Takes effect on January 01, 2020, the Circular No. 41/2016/TT-NHNN dated December 30, 2016 of the State Bank of Vietnam prescribing prudential ratios for operations of banks and/or foreign bank branches.
One of the most important content is that banks without subsidiary companies and/or foreign bank branches must maintain the minimum capital adequacy ratio of 8% as defined in financial statements thereof. Banks with subsidiary companies must maintain the minimum capital adequacy ratio of 8% as defined in financial statements thereof; and the minimum consolidated capital adequacy ratio of 8% as defined in consolidated financial statements thereof.
Besides, banks and/or foreign bank branches shall be entitled to make a decreasing adjustment to value of receivables and transactions by implementing credit mitigation techniques. Mitigating credit risks shall be carried out by implementing a single or combined technique(s) mentioned hereunder collateral; on-balance sheet netting; third-party guarantee; credit derivatives.
Within that credit risk mitigation by the collateral shall only be applied to the types of eligible collateral such as cash, securities, credit cards issued by credit institutions or foreign bank branches; gold (standard gold, physical gold, gold jewelry of which value is converted into 99.99% purity gold); securities issued or secured by payment guarantees by the Government, State Bank of Vietnam; debt securities rated by an independent credit rating company where these are at least BB- when issued by sovereigns or PSEs; debt securities rated by an independent credit rating company where these are at least BBB- when issued by firms.
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