Amend Circular 01: Apply a 3-year provisioning schedule

Amend Circular 01: Apply a 3-year provisioning schedule

The State Bank of Vietnam has just issued Circular 03/2021 / TT-NHNN dated April 2, 2021 amending and supplementing a number of articles of Circular 01/2020 / TT-NHNN dated 13/3/2020 on regulations on credit institutions, Foreign banks’ branches reschedule debt repayment terms, exempt or reduce interest and fees, keeping the debt group intact in order to support customers affected by Covid-19 pandemic.

Accordingly, regarding the restructuring of the debt repayment term, the credit institution reschedule the debt repayment term for the debt balance when fully meeting the 8 conditions.

Firstly, arising before June 10, 2020 from lending and financial leasing activities.

Second, the obligation to repay principal and / or interest arises in the period from January 23, 2020 to December 31, 2021.

Third, the debt balance of the debt is rescheduled in one of the following cases: the outstanding balance is still due or overdue up to 10 days from the payment due date, the loan repayment term is in accordance with the contract. copper, agreement; balance of the debt incurred before January 23, 2020 and overdue from January 23, 2020 to March 29, 2020; debt balance of the debt arising from January 23, 2020 and overdue before May 17, 2021.

Fourthly, credit institutions assess that customers are not able to repay their principal and / or interest on time according to contracts or agreements due to the decline in revenue and income due to the impact of Covid -19.

Fifth, customers have proposed to reschedule the debt repayment term and credit institutions evaluate customers’ ability to pay off their principal and / or interest in full according to the rescheduled repayment term.

Sixthly, credit institutions do not restructure the repayment period for debts violating the law.

Seventh, the time to restructure the repayment term (including debt extension) is in line with the impact of Covid-19 service on customers and does not exceed 12 months from the date the credit institution performs the reschedule debt repayment.

Finally, the restructuring of repayment term for customers will be implemented until December 31, 2021.

Regarding the exemption and reduction of interests and fees, credit institutions shall decide on the exemption or reduction of interests and fees according to internal regulations for the outstanding balance of debts arising before June 10, 2020 from credit extension activities (except activities purchase and investment of corporate bonds) whose obligation to repay principal and / or interest is due for the period from January 23, 2020 to December 31, 2021 and the customer is incapable of repaying the debt. on due date of principal and / or interest under contracts or agreements due to the decline in revenue or income due to the impact of Covid-19 pandemic.

The exemption or reduction of interests and fees for customers in accordance with this Circular will be implemented until December 31, 2021.

Regarding keeping the debt group and debt classification, credit institutions are allowed to keep the classified debt group in accordance with the State Bank’s regulations on debt classification in credit institutions’ operations at the latest time before January 23, 2020 for outstanding debt balance of debt incurred before January 23, 2020 subject to rescheduling, interest exemption or reduction, including outstanding debt rescheduled, interest exemption or reduction, and To adjust the group of debts according to the State Bank’s regulations for the period from January 23, 2020 to March 29, 2020.

Credit institutions are allowed to keep the group of debts which have been classified according to the regulations of the State Bank of Vietnam on debt classification in their operations with respect to the rescheduled loan balance, exemption from, or reduction of interests of deferred debts. born from January 23, 2020 to before June 10, 2020 according to the provisions of this circular.

For the outstanding balance after rescheduling debt term and keeping intact debt group still within the rescheduling term, the credit institution is not required to apply the principle of adjusting and reclassifying to the group of debt with risky level. higher than the regulations of the State Bank on debt classification in the operations of credit institutions.

For the outstanding balance after rescheduling the debt payment term and keeping the group of overdue debts according to the restructuring term without the credit institution continuing to restructure the repayment term as prescribed in this Circular, the credit institution must perform debt classification according to the State Bank’s regulations on debt classification in credit institutions’ operations.

For the interest receivable of the debt balance which is rescheduled, exempted or reduced, and kept intact the qualified debt group (group 1) as prescribed in this Circular, from the date of such restructuring. Credit institutions do not record income (accruals) but monitor off-balance sheet to urge revenues; Make accounting into income upon receipt in accordance with the law on financial regimes applicable to credit institutions.

From January 1, 2024, credit institutions shall base themselves on the State Bank’s regulations on debt classification in their operations to classify all outstanding loans and off-balance sheet commitments of customers, including the debt balance is rescheduled, the interest is exempted or reduced, and the debt group is kept intact according to the provisions of the Circular.

In addition, Circular No. 03/2021 / TT-NHNN also supplements provisions on risk provisions. Accordingly, credit institutions make specific provisions for customers whose debt balance is rescheduled, interest exemption or reduction as follows.

Pursuant to the State Bank’s regulations on provisioning for risks in the operations of credit institutions, credit institutions shall make specific provisions for all outstanding loans of customers according to results of debt classification. the outstanding balance is kept intact the debt group and the result of debt classification for the remaining outstanding loans of customers in accordance with the State Bank’s regulations on classification of debts in credit institutions’ operations (call this amount B).

Credit institutions shall determine the amount of specific provisions required to make deductions for all outstanding loans of customers according to the results of debt classification in accordance with regulations of the State Bank on debt classification in their operations, not applying regulations on holding. whole group of debt according to circular (call this amount at A).

The credit institution determines the amount of specific provision that must be supplemented according to the following formula: amount of specific provision to be appropriated = A – B.

In case the amount of specific provision to be appropriated is determined as positive, the credit institution shall make additional provisioning as follows: as of December 31, 2021, at least 30% of the amount of the specific provision may be subject to additional deduction; as of December 31, 2022, at least 60% of the specific provision amount must be additionally made; As of December 31, 2023, 100% of the specific provision must be supplemented.

From January 1, 2024, credit institutions shall base themselves on the State Bank’s regulations on provisioning for risks in their operations to set up risk provisions for all outstanding loans and off-balance sheet commitments of customers, including the debt balance, are rescheduled, exempted or reduced of interest and kept intact under the provisions of the Circular.

This Circular takes effect from May 17, 2021.

Source: bizlive.vn – Translated by fintel.vn

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