Circular No. 40/2026/TT-NHNN establishes new ceilings and prudential standards for people’s credit funds in Vietnam, addressing capital adequacy, solvency, fund deployment, and lending activities. The Circular also stipulates how to manage situations where the actual charter capital value is lower than the legally required amount.
The circular mandates a minimum capital adequacy ratio of 8%, calculated as own capital divided by total risk-weighted assets, multiplied by 100. Own capital includes Tier 1 and Tier 2 capital, minus deductions. Assets are grouped into four risk-weight categories: 0%, 20%, 50%, and 100%. The 0% category includes cash, deposits at the State Bank, and certain secured loans, while the 100% category covers fixed assets and other prescribed assets.
The State Bank’s regional branches may require people’s credit funds to maintain stricter prudential ratios based on risk assessments. This flexibility allows for tailored supervision, enhancing the safety of fund operations.
Solvency and Liquidity Rules Tighten
Funds must maintain a solvency ratio of at least 100%, comparing assets available for immediate payment to payable liabilities. This ratio must hold for both the next working day and the subsequent seven working days, ensuring short-term liquidity and payment capability.
The rules limit the use of short-term funds for medium- and long-term loans to a maximum ratio, calculated using a specific formula. Total deposits cannot exceed 20 times equity, with total deposits including demand deposits, term deposits, and savings deposits in Vietnamese Dong.
Lending limits are tied to a fund’s own capital, with specific restrictions for legal entity members and non-member customers. For legal entities, outstanding loans cannot exceed their contributed capital and deposit balance. Non-member customers face similar restrictions based on their deposit contracts. Exceptions to lending limits include loans from entrusted funds where the fund bears no risk and loans fully secured by deposits at the fund.
Internal Regulations and Reporting Mandated
Funds must establish internal regulations to manage these ratios and limits, reviewing and updating them at least annually. They must report to the State Bank if their charter capital falls below legal requirements, submitting a handling plan within 30 days. In severe cases, the State Bank can restrict operations or mandate capital increases, including measures like restricting dividend distribution or operational expansion.
The circular requires funds to use an information technology system to monitor capital, assets, and liabilities, ensuring compliance with mandated ratios and limits.
If the real value of charter capital falls below 80% of the legal requirement, the State Bank may impose additional measures, including stricter prudential ratios, to ensure the fund’s stability and compliance.
Board Accountability and IT Systems Required
People’s credit funds must establish internal regulations for managing capital adequacy, liquidity, lending, and loan management, aligning with Circular No. 40/2026/TT-NHNN and relevant laws. The Board of Directors is responsible for promulgating and amending these regulations, which must be submitted to the Regional branch of the State Bank within 10 days of any changes.
If the real value of charter capital falls below the legal capital, people’s credit funds must formulate and implement a handling plan to ensure the real value of the charter capital is at least equal to the legal capital. They have 30 days to submit a written report and handling plan to the Regional branch of the State Bank.
