SBV issued Circular to support customers affected by Covid-19 epidemic

Amid the adverse, complicated and unpredictable impacts of the Covid-19 pandemic in the world and in Vietnam, especially since March 6, 2020, the key policy of the Secretariat of the Communist Party’s Central Committee, the Government, the Prime Minister and the National Steering Committee on Controlling the Covid-19 Epidemic is precautions and not feeling over-confident; mobilizing strongly the participation of the whole political system to realize the "dual goal": Not only drastically preventing and controlling the epidemic, but also focusing on removing the difficulties to promote production and business operations, ensuring social security and the people's livelihoods, while making best efforts to achieve the set objectives and tasks of socio-economic development.

SBV Governor Le Minh Hung has requested the heads of the entities in the whole banking sector to ensure thorough understanding among all officials and organizations in order to immediately deploy a number of urgent measures and solutions to prevent and control the epidemic in the banking system, for the purpose of realizing the Government's "dual goal" of preventing and fighting the epidemic while still developing the economy; with the strong will and the readiness to share all difficulties and accompany the businesses and the people, recently, the banking industry has conducted several measures, such as: reducing the interest rates, rescheduling, postponing debts; waiving, reducing a number of payment transaction fees, etc. with a view to supporting those customers who are affected by the Covid-19 epidemic.

Under the strong guidance of the SBV Governor, the urgent participation of the functional Departments and entities, the SBV has quickly developed, finalized and issued the Circular directing the credit institutions, the foreign bank branches to restructure the repayment periods, waive and reduce the interest and fees, maintain the debt classifications in order to support those customers affected by Covid-19 epidemic.

The Circular serves as a legal framework to help credit institutions deploy prompt support to help customers affected by Covid-19 epidemic

Speaking at the meeting, SBV First Deputy Governor Dao Minh Tu emphasized that Circular 01 was issued in order to provide prompt support and remove part of the difficulties for the businesses and people affected by Covid-19 epidemic, as directed by the Government in Resolution No. 11/NQ-CP issued on February 14, 2020 at the Government's regular meeting in January 2020. The Circular 01 serves as a legal framework to guide the credit institutions and the foreign bank branches to restructure the repayment periods, waive or reduce the interest and fees, maintain the debt classifications for the borrowing businesses and people affected by the impacts of Covid-19 epidemic. The purpose of Circular 01 is to create maximum conditions on the responsibilities and authorities of the credit institutions to coordinate with their borrowers to consider and decide on the time durations for supporting the businesses by restructuring their loans, and addressing the difficulties caused by the impacts of the epidemic. In addition, the new Circular also clarify the responsibilities of the credit institutions and the borrowers upon the implementation of this support policy, ensuring the right subjects, objectivity and avoiding any abuse of the policy.

According to Mr. Nguyen Trong Du – Deputy Chief Inspector of the Banking Supervision Agency, Circular 01, which took effect from March 13, 2020 and was composed of 03 Chapters and 10 Articles, contains some key substances as follows:

Regarding the scope of debt repayment restructuring and criteria for determining debts affected by Covid-19 epidemic:

Article 4 of the Circular stipulates that debts subject to rescheduling are the outstanding amounts of principal and/or interest (including debt balances of debts subject to the Government's Decree No. 55/2015/ND-CP issued on June 9, 2015 on credit policies for agricultural and rural development) (as amended and supplemented)) that fully satisfy the following conditions: a) Arising from lending activities, financial leasing; b) The obligation to repay the principals and/or interest arising between January 23, 2020 and the following day after 03 months from the date the Prime Minister announces the end of the Covid-19 epidemic; c) Customers who are unable to pay the debts and/or interest in due time because of decreases in revenues and incomes caused by the impacts of Covid-19 epidemic.

The credit institutions and the foreign bank branches shall be responsible for providing specific guidance on the criteria to determine the outstanding debts of customers affected by Covid-19 epidemic, in which, there must be criteria for customers whose revenues and incomes are reduced because of Covid-19 epidemic.

Overview of the meeting

Regarding the waiver and reduction of interest and fees:

Article 5 of the Circular stipulates that the credit institutions and the foreign banks branches will decide on waiving and reducing their interest and fees according to their internal regulations for the outstanding loans arising from credit extension operations (except for activities of buying and investing in corporate bonds), with the obligation to repay the principals and/or interest being due between January 23, 2020 and the following day after 03 months from the date the Prime Minister announces the end of the Covid-19 epidemic, and customers who are unable to pay their debts and/or interest in due time because of declines in revenues and incomes caused by the impacts of Covid-19 epidemic.

On maintaining the debt classifications:

Article 6 of the Circular stipulates that the credit institutions and the foreign bank branches are entitled to maintain the classified debt groups in accordance with the provisions of the SBV at the closest time to January 23, 2020 with regard to the debt balances subject to loan repayment rescheduling, interest & fee waiver and reduction as prescribed in this Circular; also, they are requested to conduct debt classifications, set up risk provisions in line with the restructured terms in accordance with the legal provisions on debt classification, setting up and using risk provisions in order to address risks in the operations of the credit institutions and the foreign bank branches; however the adjustment principles shall not be applied to the debt groups with higher risk levels.

On responsibilities of the credit institutions, the foreign bank branches and the entities of the SBV:

Article 7 of the Circular specifies the responsibilities of the credit institutions and the foreign bank branches for issuing internal regulations on rescheduling, waiving and reducing their interest and fees, and maintaining the debt classifications in line with the provisions of this Circular in order to implement consistently in the whole system, ensuring close supervision, safety, prevention, and preventing the abuse of the rescheduling, waiver and reduction of interest and fees, and maintaining the debt classifications to profiteering, mis-reflecting the credit quality.

Article 8 of the Circular specifies the responsibilities of the SBV entities in the inspection, supervision, handling with issues arising in the process of implementing this Circular by the credit institutions and the foreign bank branches.

Continuing to reduce interest and fees to support businesses struggling by the COVID-19 epidemic

According to Mr. Nguyen Quoc Hung - Director General of the SBV Department of Credit for Economic Sectors, the impacts of the epidemic has led to customers being unable to pay their debts on time, thereby increasing the ratio of overdue debts and bad debts. According to the updated data until March 4, 2020, there were 23 credit institutions reporting to the SBV that an estimated VND 926 trillion of outstanding loans affected by Covid-19 epidemic, accounting for 14.27% of the total outstanding loans of these 23 credit institutions, and accounting for about 11.3% of the whole system’s loan balance, in which some industries are likely to be significantly influenced, such as: agriculture, forestry & fisheries, businesses with import and export activities, hospitality industry, food and catering services, beverages, transportation, garment & textiles, footwear, electronics, refrigeration, oil and gas, travel, education,...

Up to now, the credit institution system has implemented many measures to support and remove the difficulties for those customers affected by the epidemic. The banking sector is one of the leading sectors which have been proactively proposing and drastically implementing solutions to support their customers affected by Covid-19 epidemic, which have received high evaluation by the Government, associations, and the business community. The credit institutions have urgently reviewed the situation of their borrowers to take initiatives in developing action programs and scenarios in order to solve the difficulties for their borrowers. The credit institutions 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, waiver or lowering of the lending interest rates against existing loans, other support packages and credit products, etc. in order to share the difficulties with the Covid-19 affected individuals and enterprises.

As of March 4, 2020, there are 15 more credit institutions participating in the program of waiver/reduction of interbank money transfer fees for amounts of VND 500,000 or less, bringing the total number of banks participating in the fee waiver/reduction to 32/45 member banks of the National Payment Corporation of Vietnam (NAPAS). Thereby, the whole banking system is encouraging customers to transact safely via electronic banking channels like Internet Banking, Mobile Banking, or to conduct non-cash payments to limit the risks of Covid-19 infection. In addition, the National Credit Information Center of Vietnam (CIC) has also reduced their credit information service charges to help the credit institutions to reduce costs, lower interest rates, hence indirectly improving the credit accessibility for people and businesses.

In his concluding remarks, First Deputy Governor Dao Minh Tu suggested that the credit institutions develop plans to classify debt categories, identify debts, assess potential risks of bad debts, postpone, extend, and restructure repayment terms in order to support those enterprises in difficulties. The credit institutions should take a proactive approach to calculating their accrued interests to be in compliance with the regulations, proactively reduce their expenses, especially the administrative management costs. Particularly for the Vietnam Bank for Social Policies (VBSP), it is required to develop an action program and scenarios to support the poor, the near-poor, the disadvantaged households and the policy beneficiaries affected by Covid-19 epidemic. The Deputy Governor also said that the SBV has been collaborating closely with the relevant ministries and agencies to actively and urgently improve the legal system in order to create favorable conditions for both credit institutions and enterprises to overcome the difficulties and damage caused by Covid-19 epidemic.

VA