Provision on special loans to specially-controlled credit institutions

09:56-21/06/2018

According to the newly issued Circular No.01/2018/TT-NHNN by the State Bank of Vietnam, the provision of special loans to specially-controlled credit institutions is stipulated, including cases when special loans are provided, the amount of loans, the maturities and the lending interest rates.

According to the newly issued Circular No.01/2018/TT-NHNN by the State Bank of Vietnam, the provision of special loans to specially-controlled credit institutions is stipulated, including cases when special loans are provided, the amount of loans, the maturities and the lending interest rates.

Thereby, the Circular clearly stipulated that the State Bank of Vietnam provides special loans to specially controlled credit institutions in the following cases:

Firstly, special loans for liquidity support of credit institutions when they are in danger of insolvency or fall into insolvency, threatening the stability of the whole system during the period of special control, including cases when credit institutions are undertaking approved restructuring plans.

Secondly, special lending at the preferred rate of 0% at most to support the recovery of commercial banks, Cooperative Bank, finance companies, microfinance institutions in accordance with approved recovery plans.

Thirdly, special loans at the preferred rate of 0% at most to support the recovery of commercial banks according to the approved plans of required transfer;

Fourthly, special loans at the preferred rate of 0% at most for commercial banks which were forced to be assumed before the effective date of the Law No 17/2017/QH14 in accordance with the Decision of the Prime Minister.

Fifthly, special loans at the preferred rate of 0% at most for commercial banks which were forced to be assumed before the effective date of the Law No 17/2017/QH14 after being transferred in accordance with the approved transfer plan.

The Deposit Insurance of Vietnam provides special loans to specially controlled credit institutions in the following cases:

Firstly, special loans for liquidity support of  credit institutions when they are in danger of insolvency or fall into insolvency, threatening stability of the whole system during the period of being under special control, including cases when credit institutions are undertaking approved restructuring plans.

Secondly, special loans under the decision of the State Bank of Vietnam at the preferred rate of 0% at most to improve the liquidity of finance companies, people’s credit funds (PCFs), microfinance institutions when they are in danger of insolvency or fall into insolvency, threatening the stability of the system before approval of the restructuring plan.

Thirdly, special loans at the preferred rate of 0% at most to support the recovery of finance companies, PCFs, microfinance institutions from the Provision Fund in accordance with the approved recovery plans.

The Cooperative Bank of Vietnam provides special loans to specially controlled credit institutions in the following cases:

Firstly, special loans for liquidity support of credit institutions when they are in danger of insolvency or fall into insolvency, threatening the stability of the whole system during the period of being under special control, including cases when credit institutions are undertaking approved restructuring plans.

Secondly, special loans under the decision of the State Bank of Vietnam at the preferred rate of 0% at most for liquidity support of PCFs from the Guarantee Fund for stability of PCFs when they are in danger of insolvency or fall into insolvency, threatening the stability of the system before approval of the restructuring plan.

Thirdly, special loans at the preferred rate of 0% at most to support recovery to PCFs from the Guarantee Fund for stability of PCFs in accordance with approved recovery plans.

Also according to the Circular, credit institutions are entitled to provide special loans to specially controlled credit institutions in the cases: Firstly, special loans for liquidity support of credit institutions when they are in danger of insolvency or fall into insolvency, threatening the stability of the system during the period of being specially controlled, including cases when credit institutions are undertaking approved restructuring plans; Secondly, special lending to support recovery of credit institutions according to recovery plans, approved plans of compulsory transfer.

Regarding the amount of special loans, the State Bank of Vietnam will review, decide on the solvency of specially controlled credit institutions in the following cases:

Firstly, special loans provided by the State Bank of Vietnam for the liquidity support of credit institutions when they are in danger of insolvency or fall into insolvency, threatening the stability of the system during the period of being under special control, including cases when credit institutions are undertaking approved restructuring plans.

Secondly, special loans provided by the Deposit Insurance of Vietnam under the decision of the State Bank of Vietnam at the preferred rate of 0% at most for the liquidity support of finance companies, PCFs, microfinance institutions which are in danger of insolvency or fall into insolvency, threatening the stability of the system before approval of restructuring plans.

Thirdly, special loans provided by the Cooperative Bank of Vietnam under the decision of the State Bank of Vietnam at the preferred rate of 0% at most  for the liquidity support of PCFs from the Guarantee Fund for PCFs when PCFs are in danger of insolvency or fall into solvency, threatening the stability of the whole system before approval of restructuring plans.

For other cases, to implement under the agreement between lenders and borrowers.

The terms of special lending in some cases are decided by the State Bank of Vietnam, but do not exceed 02 years. Some cases follow the agreement between lenders and borrowers.

Regarding the interest rates applied for special loans of the State Bank of Vietnam, the Circular clearly stipulates that interest rates applied for special loans, interest rates applied for extended special loans are refinance interest rates announced by the State Bank of Vietnam in each period when special loans are disbursed, extended.

Rates applied for principal of overdue special loans are equivalent to 130% of lending rates applied for special loans right before becoming overdue, except cases stipulated in point b clause 1 Article 6 of this Circular.

The Circular also specifically stipulates interest rates applied for special loans provided by the Deposit Insurance of Vietnam, the Cooperative Bank of Vietnam, and other credit institutions. Exemption and reduction of interest rates of special loans provided by the Deposit Insurance of Vietnam, the Cooperative Bank of Vietnam, and other credit institutions are carried out under agreements between lenders and borrowers.

Regarding payment of special loans, the Circular stipulates that upon the maturity of special loans, borrowers have to pay principals and interests to lenders. Borrowers can make payment before the maturity date.

In case borrowers do not pay special loans in due course and their loans are not permitted to be extended, the State Bank of Vietnam will take the following measures:

Firstly, transfer special loans to a watch list of overdue loans according to regulations of the State Bank of Vietnam on methods of calculating and accounting interest revenues, expenses in deposit-taking and lending by the State Bank of Vietnam to credit institutions; apply rates for overdue principal as regulated in this Circular.

Secondly, draw from deposit accounts of credit institutions at the State Bank of Vietnam after sending notices in writing to credit institutions of drawing from deposit accounts for debt recovery.

Thirdly, recover debts from other sources of credit institutions.

Besides, there are other measures taken by the Deposit Insurance of Vietnam, the Cooperative Bank of Vietnam, credit institutions including: transferring to a watch list of overdue principal, interests of overdue special loans, applying interest rates to overdue principal as regulated in this Circular, recovering debts in accordance with agreements and legal regulations.

Also according to the Circular, special loans are given priority to be paid before all other remaining debts, including secured debts of credit institutions in the following cases: (i) in due course, except when restructuring plans for credit institutions are not yet approved or alternative restructuring plans are not yet approved; (ii) when credit institutions are dissolved, go bankrupt.

Transferring refinance loans to special loans

1. When the State Bank of Vietnam places credit institutions into special control, refinance loans for credit institutions will be transferred to special loans as follows:

a) In case refinance loans are undue, outstanding principal of refinance loans will be transferred to outstanding principal of special loans, interest outstanding of refinance loans will be transferred to outstanding interest of special loans, due dates of special loans are due dates of refinance loans, rates of special loans are rates of refinance loans;

b) In case refinance loans are overdue, outstanding principal of overdue refinance loans will be transferred to outstanding principal of overdue special loans, outstanding interest of deferred refinance loans will be transferred to outstanding interest of deferred special loans, interest applied for principal of overdue special loans is interest applied for principal of overdue refinance loans.

2. Transfer of refinance loans to special loans is stipulated in the Decision of the State Bank of Vietnam on placing credit institutions into special control.

Research and International Cooperation Department