Basic Procedures for Special Lending to Support Liquidity

(1) TCTD Builds Plan (within 2 months)

(2) BHTGVN participates in evaluating the recovery plan with the KSDB Board.

(3) State Bank approves the plan (within 2 months)

(4) The State Bank does not approve the plan.

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(5) The State Bank considers submitting to the Government.

(6) Restructuring according to Government decision

To implement the participation in evaluating the recovery plan of credit institutions under special control, BHTGVN has researched, developed and issued the Guidelines for Evaluating the Feasibility of Recovery Plans of Credit Institutions under special control.

Special Loans

According to the provisions of Decree 89/1999 and Decree 109/2005, BHTGVN is allowed to lend to support QTDNDs in case of temporary loss of liquidity that have not been placed in KSDB. In practice, BHTGVN has provided support to 06 QTDNDs with temporary loss of liquidity, resulting in 05 QTDNDs returning to normal, BHTGVN has basically recovered the loan capital. After the Law on Deposit Insurance was promulgated, BHTGVN was not allowed to perform the above financial support tasks.

Implementing the Law on Credit Institutions 2017 and Circular No. 01/2018/TT-NHNN on special lending to credit institutions, BHDTVN has issued Regulations and Guidelines on processes and procedures for special lending to credit institutions under special supervision.

According to the law, BHTGVN is allowed to lend in 3 cases: lending by agreement, lending under the direction of the State Bank and lending under the approved recovery plan to pay depositors at credit institutions with the interest rate that can be applied up to 0%. In case BHTGVN cannot recover the loan, it can be considered to reduce the operational reserve fund.

Table 2.7: Basic procedures for special lending to support liquidity

Source: Vietnam Deposit Insurance On building a bankruptcy plan for credit institutions

According to the provisions of the law on bankruptcy of credit institutions before the Law on Credit Institutions 2017 was promulgated, the Vietnam Deposit Insurance Corporation was not allowed to participate in developing bankruptcy plans for credit institutions. The Vietnam Deposit Insurance Corporation only made deposit insurance payments to depositors after receiving a document from a competent State agency deciding to terminate operations and dissolve or bankrupt the credit institution.

The payment of deposit insurance by the Vietnam Deposit Insurance Corporation to depositors at 39 dissolved credit institutions shows that the Vietnam Deposit Insurance Corporation has done a good job of protecting depositors, contributing to maintaining the stability of the credit institution system, ensuring the healthy and safe development of the system.

Implementing the Law on Deposit Insurance on participation in special inspection and payment of deposit insurance, in the past (from 2013 to June 2019), Deposit Insurance of Vietnam has closely followed the direction of the State Bank of Vietnam in Official Dispatch No. 1213/CQTTGSNH6.m dated August 1, 2017 of the CQTTGSNH on 15 weak People's Credit Funds, unable to recover.

recovery, expected legal entity handling, to develop payment plan, propaganda plan, prepare necessary conditions, when the competent authority issues a decision to terminate operations and determines that the credit institution has lost its ability to pay, is insolvent, and is in bankruptcy, the Vietnam Deposit Insurance can make deposit payments to depositors.

In the case of developing a bankruptcy plan for a credit institution, the Specialized Supervision Board is responsible for coordinating with the credit institution implemented by the Specialized Supervision Board, the Vietnam Deposit Insurance and the Vietnam Cooperative Bank. Thus, compared to before, the Vietnam Deposit Insurance has a position and role in developing and implementing the bankruptcy plan for credit institutions in general and the People's Credit Institution in particular. This is the basis for the Specialized Supervision Board to develop a bankruptcy plan for credit institutions, which the Specialized Supervision Board submits to the State Bank for consideration and assessment of the feasibility of the bankruptcy plan.

The credit institution and the Government shall decide on the bankruptcy policy of the credit institution under special supervision.

The contents of the bankruptcy plan include: (i) assessment of the current situation and the process of handling the credit institution subject to the decision on bankruptcy; (ii) assessment of the impact of implementing the bankruptcy plan of the credit institution subject to the decision on bankruptcy on the safety of the credit institution system; (iii) payment plan for individual customer deposits; (iv) Implementation roadmap and responsibility for implementing the bankruptcy plan.

Organization of bankruptcy plan implementation: The State Bank directs, inspects and supervises the implementation of the approved bankruptcy plan, and requests the credit institution approved by the KSDB to submit a request to the court to open bankruptcy proceedings in accordance with the provisions of the law on bankruptcy.

Bankruptcy handling of credit institutions has been stipulated in the Law on Credit Institutions 2017; However, considering bankruptcy handling of a specific credit institution so as not to affect the safety and soundness of banking operations and monetary security requires considering many factors.

On May 17, 2019, the Governor of the State Bank of Vietnam issued conclusion notice No. 144/TB-NHNN on the plan to handle weak QTDND, accordingly assigning

The CQTTGSNH shall take the lead in coordinating with relevant units to study and propose solutions to handle weak QTDNDs in the direction of not proposing bankruptcy at the present time, but instead using recovery, dissolution, asset purchase and transfer options..., according to the provisions of law to submit to the Prime Minister for approval.

Implementing the direction of the State Bank, the Vietnam Deposit Insurance has reviewed and assessed the current financial situation, debt recovery ability, deposit balance and depositors to develop a payment plan, participate in assessing the feasibility of the recovery plan and give opinions when commercial banks participate in handling the People's Credit Funds.

2.3. Evaluation of Special Control activities of Vietnam Deposit Insurance

2.3.1. Achievements

The legal framework for the special supervision activities of the Vietnam Deposit Insurance has been gradually improved. Participation in special supervision activities is identified as an important task in restructuring weak credit institutions, especially the Law on Credit Institutions 2017 and Circular 01/2018 of the State Bank of Vietnam have expanded the tasks of the Vietnam Deposit Insurance and prescribed measures to handle credit institutions under special supervision. Circular 11/2019/TT-NHNN on special supervision of credit institutions of the Governor of the State Bank of Vietnam replacing Circular 07/2013/TT-NHNN stipulates that in addition to the Vietnam Deposit Insurance sending staff to participate at the request of the State Bank of Vietnam, the Vietnam Deposit Insurance is coordinated with the State Bank of Vietnam, the State Bank of Vietnam, and the Special Supervision Board in the process of special supervision of credit institutions. Thus, the position and role of the Vietnam Deposit Insurance in participating in special supervision have been more proactive than before. According to Circular 07/2013/TT-NHNN, BHTGVN only gives opinions when requested by the Supervisory Board or the State Bank. Now, BHTGVN is proactively coordinating throughout the entire supervisory process with the State Bank of Vietnam, the management agency and the Supervisory Board in the process of implementing measures to restructure credit institutions.

KSDB. That shows that BHTGVN is increasingly participating more deeply in the restructuring process of credit institutions under KSDB in general and QTDND under KSDB in particular.

The Prime Minister has issued a decision on the deposit insurance limit at 75 million VND; Currently, the deposit insurance limit is being considered to be raised to 125 million VND. This is the basis for the Vietnam Deposit Insurance to verify and compare deposits and depositors, develop a payment plan, and make a list of the amount and number of people expected to pay to proactively implement when the obligation to pay insurance arises.

The State Bank of Vietnam recognizes that the handling of credit institutions under special supervision is a complex and sensitive issue, so it has provided timely guidance and direction to the State Bank branches in provinces and cities, the Cooperative Bank, the Deposit Insurance of Vietnam and relevant agencies, according to their functions and duties, to participate in the handling of credit institutions under special supervision effectively.

The Board of Directors and the General Director determined that participating in the KSDB is a new, very complicated and difficult task. They paid attention, directed and issued Decision No. 343/QD-BHTG113 dated June 8, 2015 on promulgating the Regulations on the operation of the Steering Committee and the Steering Group for monitoring, inspecting and handling problematic QTDNDs, which stated the duties and powers of the members of the Steering Committee, including the heads of the departments: Inspection, Supervision, Management of fee collection and payment of social insurance, Legal Affairs, Information and propaganda, at the branches of BHTGVN. At the same time, issue full documents on handling credit institutions in general, and KSDB in particular (Document No. 415/BHTG-TPCT dated June 27, 2016 on instructions for checking, determining payment amounts and developing insurance payment plans for QTDND, Instruction No. 1215/HD-BHTG dated December 9, 2016 on temporary instructions for BHTGVN to participate in the KSDB process for QTDND, the Emergency Handling Team, documents on special loans, assessing the feasibility of the plan

recovery...) to promptly direct and advise the Board of Directors in handling credit institutions under special control.

The establishment of the Steering Committee and Steering Group has brought high efficiency in practice, proactively deployed, handled arising situations, updated the situation, information, and reported quickly and accurately. Because the focal point is the Steering Committee, it is implemented relatively systematically according to regulations; the information system is smooth, advising and reporting promptly and accurately to the Board of Directors of the Vietnam Deposit Insurance and the State Bank to handle arising situations.

Regarding the work of participating in the special inspection: the issuance of the Guidance in Document No. 415/BHTG-TPCT dated June 27, 2016 on the guidance for checking, determining the payment amount and developing the insurance payment plan for QTDND, Guidance No. 1215/HD-BHTG dated December 9, 2016 on the temporary guidance for BHTGVN to participate in the special inspection process for QTDND, documents on special lending, assessing the feasibility of recovery plans... helps officers participating in the special inspection to perform their tasks in accordance with the process and procedures; have a clear direction in verifying, comparing, focusing, and making 03 Lists, preparing conditions for the work of paying insured deposits as well as participating in the assessment of the feasibility of recovery plans and implementing special lending in accordance with the provisions of law.

The entire system of the Vietnam Deposit Insurance Corporation has identified participating in the special inspection as a key task in restructuring credit institutions in general and the People's Credit Funds in particular; therefore, the Board of Directors of the Vietnam Deposit Insurance Corporation has directed the leaders of the regional Deposit Insurance Branches to closely coordinate with the State Bank of Vietnam in localities and the Special Inspection Board; at the same time, assign qualified and capable staff to participate in the special inspection, participating in 100% of the People's Credit Funds under the special inspection.

The staff participating in the KSDB have professional expertise, experience in inspecting QTDND, handle arising situations well; have a spirit of

responsibility, overcome difficulties, and complete assigned tasks. When assigned to participate in the KSDB, the staff developed a program and work plan as approved by the Leadership; proactively proposed ideas to develop a work program with the KSDB Board, properly performed the functions and tasks of the BHTGVN, and at the same time performed well the tasks assigned by the Head of the KSDB Board.

During the process of participating in the KSDB, the staff participating in the KSDB advised the Board of Directors of the regional BHTG Branch, coordinated with the KSDB Board and the local State Bank to develop a plan for consolidation and recovery, a payment plan, a bankruptcy plan, and a propaganda plan so that they can be deployed and applied immediately when the competent authorities decide on one of the above plans.

Implementing the Law on Credit Institutions 2017 and Circular 01/2018 of the State Bank of Vietnam, the Vietnam Deposit Insurance has commented on the feasibility assessment of the recovery plan of some People's Credit Funds; reviewed the special lending application files of some People's Credit Funds and the State Bank of Vietnam. Through the review and evaluation, there have been responses on whether or not to the recovery plan, and there has been an official dispatch replying that the application does not meet the conditions for special lending according to regulations. The Vietnam Deposit Insurance has issued full guidance documents and organized professional training for staff on participating in special lending, on assessing the feasibility of recovery plans, and on special lending for unified implementation throughout the system.

Based on verified data on deposits and depositors, BHTGVN coordinates with the Cooperative Bank and commercial banks to make payments to depositors according to the direction of the State Bank of Vietnam; At the same time, the above data also serves as a basis for BHTGVN to provide opinions, evaluate recovery plans and provide special loans when the People's Credit Funds and the Specialized Credit Control Board have requests.

In addition, BHTGVN also consulted with a number of local branches of the State Bank of Vietnam and commercial banks on the plan for commercial banks to participate in handling the cases.

QTDND is KSDB, contributing to the effective handling of QTDND and ensuring the legitimate rights and interests of depositors.

2.3.2. Limitations and causes

Besides the achievements in recent years, the participation of BHTGVN in the KSDB still has limitations that need to be overcome, namely:

2.3.2.1. The documents guiding the implementation of the law have not yet specifically and clearly defined the roles and tasks of the officers of the Deposit Insurance of Vietnam in the process of participating in Special Control.

Up to now, legal documents regulating the KSDB have been increasingly improved and the role of BHTGVN in participating in the KSDB is regulated as follows: sending staff to participate in the KSDB, coordinating with agencies in the KSDB, providing special loans to credit institutions under the KSDB; participating in assessing the feasibility of the recovery plan; developing payment plans, and giving opinions on the bankruptcy plan of credit institutions under the KSDB. Specifically:

Circular 07/2013/TT-NHNN and Circular 11/2019/TT-NHNN of the State Bank of Vietnam regulating the supervision of credit institutions do not specifically stipulate the roles and tasks of members of the supervision board who are officers of the Deposit Insurance of Vietnam.

Many KSDB Boards, before implementing KSDB work, do not convene BHTGVN officers to attend meetings to assign tasks, and do not have specific programs, plans, and work contents. BHTGVN officers participating in the KSDB Board are not allowed to participate in developing plans, programs, and work contents of the KSDB Board; the assignment of tasks depends entirely on the subjective will of the Head of the KSDB Board or the viewpoint of each branch of the State Bank of Vietnam in the province or city, or the assignment of tasks in some cases is not suitable with the functions and tasks of BHTGVN. Therefore, BHTGVN officers participating in KSDB in some cases do not grasp the operation situation of the KSDB Board and the operation situation of the People's Credit Fund, leading to the failure of the KSDB Board.