THE GOVERNOR OF THE STATE BANK

Pursuant to the 1997 Law on the State Bank of Vietnam and the 2003 Law Amending and Supplementing a Number of Articles of the Law on the State Bank of Vietnam;

Pursuant to the 1997 Law on Credit Institutions and the 2004 Law Amending and Supplementing the Law on Credit Institutions;

Pursuant to the Government's Decree No. 52/2003/ND-CP of May 19, 2003, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the director of the Credit Department,

Article 1.- To promulgate together with this Decision the Regulation on debt purchase and sale by credit institutions.

Article 2.- This Decision takes effect 15 days after its publication in "CONG BAO." This Decision replaces the State Bank Governor's Decision No. 140/1999/QD-NHNN14 of April 19, 1999, promulgating the Regulation on debt purchase and sale by credit institutions.

Article 3.- The director of the Office, the director of the Credit Department and heads of concerned units under the State Bank, directors of the State Bank's provincial/municipal branches, chairmen of managing boards, and general directors (directors) of credit institutions shall implement this Decision.

For the State Bank Governor
Deputy Governor
NGUYEN DONG TIEN

Article 1.- Scope of application

This Regulation provides for the purchase and sale of debts by credit institutions (including their organizations tasked to purchase and sell debts) which are established and operate under the Law on Credit Institutions, with respect to debts owed by their clients.

Article 2.- Subjects of application

1. Credit institutions established and operating under the Law on Credit Institutions.

2. Credit institutions' organizations tasked to purchase and sell debts.

3. Companies for purchase and sale of enterprises' debts and assets.

4. Other domestic and foreign organizations and individuals.

Article 3.- Interpretation of terms

In this Regulation, the terms below are construed as follows:

1. Debt purchase and sale means the transfer of a debt whereby the debt seller transfers the creditor's right over the debt to the debt purchaser and receives payment from the debt purchaser.

2. Purchased and sold debt means a debt (including a debt paid on a third party's behalf in guarantee) lent to a client by a credit institution established and operating under the Law on Credit Institutions or a foreign credit institution, which has a debit balance or is accounted off-balance-sheet.

3. Debt sellers include credit institutions established and operating under the Law on Credit Institutions, credit institutions' organizations tasked to purchase and sell debts, and foreign credit institutions that own debts.

4. Debt purchasers include domestic and foreign organizations and individuals that wish to purchase debts from debt sellers to become new owners of the debts.

5. Debtors include organizations and individuals that owe purchased and sold debts to credit institutions.

6. Brokers include economic organizations and credit institutions acting as intermediaries to arrange debt purchase and sale between debt purchasers and sellers and enjoy brokerage commissions as agreed.

7. Value of a purchased and sold debt is the total value of debt principal and interest (including interest payable as a fine) and other debt-related expenses (if any) at the time of debt purchase and sale.

8. Debt purchase and sale price means a sum of money to be paid by the debt purchaser to the debt seller under the debt purchase and sale contract.

9. Sale of a recourse debt means the debt purchase and sale whereby the debt seller undertakes to guarantee the debtor's solvency and reaches agreement with the debt purchaser that in case the debtor fails to pay the due debt, the debt purchaser has the right to recourse against the debt seller for the debt, and the debt seller is responsible for paying the debt to the debt purchaser.

10. Debt purchase and sale contract is a written agreement between the debt purchaser, debt seller and related parties (if any) on the purchase and sale of a debt and the transfer of the creditor's right from the debt seller to the debt purchaser, and other relevant contents.

Article 4.- Scope of debt purchase and sale

1. Debts to be purchased and sold include:

a/ Debts (including debts owed by other credit institutions) owed by clients to credit institutions, which are accounted in-balance-sheet.

b/ Debts which are accounted off-balance-sheet and have been handled with the risk provision or other sources by credit institutions.

2. A debt may be purchased or sold partly or wholly as agreed upon by the debt purchaser and seller.

3. Parties may not purchase and sell debts which have been agreed not to be purchased and sold.

Article 5.- Debt purchase and sale principles

1. Assurance of the safe operation of credit institutions and compliance with Vietnamese law and international practice.

When a treaty to which the Socialist Republic of Vietnam has signed or acceded contains provisions different from those of this Regulation, the provisions of that treaty prevail.

2. A debt shall be purchased and sold on the basis of agreement between the debt purchaser and seller, ensuring legitimate rights and interests of the involved parties.

3. The transfer of the purchased and sold debt shall be conducted simultaneously with the transfer of the obligations of the debtor and parties related to the debt (including the rights associated with the debt guarantees) from the debt seller to the debt purchaser.

4. For the purchase and sale of debts involving foreign organizations or individuals and foreign currency payments, the debt purchaser and seller shall observe current provisions of law on foreign exchange management and other relevant provisions of Vietnamese law.

5. A debt may be sold partly or wholly to many debt purchasers, and purchased and sold many times.

Article 6.- Debt purchase and sale modes

Debt purchase and sale parties may opt for either of the following two modes of debt purchase and sale:

1. Debt purchase and sale through debt auction in accordance law on property auction.

2. Debt purchase and sale through direct negotiation between the debt seller and debt purchaser or through a broker.

Article 7.- Debt purchase and sale price

The debt purchase and sale price shall be determined as follows:

1. The debt purchase and sale price shall be directly agreed upon by the parties or through a broker. Particularly for group-1 debts under the State Bank's current regulations on classification of debts, appropriation and use of credit risk provisions in banking activities of credit institutions, the debt purchase and sale price may not be lower than the value of the purchased and sold debt.

2. The debt purchase and sale price shall be the highest bid in case the debt is auctioned.

Article 8.- Process of debt purchase and sale

Based on their practical characteristics and conditions, credit institutions shall develop a process of purchase and sale of their debts (including their organizations tasked to purchase and sell debts) in accordance with this Regulation.

Article 9.- Debt purchase and sale contract

1. A debt purchase and sale contract shall be established in writing to be signed by the debt purchaser, debt seller and related parties (if any) for each time of debt purchase and sale. Such a contract comprises the following principal contents:

a/ Names and addresses of the parties to the contract;

b/ Names and addresses of the debtor and parties related to the purchased and sold debt;

c/ Value of the purchased and sold debt at the time of transaction;

d/ Price of debt purchase and sale and mode of payment;

e/ Forms of guaranteeing the purchased and sold debt;

f/ Valid duration of debt purchase and sale;

g/ Rights and obligations of the debt seller and purchaser;

h/ Mode and procedures for the transfer of dossiers of the purchased and sold debt;

i/ Other commitments.

2. The debt purchaser and seller may agree on notarization or non-notarization of the debt purchase and sale contract.

3. The debt seller shall notify in writing the signing of the debt purchase and sale contract to the parties related to the purchased and sold debt.

4. When a debt is sold to many purchasers, the debt seller and purchasers shall agree on the proportion of debt to be purchased by each party, the mode of purchase and sale, and rights and obligations of each party under the debt purchase and sale contract.

5. When a debt is partly sold, the debt seller and purchaser shall agree on measures to guarantee the purchased and sold part of the debt, and the rights and obligations of the parties under the debt purchase and sale contract.

6. If a recourse debt is sold, the debt seller and purchaser shall agree on conditions for exercising the purchaser's right to recourse against the seller, and the rights and obligations of the parties under the debt purchase and sale contract.

7. When the purchased and sold debt is redeemed and resold, a debt purchase and sale contract must be made and signed upon each time of redemption and resale.

8. When a debt being a syndicated loan is purchased and sold, the debt purchaser and sellers shall agree on the mode of debt purchase and sale and the rights and obligations of the parties to the debt purchase and sale contract.

Article 10.- Competence to sign a debt purchase and sale contract

1. Representatives at law of the debt seller and purchaser are competent to sign a debt purchase and sale contract.

2. Representatives at law of the debt seller and purchaser may authorize other persons to sign a debt purchase and sale contract.

Article 11.- Currency used in transactions

Unless otherwise agreed by the parties, the currency used in a debt purchase and sale transaction is the currency of the purchased and sold debt.

Article 12.- Transfer of the right over debt guarantees

1. All rights and interests associated with guarantees for the purchased and sold debt such as mortgage, pledge or guarantee shall be unchanged and transferred by the debt seller to the debt purchaser under the debt purchase and sale contract.

2. When the debt purchaser and seller agree to modify debt guarantees, such modification must be consented by the debtor and related parties.

3. The transfer of the right over debt guarantees to debt purchasers being foreign organizations or individuals must comply with relevant laws.

Article 13.- Rights and obligations of the debt purchaser

1. The debt purchaser has the following rights:

a/ To inherit all the debt seller's rights and obligations over the purchased debt as well as rights and obligations towards the debt guarantors;

b/ To request the debt seller to transfer all dossiers and complete procedures for the transfer of the creditor's right towards the debtor and debt guarantors according to the debt purchase and sale dossiers as well as other rights agreed in the debt purchase and sale contract to the debt purchaser;

c/ To have recourse against the debt seller for payment when the debt purchaser cannot recover the purchased debt as agreed in accordance with Clause 6, Article 9 of this Regulation;

d/ To initiate lawsuits against the debt seller, debtor and related parties that breach commitments.

2. The debt purchaser has the following obligations:

a/ To make full and timely payment according to the debt purchase and sale price agreed in the debt purchase and sale contract;

b/ To pay expenses (including brokerage commissions, if any) incurred in the course of debt purchase and sale as agreed in the debt purchase and sale contract.

Article 14.- Rights and obligations of the debt seller

1. The debt seller has the following rights:

a/ To receive from the debt purchaser the payments at the debt purchase and sale price agreed by the parties in the debt purchase and sale contract;

b/ To initiate lawsuits against related parties that breach commitments.

2. The debt seller has the following obligations:

a/ To transfer to the debt purchaser all the debt dossiers on time and the right over guarantees for the purchased and sold debt as agreed in the debt purchase and sale contract;

b/ To transfer debt-guarantee assets (if any) and complete legal procedures for transfer of the creditor's right and other rights to the debt purchaser in accordance with law;

c/ To notify in writing the debtor and other related parties (guarantor, guarantee certifier, third party providing asset guarantee) of the debt purchase and sale;

d/ To make payment for the debt to the debt purchaser that cannot recover the purchased debt as agreed in the case of sale of a recourse debt;

e/ To pay expenses (including brokerage commissions, if any) incurred in the course of debt purchase and sale as agreed in the debt purchase and sale contract.

Article 15.- Rights and obligations of the broker

1. The broker has the following rights:

a/ To arrange debt purchase and sale for the debt purchaser and seller at the request of the parties;

b/ To receive brokerage commissions and have relevant reasonable expenses paid as agreed by the parties in the brokerage contract;

c/ To initiate a lawsuit against the debt seller or purchaser that breaches the signed brokerage contract.

2. The broker has the following obligations:

a/ To provide truthful brokerage;

b/ To take legal responsibility for the information he/she has supplied;

c/ Not to disclose or supply information detrimental to the interests of the debt purchaser and seller;

d/ To preserve documents supplied to him/her for providing brokerage and return all those documents to the debt purchaser and seller after the brokerage is completed;

e/ To pay compensations for damage caused by him/herself to the debt purchase and sale parties.

Article 16.- Rights and obligations of the debtor and debt guarantors

1. The debtor and debt guarantors have the following rights:

The debtor and debt guarantors may lodge a complaint or initiate a lawsuit against the debt seller if the debt purchase and sale contract is inconsistent with the credit contract with regard to the purchased and sold debt, which is detrimental to the interests of the debtor and related parties (if any).

2. The debtor and debt guarantors have the following obligations:

a/ To unconditionally consent to the transfer of the creditor's right from the debt seller to the debt purchaser;

b/ To fulfill in time all the obligations committed with the creditor;

c/ To join the debt seller, debt purchaser and related parties in completing legal procedures for transfer of the creditor's right and other rights from the debt seller to the debt purchaser.

Article 17.- Settlement of disputes

A dispute arising in the course of debt purchase and sale must firstly be settled through negotiation between related parties. If it cannot be settled through negotiation, the parties shall initiate a lawsuit at a court or arbitration in accordance with law.

Article 18.- Management of purchased and sold debts

1. Purchased debts shall be managed and classified by credit institutions, which shall also set aside risk provisions for them under the State Bank's current regulations, and accounted as total loan debt balances which must be controlled within the limit of equity capital of those credit institutions according to current regulations.

2. For a debt which is sold under an agreement on the sale of a recourse debt, the recourse debt-selling credit institution shall set aside a risk provision under the State Bank's current regulations, except for debts which are accounted off-balance-sheet and have been handled with the risk provision or other sources by the credit institution.

3. When the debt purchaser and seller agree that the debt seller shall redeem the purchased and sold debt, while the debt is owned by either party (the purchaser or seller), that party shall manage and classify the debt and set aside a risk provision for it according to current regulations.

Article 19.- Financial handling and accounting in debt purchase and sale operations

1. Handling of the difference between the debt purchase and sale price and the value of the seller's debt:

a/ For debts accounted in balance sheet:

- If the debt purchase and sale price is higher than the value of the debt, the difference shall be accounted as the fiscal year's income of the credit institution.

- If the debt purchase and sale price is lower than the value of the debt, the difference shall be offset with compensations paid by an individual or a collective (when that individual or collective is identified to have caused the damage and must pay compensations according to regulations), the insurer's insurance sum or the risk provision already set aside; the deficit shall be accounted as the credit institution's business cost in the period.

b/ For debts accounted off-balance-sheet: Except when the purchased and sold debt is subject to a separate handling mechanism, all proceeds from debt sale shall be accounted as other incomes of the credit institution.

2. Expenses incurred in the course of debt purchase and sale shall be accounted as the credit institution's operation expenses in the period.

3. The accounting in debt purchase and sale transactions shall comply with current regulations on the accounting regime applicable to credit institutions.

Article 20.- Information and reporting regime

Credit institutions participating in debt purchase and sale transactions shall abide by the reporting and statistical regime under the State Bank's current regulations.

Article 21.- Credit institutions, clients and concerned organizations and individuals shall implement this Regulation. Based on this Regulation and the provisions of relevant legal documents, credit institutions shall promulgate specific guiding documents suitable to their conditions, characteristics and operation charters.