and the other sent to the Banking Inspection and Supervision Department – the State Bank of Vietnam. Address: 25 Ly Thuong Kiet street – Hoan Kiem district – Hanoi.

Form No. 03

NAME OF THE CREDIT INSTITUTION AND FOREIGN BANK BRANCH

REVIEW REPORT ON CREDIT EXTENSIONS TO CUSTOMERS AND THEIR RELATED PERSONS

(mm/yyyy)……………

Unit: Billion dong, base currency

Notes:

1. Foreign exchange rate:………quoted on date (dd/mm/yyyy)……

2. Equity of the credit institution determined as at date (dd/mm/yyyy)……

1. Subjects of application: Credit institutions with approved credit overextensions that remain valid.

2. Reporting data requirements: Main offices of credit institutions must collect and combine data about the entire system, and then must send them to the State Bank of Vietnam.

3. Reporting deadline: No later than the 12th day of the month immediately following the reporting month.

4. Instructions for preparation of reports:

- Credit institutions make review reports on current conditions of overextension of credit extended under this Decision and overextended credit approved prior to the effective date of this Decision. 

- As for each customer and/or a customer and their related persons who are granted approval of a credit overextension:  At Column (05), clearly specifying the approved overextension limit of each customer and/or each customer and their related persons; at Column (16), clearly stating the number of an official document and issue date of the approval document on credit overextension.  

- Column (9) = Column (6) + Column (7) + Column (8).

- Column (12): Specifying the debt class of each customer and entering one of the following values: 1, 2, 3, 4, 5.

- Column (14) Collateral: Clearly providing information about the loan security, including such forms as pledge, hypothecation, guarantee, margin deposit and trust.

- Column (17): Credit institutions must specify purposes of borrowed funds and maturity period of credit overextensions (if any), etc.

- Recipients: The reporting credit institution shall make this report into 2 copies, including one copy sent to the Department of Economic Sector Credit and the other sent to the Banking Inspection and Supervision Department – the State Bank of Vietnam. Address: 25 Ly Thuong Kiet street – Hoan Kiem district – Hanoi.

[1]  Including investment programs and projects of enterprises that are funded by bonds.