Specific Provisioning Rates
The draft Decree stipulates that the specific provisioning rates for loans classified from Group 1 to Group 5 debts of credit institutions (excluding microfinance institutions), and foreign bank branches are as follows:
Group 1 (Standard Loans): 0%; Group 2 (Special Mention Loans): 5%; Group 3 (Substandard Loans): 20%; Group 4 (Doubtful Loans): 50%; Group 5 (Loss Loans): 100%.
The specific provisioning rates for loans classified from Group 1 to Group 5 debts of microfinance institutions are as follows:
Group 1: 0%; Group 2: 2%; Group 3: 25%; Group 4: 50%; Group 5: 100%.
General Provisioning Rates
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 as 0.75% of the total outstanding balance of loans classified from Group 1 to Group 4, excluding the following:
Deposits at credit institutions, foreign bank branches in accordance with the provisions of law and deposits at credit institutions abroad.
Loans, purchases of time deposits, and negotiable instruments between credit institutions, foreign bank branches in Vietnam.
Purchases of certificates of deposit, bonds issued by other credit institutions, foreign bank branches in the country.
Repurchases of Government bonds on the securities market in accordance with the provisions of law on the issuance, registration, depository, listing, and trading of Government debt instruments on the securities market.
For microfinance institutions, the general provision amount that must be set aside is determined as 0.5% of the total outstanding balance of loans from Group 1 to Group 4, excluding deposits at credit institutions, foreign bank branches in accordance with the provisions of law.
Time of Risk Provisioning
Option 1:
Within the first 05 working days of the month, except for the case specified in clause (*), credit institutions, and foreign bank branches shall base on the results of self-classification of debts in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches to carry out risk provisioning for the time as of the last day of the previous month.
Within the first 10 working days of the first month of the quarter, credit institutions (excluding credit institutions that are cooperatives, microfinance institutions), foreign bank branches shall base on the results of debt classification adjusted according to the debt group of the list of customers provided by the National Credit Information Center of Vietnam in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches to carry out risk provisioning for the time as of the last day of the previous month (*).
Option 2 :
Within the first 05 working days of the month, credit institutions (excluding credit institutions that are cooperatives, microfinance institutions), foreign bank branches shall carry out provisioning for the time as of the last day of the previous month based on the debt group with a higher risk level between:
The debt group according to the results of self-classification of debts for the time as of the last day of the previous month in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches; and
The debt group adjusted according to the debt group of the list of customers provided by the National Credit Information Center of Vietnam (CIC) in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches at the most recent time.
Within the first 10 working days of the first month of the quarter, credit institutions (excluding credit institutions that are cooperatives, microfinance institutions), foreign bank branches shall base on the results of debt classification adjusted according to the debt group of the list of customers provided by CIC in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches to carry out risk provisioning for the time as of the last day of the previous month.
Within the first 05 working days of the month, credit institutions that are cooperatives, microfinance institutions shall base on the results of self-classification of debts in accordance with the provisions of the State Bank on the classification of assets in the operations of credit institutions, foreign bank branches to carry out risk provisioning for the time as of the last day of the previous month.
