DIRECTIVE

ON THE IMPLEMENTATION OF DEBTS CLASSIFICATION AND SETTING UP OF RISK PROVISIONS IN ACCORDANCE WITH THE DECISION NO. 493/2005/QD-NHNN

On 22 April 2005, the Governor of the State Bank signed the Decision No. 493/2005/QD-NHNN on the issuance of the Regulation on debts classification, provisioning and use of provisions to deal with credit risks in banking activities of credit institutions according to international rules. With a view to accurately assessing the actual situation, the quality of Vietnam Banks system in general and of each credit institution in particular on the basis of international standards, the Governor of the State Bank instructs:

1. Credit institutions (except for local peoples credit funds) to carry out the general examination and assessment of their credit quality and ability to set up the risk provisions in accordance with the following contents:

- Debts classification: Debts are to be classified by Group 1 to Group 5 in accordance with Article 6 of the above mentioned Regulation.

- The ratio of bad debts (NPL) to the total outstanding debts: Bad debts include the debts classified in the Group 3 to the Group 5.

- The setting up of risk provisions: Provisions, that have actually been made and the ability to make provisions according to the above-mentioned regulation.

Reporting time: as of 30 June 2005.

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3. The State Bank shall deal with credit institutions which commit violation as follows:

- To impose administrative punishment for violation in monetary area and banking activity in accordance with current provisions.

- To organize the general inspection of credit institutions which are suspected of reporting wrong data in order to take appropriate solutions.

4. The Department of Banks and Non-Bank Credit Institutions shall be responsible for cooperating with the State Bank Inspection to consolidate, assess the data and submit to the State Bank Governor the settlement of violations to point 3, as mentioned above, committed by organization, individuals.

This Directive shall be effective after 15 days since its publication in the Official Gazette. The Credit Institutions must seriously comply with this Directive. Any obstacle that may arise during the implementation should timely be reported to the State Bank (the Department of Banks and Non-Bank Credit Institutions) for guidance and solutions.

THE GOVERNOR OF THE STATE BANK




Le Duc Thuy