What are regulations on intracorporate credit rating systems in Vietnam?

Intracorporate credit rating systems in Vietnam are specified in Article 5 of Circular 11/2021/TT-NHNN, specifically as follows:

1. An intracorporate credit rating system involves:

a) Sets of financial and non-financial indicators, processes for evaluation of solvency and payment ability of borrowers based on qualitative and quantitative analysis of finance, business, governance and reputation borrowers;

b) Methods of assessment and rating applied to specific groups of borrowers, including those constrained from credit lines and their related persons.

2. An intracorporate credit rating system must be built according to the following principles:

a) It should be developed based on data and information of all borrowers collected during at least 01 (one) year immediately preceding the year of establishment of the intracorporate credit rating system;

b) At least once a year, the intracorporate credit rating system must be reviewed, revised and updated on the basis of data and information of borrowers collected during the entire year;

c) There are regulations for rating levels corresponding to the levels of risk that are from low to high;

d) It must be approved for use by the Governing Board (if it is used by a credit institution that is registered as a joint-stock company), the Board of Directors (if it is used by a credit institution that is a limited liability company), the General Director or the Director (if it is used by a foreign bank branch).

3. Credit institutions and foreign bank branches must develop intracorporate credit rating systems to rank their borrowers periodically or when necessary, serving as a basis to consider credit extension, manage credit quality, develop risk provisioning policies suitable to their scope of operations, borrowers and actual condition.

Non-bank credit institutions are not bound to set up intracorporate credit rating systems.

4. Within 10 (ten) days from the date of introduction, revision or update of an intracorporate credit rating system, a credit institution or foreign bank branch must send the State Bank directly or by post or electronic means as prescribed in Clause 5 of this Article the following written documents:

a) In case of introduction of a new one:

(i) Written report on release and application of that credit rating system;

(ii) Written description of the intracorporate credit rating system, processes for collection of information and data about borrowers and ratings of borrowers;

(iii) Instructions for use of the intracorporate credit rating system, including decentralization or authorization for collection of information and data about borrowers and ratings of borrowers.

b) In case of revision or update of the existing one:

(i) Written report on revision or update of that credit rating system, clarifying reasons for such revision or update;

(ii) Written documents stating such revision or update of that credit rating system and instructions for use of that credit rating system.

5. Credit institutions and foreign bank branches shall submit their reports to SBV according to clause 4 of this Article as follows:

a) Credit institutions and foreign bank branches shall submit their reports to SBV (via Bank Supervision and Inspection Agency), unless otherwise prescribed in point b of this clause;

b) Foreign bank branches subject to microprudential inspection and supervision by SBV's branches in provinces and centrally-run cities shall submit their reports to SBV’s branches in these provinces and centrally-run cities.

Best Regards!