5 GROUPS OF LOANS OF A CREDIT INSTITUTION OR FOREIGN BANK BRANCH
The State Bank of Vietnam issues the Circular No. 11/2021/TT-NHNN providing the classification of assets, risk provisioning levels and methods and use of provisions for handling risks in operations of credit institutions and foreign bank branches on July 30, 2021.
Accordingly, a credit institution or foreign bank branch shall classify loans into the following 5 groups: Group 1 - Pass; Group 2 - Special mention; Group 3 - Sub-standard; Group 4 - Doubtful; Group 5 - Potential loss. The classification of loans must fully satisfy the following requirements: Having an internal credit-rating system suitable to its business operations, customers and types of risk of loans, and having tested this system for at least 01 year; Having a risk provisioning policy; etc.
Besides, a credit institution or foreign bank branch shall use risk provisions to handle risks in the following cases: Its institutional customers are dissolved or go bankrupt under law or its individual customers are dead or missing; Loans are classified into group 5 (potential loss).
After a minimum period of 05 years, from the date of using provisions to handle risks and after taking all measures but the debts are unable to recovered, credit institutions, foreign bank branches shall be allowed to decide to release the risk-handled debt off the off-balance sheet.
This Circular takes effect from October 01, 2021.
