Press Release on issuance of Circular No.09/2015/TT-NHNN
The Governor of the State Bank of Vietnam (SBV) issued Circular No. 09/2015/TT-NHNN on July 17 on debt trading of credit institutions and foreign bank branches. This Circular replaces Decision No.59/2006/QD- NHNN dated December 21, 2006 on issuing Regulations on debt trading of credit institutions.
Circular No. 09/2015/TT-NHNN including 4 Chapters, 26 Articles stipulates revised substances in comparison with Decision No. 59/2006/QD- NHNN as follows:
1. Scope of governing (Article 1)
- The Circular governs the debt trading arising from the lending activities (including payments on behalf of financial guarantees) of credit institutions and foreign bank branches; dossiers, proceed and procedures of approving debt trading of credit institutions and foreign bank branches.
- The Circular does not govern debt trading of Vietnam Asset Management Company (VAMC); debt trading arising from borrowing and lending contracts among credit institutions and foreign bank branches.
2. Interpretation (Article 3)
- The Circular stipulates that debts which can be traded are debts recorded on and off balance sheet or written off balance sheet and meet all conditions in accordance with Article 4 of the Circular.
- The Circular deletes regulation on the sale and purchase of debts with recourse
- The Circular stipulates debt purchasers include resident and non-resident institutions and individuals.
For debt purchasers as resident institutions and individuals, the Circular stipulates specific groups, including: (i) Credit institutions and foreign bank branches get SBV’s approval to perform debt trading; (ii) institutions performing debt trading (non- credit institutions and non-foreign bank branches) meet fully conditions of debt trading in line with law; (iii) other institutions and individuals don not operate debt trading performance
3. Conditions of traded debts (Article 4)
The debts which can be traded must meet all requirements of dossiers, vouchers and other related documents, guarantee contract (if any) provided by debt sellers and fully reflect the status of debts in line with law; the debts do not contain any written agreement about debt traded imposibility; debts are not utilized as a mortgage to implement civil obligations at the time of debt trading, excluding the case that the collateral receivers accept by written approval.
4. Principles of debt trading (Article 5)
- The Circular stipulates principles that credit institutions and foreign bank branches are allowed to purchase debts only when getting the SBV’s approval of debt purchasing in their License and having non-performing loan ratio of below 3%, excluding the case of purchasing debts to implement restructuring plan as the SBV’s approval.
For selling debts, the Circular stipulates that credit institutions and foreign bank branches are allowed to sell debt without SBV’s permission.
- The Circular stipulates that credit institutions and foreign bank branches are required to promulgate internal regulations on debt trading (including regulations on authority delegation between assessment and decision making on debt trading; debt trading method; procedures of debt trading; procedures of valuating debts; procedure of putting debts up for auction procedures for debt disposal and risk management of debt trading) before purchasing and selling debts.
- Debt sellers are not allowed to repurchase sold debts.
- The Circular stipulates that credit institutions are not allowed to sell their debts to their sub companies, excluding the case of selling debts to their asset management company in line with approved restructuring plan. Asset management company is a sub- companies of credit institutions is only allowed to purchase debts of other credit institutions and foreign bank branches when their mother credit institutions have NPL ratio of below 3%, excluding the case of purchasing debts in accordance with approved plan on restructuring.
5. Documents, procedures of requesting for approval of debt trading of credit institutions and foreign bank branches (Article 6 and Article 7)
The Circular stipulates documents and procedures of approving debt trading of credit institutions and foreign bank branches in line with Circular No.08/2015/TT-NHNN dated June 30, 2015 on revising several articles of Circular No.40/2011/TT- NHNN on granting license to credit institutions.
6. Transaction currency (Article 8)
- Currency used in debt trading is Vietnam dong. The utilization of foreign currencies in debt trading is only permitted when credit institutions and foreign bank branches sell their debts in foreign currencies to debt purchasers as non-residents.
- For debt collection, the Circular stipulates that the currency in debt collection is the currency of debts or other currencies as agreement among debt purchasers and borrowers in accordance with law on controlling the utilization of foreign currencies in Vietnam.
7. Regulations on forex management in debt trading
The Circular stipulates:
- Responsibilities of debt purchasers and sellers, borrowers and other relevant sides for complying with law on controlling the utilization of foreign currencies in Vietnam when trading debts and collecting purchased debts.
- The utilization of settlement account in VND or foreign currencies is to make payment or debt recovery of debt purchasers.
- Registration of changes of debt sellers, registration of debt collection plan of debt purchasers for trading debts arising from overseas lending and guarantee operations.
8. Board of debt trading (article 11)
The Circular stipulates credit institutions and foreign bank branches are required to establish the Board of debt trading with components, tasks and mandates as stipulated by credit institutions and foreign bank branches in order to create the activeness and be in line with organizational structure and operations of credit institutions and foreign bank branches.
9. Valuating debts (Article 12)
The Circular stipulates that (i) credit institutions self –define the price and starting price of debts on the basis of book value of loans and interest paid by borrowers in the future; classify debt groups and the ability of collecting debts and mortgage asset (if any), (ii) credit institutions and foreign bank branches hire institutions with price appraisal function to define the price and the starting price of debts for serving the decision making of Board of debt trading.
10. Debt trading contract (Article 13)
The Circular stipulates that debt purchasers and sellers are required to make written agreements with sufficient information on debts in order to avoid the arguments of defining the time of transferring the rights and obligations when implementing agreements in the contract.
11. Transferring rights and obligations relating to debts (Article 14)
Debt purchasers sellers can make agreements in adjusting methods of traded debt guarantee in line with law.
12. Debt trading from syndicated credit extension (Article 15)
The Circular stipulates that debt purchasers and sellers make agreements in debt trading plan; debt sellers inform the debt trading to other members via written documents.
In case of selling the proportion of debts of leading member, debt sellers, purchasers and other members shall have to make an agreement for changing substances in syndicated contract.
13. Management of traded debts (Article 20)
Credit institutions and foreign bank branches are required to make final accounting to monitor the buying price of traded debts in order to ensure the distinguishing purchased debts from debts generated from credit extension of credit institutions and foreign bank branches; and calculate the amount of purchasing debts to the total credit outstanding of the borrowers.
Other credit institutions and individuals are not belonged to the above mentioned subjects are responsible for managing debts in compliance with law.
14. Responsibility of SBV relevant entities (Article 24)
The draft Circular stipulate Banking Supervision Agency is the leading agency to receive, valuate and submit to the Governor for approval of debt trading of credit institutions and foreign bank branches.
Circular No.09/2015/TT-NHNN will take effect from September 1, 2015.
Translated by TLH