People’s credit funds to be ranked


Annual ranking to be conducted by SBV, with points awarded in five criteria.

People’s credit funds in Vietnam are to be assessed and ranked annually under a circular being prepared by the State Bank of Vietnam (SBV).

The ranking will be out of 100 points, with criteria including Equity 10 points, Asset Quality 30 points, Administration, Management and Control 30 points, Business Results 10 points, and Solvency 20 points.

The draft circular also regulates the detailed scoring in each criterion.

Those receiving total scores of over 80 will receive Rank A (Good), from 70 to 80 Rank B (Fairly Good), from 60 to 70 Rank C (Average), and below 60 Rank D (Weak).

If a people’s credit fund were to receive zero points in two criteria it would lose one rank.

Rankings will be conducted annually and the first will be completed prior to April 31 next year. The central bank can also arrange for a new ranking assessment to be conducted at any time when requested to do so by their Supervisory Board and SBV branches.

Within five days of the rankings being finalised, SBV branches in cities and provinces and the departments of inspection and supervision of domestic credit institutions will report to the SBV Governor on the ranking results of people’s credit funds in each locality, through the Banking Supervision Agency under the SBV. In July every year the SBV Governor will approve the rankings.

The draft circular is being prepared as some credit institutions are in financial distress and earlier this year SBV deputy Governor Nguyen Phuoc Thanh announced that the central bank was considering allowing ailing financial companies and people’s credit funds to declare bankruptcy.

Last February, the Tho Loc People’s Credit Fund in Hanoi’s Phuc Tho district was put under comprehensive special supervision by the SBV for three months as it faced insolvency and could not cover deposits. It had committed numerous violations in financial management and credit provision, damaging its financial status and business performance, according to the SBV.

A people’s credit fund is a type of cooperative credit institution operating on the principles of voluntary participation, self-management, and self-responsibility for its operating results, fulfilling the basic objectives of providing mutual assistance between members to develop the strength of the collective and with each member helping other members to conduct efficient production and business activities and service provision and to improve living standards. Activities of a people’s credit fund must ensure that expenses are covered and profit is accumulated in order to develop.

The total amount of lending to one customer must not exceed 15 per cent of the people’s credit fund’s total assets and the total lending to one customer and a related party must not exceed 25 per cent.

As at the end of 2015 there were more than 1,200 people’s credit funds in Vietnam.

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