JOINT CIRCULAR

GUIDING THE SETTLEMENT OF OVER-DUE DEBTS OF STATE-RUN BANKS AFTER THE POST-INSPECTION RENOVATION OF BANKING OPERATIONS

In implementation of the Prime Minister's conclusion in Notice No.25/TB of March 17, 1997 and his Official Dispatch No.4086/KTTH of August 15, 1997 regarding the settlement of over-due debts of State-run commercial banks and after consulting the State Inspectorate, the State Bank and the Ministry of Finance now jointly provide the following implementation guidance:

I. GENERAL PROVISIONS:

1. Scope of over-due debt settlement

1.1. Over-due debts up to December 31, 1996 of the State-run commercial banks with debit balance remaining until September 30, 1997.

1.2. Over-due debts contracted after December 31, 1996 and other over-due debts with debit balance remaining until December 31, 1996 which have eventually been recovered by the commercial banks shall not be regulated by this Circular.

1.3. Over-due debts allowed by the Government to be frozen for the period before 1995 shall be settled in the second stage of debt settlement and according to other relevant regulations of the Government, the State Bank and the Ministry of Finance.

...

...

...

2.1. State enterprises.

2.2. Cooperatives engaged in agriculture, cottage industry and handicraft, forestry, salt production, aquaculture and fisheries, construction, etc.

2.3. Private enterprises, individuals and peasant households engaged in agriculture, forestry, fishery and salt production.

II. CLASSIFICATION AND OVER-DUE DEBT SETTLEMENT METHODS:

A. OVER-DUE DEBTS CONTRACTED FOR SUBJECTIVE REASONS

1. Over-due debts contracted for subjective reasons on the part of lending banks:

1.1. The reasons may include:

a/ Violations of the regulations on credit activities;

b/ Bank officials act in complicity with customers to illegally involve their individual borrowings in the loans given by the banks to customers or fail to remit collected debts to the bank.

...

...

...

1.3. Settlement procedures: The Central State Bank shall provide guidance for the inspection and settlement of the debts of this type on a case-by-case basis, then report the results to the Prime Minister and the Steering Committee.

2. Over-due debts due to intentional deception and fraudulence by customers:

2.1. Proposed direction for settlement: Applying all measures for complete collection.

2.2. Settlement procedures: If all the measures fail, the State-run commercial banks shall propose the institution of legal action and report the results to the State Bank.

3. Over-due debts due to the use of borrowed ital for wrong purposes by customers that are State enterprises.

3.1. Proposed direction for settlement: Ensuring that all the debts are recovered.

3.2. The settlement procedures: The State-run commercial banks shall sum up and report to the State Bank and the Ministry of Finance for examination and verification of the reasons, for guiding the application of debt-recovering measures or other appropriate settlement measures.

B. OVER-DUE DEBTS DUE TO OBJECTIVE REASONS:

1. Over-due debts due to objective reasons which may be considered for debt write-off:

...

...

...

a/ Force majeure: natural calamities, floods, crop failure, epidemics occurring to borrowers defined in Point 2, Section I who are, therefore, in able of paying debts to the banks.

b/ Bankruptcy declaration decisions issued by the People's Court or decisions on the dissolution of borrowers defined in Points 2.1 and 2.2, Section 1 above, who are now in able of paying debts to the banks.

c/ Borrowers defined in Point 2.3 die or have been declared dead by the court under provisions of law (Article 91 of the Civil Code) or have been declared missing (Article 88 of the said Code), who had no ability or property to pay debts to the banks or have no heirs as defined by law.

1.2. The dossier and procedures:

a/ A dossier of request for debt write-off for reasons specified in Item a, Point 1.1, Part B, Section II include:

- The request of the ital-borrowing party.

- The minutes on the damage caused by natural calamities, floods, crop failures, accidents, epidemics occurring to the ital-borrowing party ascertaining the damage extent and ital loss, together with the proposal or certification of the local competent agencies at the time the damage is incurred. More concretely:

+ For State enterprises: Certification by the provincial/municipal People's Committee, certification by the Department for Management of State ital and Property at Enterprises (for local State enterprises) or the General Department for Management of State ital and Property at Enterprises (for State enterprises at central level); certification by the local specialized agency related to these reasons; and certification by the provincial/municipal State bank and the lending bank.

+ For cooperatives: certification by the commune/ward People's Committee; the rural/urban district People's Committee; the rural/urban district Finance Section; the local specialized agency related to these reasons; and the lending bank.

...

...

...

- The ital borrowing agreement (with copies thereof signed by the Director of the lending bank branch).

b/ A dossier of request for debt write-off for reasons defined in Item b, Point 1.1, Part B, Section II above, shall include:

- The bankruptcy declaration decision issued by the court or the dissolution decision (notarized).

- The dissolution plan, the plan for dividing the enterprise's property, the final account statement of the enterprise's dissolution process (or the report on the liquidation of the enterprise's property);

- The ital borrowing agreement (with copies thereof signed by the Director of the lending bank branch).

c/ The dossier, procedures for debt write-off for reasons defined in Item c, Point 1.1, Part B, Section II above shall include: Documents certifying that the customer has died or has been declared dead by the court under the provisions of law (for cases of death or declaration that a person is missing or dead by the court as prescribed in Articles 60, 63, 88 and 91 of the Civil Code).

1.3. Debt write-off accounting

Basing themselves on the debt write-off decisions of the Central Steering Committee for Over-due Debt Settlement and the relevant legal dossiers, the accountants of the local State-run commercial banks shall make entries in the register for accounting:

Debit: In an appropriate account (according to the designated ital source and specific payment relation).

...

...

...

Outstanding balance: In the account outside the table of suspended interest on the written off debt

2. Over-due debts due to objective reasons which shall be considered for being frozen for 3 to 5 years and during which the borrowing customers shall not have to pay the interests thereon.

2.1. Eligible subjects: State enterprises

2.2. The reasons may include:

a/ Borrowing customers engaged in exports and imports directly affected by changes in the State mechanisms and policies (ban on export of timber, rice, market loss, etc.);

b/ Restructure of enterprises;

c/ Loans provided to designated borrowers or by decision of the higher-level agency (largely arising at the Bank for Investment and Development, loans provided under State plans, loans for buying silkworm cocoon or live pigs to stabilize prices...).

2.3. The dossier and procedures shall include:

a/ The documents directly related to the incurring of over-due debts of the enterprises.

...

...

...

c/ The plan for efficient business and plan for paying debts to the banks after the expiry of the debt-freezing period, which has been agreed upon by the specialized managing agency and the lending bank.

d/ The ital-borrowing agreement (with copies thereof signed by the lending bank branch).

3. Over-due debts due to objective reasons eligible for 3 to 5 year-reschedule, during which time interests shall still be calculated and collected.

3.1. Eligible subjects: State enterprises.

3.2. The reasons may include:

The debts owed to the bank have turned due because the borrowing customers which are State enterprises suffer from losses in their business, but should, in view of the needs of the national economy or of the locality, be maintained to carry on its operation.

3.3. The dossier, procedures and conditions for a debt reschedule request shall include:

a/ A written request of the enterprise with certification of the specialized State management agency (as prescribed in Section II, Part B, Point 2.3, Item b above) on the necessity to maintain the enterprise's operation and to settle difficulties for the enterprise and the lending bank.

b/ The plan for efficient production and business and plan for payment of debts to the bank after expiry of the debt reschedule period agreed upon by the specialized managing agency and the lending bank.

...

...

...

III. ORGANIZATION OF DIRECTION FOR IMPLEMENTATION

1. The establishment of the Steering Committee for Over-Due Debt Settlement:

1.1. At the central level: The Governor of the State Bank shall act as Chairman of the Committee, and its members shall include leading officials of the Ministry of Finance and the State Inspectorate. The above said ministries and agencies shall each appoint one departmental-level official and a number of assisting experts.

1.2. At the provincial/municipal level: The president of a provincial/municipal People's Committee shall set up a steering board headed by a vice president of the provincial/municipal People's Committee; its members shall include the Director of the provincial/municipal Finance and Pricing Department, the Director of the State Bank branch (on duty), the Director of the Department for Management of the State's ital and Property at Enterprises, the provincial/municipal State Inspectorate. Each of the above said agencies shall appoint a number of assisting experts.

2. The tasks of branches and levels in compiling, examining and summing up dossiers and set form for over-due debt classification report:

2.1. The chairman of the Managing Board and the General Director of the State-run bank of Vietnam shall:

2.1.1. Direct its affiliates to compile dossiers, carry out procedures and report the classification in accordance with the guidance of this Circular. Such branches shall perform the following specific tasks:

a/ Assuming the responsibility for determining objects eligible for the settlement as prescribed in Points 1 and 2, Section I of this Circular. More concretely:

- Examining and verifying the customers' eligibility for being considered for over-due debt settlement;

...

...

...

b/ Gathering all dossiers and completing all procedures as prescribed in Section II of this Circular, classifying debt dossiers according to the types of reasons.

c/ On the basis of the above said types of customers, the scope of over-due debt balance to be settled, dossiers and procedures, filling in documents to the forms attached to this Circular and obtaining certification of the competent agencies under this Circular's guidance. The attached forms include:

+ Forms X1 and X2: Detailed summarized statement of over-due debts considered for write-off;

+ Forms K1 and K2: Summarized statement of over-due debts considered for freezing;

+ Forms G1 and G2: Summarized statement of over-due debts considered for reschedule.

d/ The branches of the State-run commercial banks shall send dossiers to the provincial/municipal steering boards and to the head-offices of the Vietnamese State-run commercial banks before December 15, 1997.

2.1.2. Receiving and examining legal dossiers on debt classification submitted by the attached branches after obtaining the competent agency's certification on such dossiers as prescribed in Part B, Section II of this Circular so as to ensure their accuracy, validity and completeness.

2.1.3. Summing up set form reports on over-due debt classification by its own banking system, then submitting them to the Central Steering Committee in strict accordance with this Circular's guidance. Time limit for completion: before December 31, 1997.

2.1.4. Checking and verifying over-due debts owed to the bank by customers who borrowed with deliberate fraud and intent of appropriation..., coordinating with the functional agencies in applying measures to thoroughly collect debts or propose institution of legal actions (when necessary). Time limit for completion: January 1998.

...

...

...

2.2.1. Direct the branches of the State-run commercial banks in their respective localities to make dossiers as guided in Part B, Section II of this Circular.

2.2.2. Examine and verify the legal dossiers on debt classification under this Circular's guidance, then affix signature(s) thereon to certify their validity and completeness. Time limit for completion: before December 15, 1997.

2.3. The Central State Bank shall:

2.3.1. Guide the examination and specific settlement of over-due debts due to subjective reasons defined in Part A, Section II of this Circular.

2.3.2. Assume the prime responsibility and coordinate with the Ministry of Finance and the State Inspectorate in:

a/ Submitting to the Prime Minister the ital sources as support for the State Bank to make up for the debts of the State-run commercial banks it has written off.

b/ Inspecting and guiding in detail the settlement ( ital transfer, cost-accounting and accountancy). In implementation of Point 3 of Official Dispatch No.4086/KTTH of August 15, 1997 of the Prime Minister on the application of debt write-off methods defined in Point 1, Part B, Section II "the State-run commercial banks shall be entitled to gradually enter the written-off debts in their expenditures or risk funds, or reduce their debts owed to the State Bank".

Guiding the State-run commercial banks in applying the debt freezing methods defined in Point 2, Part B, Section II and the debt reschedule methods defined in Point 3, Part B, Section of this Circular.

c/ Verifying and proposing the specialized agencies to handle the borrowers who have used borrowed ital for wrong purpose which may result in losses.

...

...

...

2.4.1. Direct the provincial/municipal steering boards and the State-run commercial banks in strictly observing this Circular's guidance;

2.4.2. Examine the dossiers, procedures and reports on over-due debt classification; codify figures submitted by the State-run commercial banks requesting debt write-off, freezing and reschedule as prescribed in Part B, Section II of this Circular; uniformly apply measures for handling them case by case and instruct the State Bank to guide the implementation of provisions in Item 2.3.2 b, Point 2, Section III of this Circular.

2.4.3. Report the results of the over-due debt settlement to the Prime Minister in the first quarter of 1998.

3. This Circular takes effect 15 days after its signing. Any difficulty and/or problem arising in the course of implementation shall be reported to the Standing Board of the Central Steering Committee (the Central State Bank) for study and settlement.

FOR THE MINISTER OF FINANCE
VICE MINISTER




Pham Van Trong

ACTING GOVERNOR OF THE STATE BANK





Do Que Luong