DECISION

ON THE AMENDMENT, SUPPLEMENT OF SEVERAL ARTICLES OF THE REGULATION ON PRUDENTIAL RATIOS IN THE OPERATION OF CREDIT INSTITUTIONS, ISSUED IN CONJUNCTION WITH THE DECISION NO. 457/2005/QD-NHNN DATED 19 APRIL 2005 OF THE GOVERNOR OF THE STATE BANK

THE GOVERNOR OF THE STATE BANK

- Pursuant to the Law on the State Bank of Vietnam issued in 1997 and the Law on the amendment, supplement of several Articles of the Law on the State Bank of Vietnam issued in 2003;
- Pursuant to the Law on the Credit Institutions issued in 1997 and the Law on the amendment, supplement of several Articles of the Law on the Credit Institutions issued in 2004;
- Pursuant to the Decree No. 96/2008/ND-CP dated 26 August 2008 of the Government providing for functions, duties, authorities and organizational structure of the State Bank of Vietnam;
- Upon the proposal of the Director of the Banks & Non-Banking Credit Institutions Department,

DECIDES:

Article 1. To amend, supplement several articles of the Regulation on prudential ratios in the operation of credit institutions, issued in conjunction with the Decision No. 457/2005/QD-NHNN dated 19 April 2005 of the Governor of the State Bank which was amended, supplemented in accordance with the Decision No. 03/2007/QD-NHNN dated 19 January 2007 of the Governor of the State Bank on the amendment, supplement of several articles of the Regulation on prudential ratios in operation of credit institutions, issued in conjunction with the Decision No. 457/2005/QD-NHNN dated 19 April 2005 of the Governor of the State Bank as follows:

1. Paragraph 20 of Article 2 is amended as follows:

20. Capital contribution, shares purchase mean a credit institution uses its charter capital and reserve fund for making contribution to charter capital, buying shares of other enterprises, credit institutions, appropriating charter capital to its subsidiaries; making contribution to investment fund, making capital contribution for implementation of investment projects; including the entrustment of capital to legal entities, other organizations, enterprises to perform the investment under above mentioned forms."

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"22. The subsidiary company of the credit institution is the company which has 100% of charter capital appropriated by the credit institution, has legal status, performs independent accounting by its own capital for engaging in finance, banking, insurance sectors and management, exploitation, disposal of assets in the process of disposal of loan security assets and assets assigned by the State Bank to the credit institution for disposal and debt recovery.

3. Paragraph 1.4 of Article 8 is amended, supplemented as follows:

1.4. A credit institution shall not be entitled to extend unsecured credit, extend credit with preferential conditions to enterprises it is holding the control right, and must comply with following restrictions:

a. Total limit of lending and guarantee by a credit institution to an enterprise, which the credit institution is holding the control right, shall not be permitted to exceed 10% of the credit institutions own capital.

b. Total limit of lending and guarantee by a credit institution to enterprises, which the credit institution is holding the control right, shall not be permitted to exceed 20% of the credit institutions own capital.

The credit institution shall be entitled to extend unsecured credit to its subsidiary, which is finance leasing company, with the maximum level not in excess of 5% of the credit institution's own capital, but the restrictions provided for in point a and point b of this Paragraph must be complied with.

4. Article 16 is amended, supplemented as follows:

Credit institutions shall be only entitled to use their charter capital and reserve fund to contribute capital, purchase shares of other enterprises, investment funds, investment projects, credit institutions, grant charter capital to their subsidiary companies in accordance with provisions in this Regulation and other related provisions of applicable laws.

5. Article 17 is amended, supplemented as follows:

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2. The total level of capital contribution, share purchase by a credit institution in all enterprises, investment funds, investment projects and other credit institutions, the grant of charter capital to the credit institution's subsidiaries shall not be permitted to exceed 40% of the charter capital and reserve fund of the credit institution.

3. Any credit institution which performs the capital contribution, share purchase in excess of the ratio stipulated in Paragraph 1 and Paragraph 2 of this Article must be approved in advance in writing by the State Bank and fully satisfy following conditions:

a. The credit institution fully complies with other prudential ratios in banking activity, has the bad debt ratio/ ratio of non-performing loan (NPL) from 3% downward and its business activity gained profits continuously in three (03) previous consecutive years.

b. The capital contribution, share purchase made by the credit institution to other credit institutions is for the purpose of giving financial support to the credit institutions having difficulties in finance, being in danger of insolvency that may affect the security of credit institution system.

6. Article 18 is amended, supplemented as follows:

Credit institutions, which have carried out capital contribution, share purchase in excess of the ratios provided for in Paragraph 1 and Paragraph 2 of Article 17 of this Regulation, shall not be permitted to make further capital contribution to, share purchase of other enterprise, investment fund, investment project, credit institution, appropriate charter capital to its subsidiary company until ratios provided for in Paragraph 1 and Paragraph 2 in Article 17 of this Regulation are complied with.

Article 2. This Decision shall be effective after 15 days since its publication in the Official Gazette. Provisions of the Decision No. 03/2007/QD-NHNN dated 19 January 2007 of the Governor of the State Bank on the amendment, supplement of several articles of the Regulation on prudential ratios in the operation of credit institutions, issued in conjunction with the Decision No. 457/2005/QD-NHNN dated 19 April 2005 of the Governor of the State Bank which are contrary to those of this Decision shall cease their effectiveness.

Article 3. The Director of Administrative Department, Director of the Banks & Non-Banking Credit Institutions Department, Head of units of the State Bank, General Managers of the State Bank branches in provinces and cities under the central Governments management. Chairman of the Board of Directors and General Directors (Directors) of credit institutions shall be responsible for the implementation of this Decision.

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FOR THE GOVERNOR OF THE STATE BANK OF VIETNAM
DEPUTY GOVERNOR




Tran Minh Tuan