On March 13, 2020, the State Bank of Vietnam (“SBV”) issued Circular No. 01/2020/TT-NHNN directing credit institutions and foreign bank branches to restructure repayment periods, waive and reduce interest and fees, maintain debt classifications in order to support those customers affected by the Covid-19 pandemic (“Circular 01”).

Circular 01 came into force on March 13, 2020, serving as the legal framework to help credit institutions deploy prompt support and remove some of the difficulties for businesses and people affected by the Covid-19 pandemic. Circular 01 maximizes conditions for credit institutions and foreign bank branches (“CIFBB”) to coordinate with their borrowers and to consider and decide on the durations to support businesses by restructuring their loans. Circular 01 is composed of 03 chapters and 10 articles.  Some of the key substances are as follows:

Debt rescheduling

Article 4 stipulates that debts subject to rescheduling are outstanding principal or interest amounts (including debt balances of debts subject to the Government’s Decree No. 55/2015/ND-CP) that fully satisfy the following conditions:

(a) Arising from lending activities, financial leasing;

(b) Principal and/or interest arising during the period of 23/01/2020 to the date three months after the date on which the Prime Minister declares the end of the Covid-19 outbreak;

(c) The borrower is unable to repay the principal and/or interest by the due date because of decreases in revenue caused by the Covid-19 pandemic.

CIFBB shall decide the rescheduling of debts cases in consideration of the borrowers’ request and ability to fully repay the principal and/or interest after the debt is rescheduled. However, the debt shall not be deferred for more than 12 months from the initial repayment deadline according to the loan/finance lease agreement.

Reduction and exemption of interest and fees

Article 5 stipulates  that CIFBB shall, according to their own rules and regulations, decide reduction and exemption of interest and/or fees on extension of the debts (except purchases of corporate bonds) that are due during the period of 23/01/2020 to three months after the date that the Prime Minister declares the end of the Covid-19 outbreak and the borrowers are unable to repay the principal and/or interest by the due date specified in the original agreement because of a decrease in revenue caused by Covid-19.

Retention of debt category:

Article 6 stipulates that CIFBB may retain the categories of the following debts if they have been categorized in accordance with SBV regulations before 23/01/2020:

(i) debts that are subject to debt rescheduling (Article 4), and

(ii) reduction and exemption of interest and fees (Article 5).

For these debts,  CIFBB must conduct debt classifications, set up risk provisions in line with the rescheduled terms according to debt classification regulations. Nonetheless, these provisions shall not be applied to the higher-risk debt group.

Responsibilities of CIFBB and SBV units:

Article 7 specifies that CIFBB shall be responsible for issuing internal regulations on rescheduling, exemption or reduction of interest and fees, retention of debt categories to keep the whole system functioning consistently, ensuring close supervision, safety, ensuring policies are not taken advantage of for profiteering, or incorrectly reflecting credit quality.

Article 8 specifies the responsibilities of the SBV units for  the inspection, supervision, handling of any issues arising in the process of implementing Circular 01 by CIFBB.

Continuing to reduce interest and fees to support businesses struggling with the COVID-19 pandemic

According to the SBV’s Department of Credit for Economic Sectors, the impacts of the pandemic has led to customers being unable to pay their debts on time.  Thereby an increase in the ratio of overdue and bad debts has arisen. Up till now, CIFBB have implemented many measures to support and remove difficulties for those customers affected by the Covid-19 pandemic. CIFBB have urgently reviewed the situation of their borrowers to take initiatives in developing action programs in order to solve the difficulties of their borrowers. CIFBB have initially provided support to more than 44,000 Covid-19 affected customers, with the total loan outstanding of VND 222 trillion through various measures such as debt rescheduling, exempting or lowering of the interest rates against existing loans, other support packages and credit products, etc. in order to share the difficulties of Covid-19 affected individuals and enterprises.

The Deputy Governor of the SBV also emphasized that the SBV has been collaborating closely with the relevant ministries and agencies to actively and urgently improve the legal system to create more favorable conditions for both CIFBB and enterprises to overcome the difficulties caused by the Covid-19 pandemic.

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