MONTHLY LEGAL UPDATE – 04/2019: LEGAL UPDATE RELATING TO FINANCE AND CREDIT

 

1. LEGAL DOCUMENTS ARE EFFECTIVE FROM 01/04/2019

1.1. Circular No. 52/2018/TT-NHNN providing on rating credit institutions and branches of foreign banks

v  Name of legal document: Circular No. 52/2018/TT-NHNN issued on 31/12/2018 by the State Bank of Viet Nam providing on rating credit institutions and branches of foreign banks (hereinafter referred to as the “Circular No. 52/2018/TT-NHNN”)

v  Effective date: 01/04/2019.

Some contents should be noted:

·           Firstly, stipulating on principles and methods of ranking foreign credit institutions and branches of foreign banks.

Specifically, Article 4 of Circular No. 50/2018/TT-NHNN stipulates: “Article 4. Principles and methods of ranking foreign credit institutions and branches of foreign banks

1. The rating should ensure full reflection of the operational status and risks of credit institutions and branches of foreign banks and comply with the provisions of law.

2. Credit institutions and foreign bank branches are divided into peer groups, specifically as follows:

a) Group 1: Commercial banks have a large scale (the total average asset value in a quarter is ranked over 100,000 billion dong);

b) Group 2: Commercial banks are small in scale (the total average asset value in a quarter is equal to or lower than VND 100,000 billion);

c) Group 3: Branches of foreign banks;

d) Group 4: Financial companies;

e) Group 5: Financial leasing companies;

e) Group 6: Cooperative banks.

3. Credit institutions and branches of foreign banks are ranked according to the criteria system. Each ranking criterion includes quantitative indicators and qualitative groups. Group of quantitative indicators measures the level of banking operations on the basis of operating data of foreign credit institutions and branches of foreign banks. Qualitative indicators group to measure the compliance with legal regulations of credit institutions and branches of foreign banks.

4. Weight of the target group, the weight of each indicator in each peer group is determined on the basis of the importance of each group of criteria, each indicator for the level of banking activity and love demand of inspection and supervision.

5. Based on the rating score achieved, credit institutions, foreign bank branches are classified into one of the following categories: Good (A), Fair (B), Medium (C), Weak ( D) or Extremely Weak (E).”

·           Secondly, stipulating on frequency, time for implementation and approval of ratings.

Specifically, Article 21 of Circular No. 52/2018/TT-NHNN stipulates: “Article 21. Frequency, time for implementation and approval of ratings

1. Before June 10 every year, the Banking Inspection and Supervision Agency shall submit to the State Bank Governor for approval the ranking results of the preceding year for credit institutions and branches of foreign banks.

2. Before June 30 every year, the Governor of the State Bank shall approve the ranking results of the preceding year for foreign credit institutions and branches of foreign banks.

3. In case of serving unexpected state management requirements, the State Bank Governor shall decide the time for ranking and approving other ranking results prescribed in Clauses 1 and 2 of this Article.”