Specific Provision Levels
The draft Decree stipulates that the specific provision ratio for classified loans from Group 1 to Group 5 of credit institutions (excluding microfinance institutions and foreign bank branches) are as follows:
Group 1 (Standard Loans): 0%; Group 2 (Loans Requiring Attention): 5%; Group 3 (Substandard Loans): 20%; Group 4 (Doubtful Loans): 50%; Group 5 (Loans Likely to Incur Losses): 100%.
The specific provision ratio for classified loans from Group 1 to Group 5 of microfinance institutions are as follows:
Group 1: 0%; Group 2: 2%; Group 3: 25%; Group 4: 50%; Group 5: 100%.
General Provision Level
The draft Decree clearly states that for credit institutions (excluding microfinance institutions and foreign bank branches), the general provision amount that must be set aside is determined to be 0.75% of the total outstanding balance of classified loans from Group 1 to Group 4, with the following exceptions:
Deposits at credit institutions and foreign bank branches in accordance with legal regulations and deposits at credit institutions abroad.
Loans, purchased time deposits and other valuable papers between credit institutions and foreign bank branches in Vietnam.
Purchased certificates of deposit and bonds issued by other credit institutions and foreign bank branches in Vietnam.
Repurchase of government bonds on the stock market in accordance with legal regulations on issuance, registration, custody, listing and trading of government debt instruments on the stock market.
For microfinance institutions, the general provision amount that must be set aside is determined to be 0.5% of the total outstanding balance of classified loans from Group 1 to Group 4, excluding deposits at credit institutions and foreign bank branches in accordance with legal regulations.
Timing of Risk Provisioning
Option 1:
Within the first 05 business days of the month, except as provided in paragraph (*), credit institutions, foreign bank branches shall base on the results of self-classification of loans in accordance with the State Bank’s regulations on classification of assets in the operations of credit institutions, foreign bank branches to make risk provisions for the end of the last day of the previous month.
Within the first 10 business days of the first month of the quarter, credit institutions (excluding cooperative credit institutions, microfinance institutions), foreign bank branches, based on the results of loan classification adjusted according to the loan group of the list of customers provided by Vietnam National Credit Information Center in accordance with the State Bank’s regulations on classification of assets in the operations of credit institutions, foreign bank branches to make risk provisions for the end of the last day of the previous month.
Option 2:
Within the first 5 business days of the month, credit institutions (excluding cooperative credit institutions, microfinance institutions), foreign bank branches shall make provisions for the end of the last day of the previous month based on the loan group with a higher risk level between:
The loan group according to the results of self-classification of loans for the end of the last day of the previous month in accordance with the State Bank’s regulations on classification of assets in the operations of credit institutions, foreign bank branches;
The loan group has been adjusted according to the loan group of the list of customers provided by Vietnam National Credit Information Center (CIC) in accordance with the State Bank’s regulations on classification of assets in the operation of credit institutions, foreign bank branches at the most recent time.
Within the first 10 business days of the first month of the quarter, credit institutions (excluding cooperative credit institutions, microfinance institutions), foreign bank branches shall base on the results of loan classification adjusted according to the loan group of the list of customers provided by CIC in accordance with the State Bank’s regulations on classification of assets in the operations of credit institutions, foreign bank branches to make risk provisions for the end of the last day of the previous month.
Within the first 5 business days of the month, cooperative credit institutions, microfinance institutions shall base on the results of self-classification of loans in accordance with the State Bank’s regulations on classification of assets in the operations of credit institutions, foreign bank branches to make risk provisions for the end of the last day of the previous month.
