New proposal on financial mechanism for the Social Policy Bank

The Ministry of Finance is drafting a Decree on financial mechanisms and performance assessment for the Social Policy Bank.

The Ministry of Finance proposes new regulations on financial mechanisms and performance evaluation for the Social Policy Bank.

The Ministry of Finance said that recently, the implementation of Decision No. 180/2002/QD-TTg dated December 19, 2002 on the financial management regulations for the Vietnam Bank for Social Policies (VBSP) and Decision No. 30/2015/QD-TTg dated July 31, 2015 on amending and supplementing a number of articles of Decision No. 180/2002/QD-TTg has raised a number of difficulties and shortcomings that need to be amended, supplemented and perfected to suit the actual situation, such as regulations on: (i) setting aside credit risk provisions; (ii) handling revenue and expenditure differences; (iii) compensating for interest rate differences and management fees; (iv) auditing regime; (v) responsibilities of state management agencies and the VBSP;...

The purpose of developing and promulgating the Decree on financial mechanism and performance assessment for the Vietnam Bank for Social Policies replacing Decision No. 180/2002/QDTTg and Decision No. 30/2015/QD-TTg is to ensure compliance with the provisions of the Law on Credit Institutions, the Law on State Budget, the Law on Public Investment, etc., the Development Strategy of the Vietnam Bank for Social Policies to 2030 approved by the Prime Minister in Decision No. 05/QD-TTg dated January 4, 2023; at the same time, to handle difficulties and shortcomings in the operation of the Vietnam Bank for Social Policies in the past; thereby improving the operational efficiency and financial capacity of the Vietnam Bank for Social Policies to more effectively implement the State's policy credit programs to support hunger eradication, poverty reduction and social security.

The Ministry of Finance proposed a draft Decree on financial mechanisms and performance evaluation for the Vietnam Bank for Social Policies, consisting of 10 chapters, 36 articles and 6 appendices, including the following main contents: (i) Principles of financial management and ensuring operational safety; (ii) Management and use of capital and assets; (iii) Debt classification, provisioning and use of risk reserves; (iv) Compensation for interest rate differences and management fees; (v) Income and expenses of the Vietnam Bank for Social Policies; (vi) Financial results, provisioning and use of funds; (vii) Accounting regime, financial planning, reporting and auditing regime; (viii) Performance evaluation; (ix) Responsibilities of state management agencies and the Vietnam Bank for Social Policies.

On the principles of financial management

According to the provisions of Articles 16 and 23 of the Law on Credit Institutions (effective from August 1, 2024), policy banks operate on a non-profit basis to implement the State's socio -economic policies. In addition, in Decision No. 05/QD-TTg dated January 4, 2023 (Decision No. 05/QD-TTg), the Prime Minister set the goal of developing the VBSP by 2030 "to develop the VBSP into an organization capable of self-reliance and long-term stable development". Therefore, the Ministry of Finance proposes to amend and complete the content on the principles of financial management and operation assurance for the VBSP on the basis of inheriting current legal provisions, and at the same time updating to ensure compliance with the provisions of the Law on Credit Institutions and Decision No. 05/QD-TTg mentioned above.

About working capital

The Ministry of Finance said that according to Article 18 of the Law on Credit Institutions, the charter capital of policy banks is provided by the State budget, supplemented from the State budget and other legal financial sources.

According to current regulations in Decision No. 30/2015/QD-TTg, the charter capital of the VBSP is provided by the state budget upon its establishment and is supplemented annually in proportion to the growth rate of outstanding policy credit assigned by the Prime Minister. The supplementation of charter capital in proportion to the growth rate of outstanding policy credit assigned by the Prime Minister is to ensure that the VBSP has sufficient resources to implement the annual plan for growth of outstanding policy credit assigned by the State.

In addition, in Decision No. 05/QD-TTg, the Prime Minister also set out tasks and solutions to orient and develop the VBSP until 2030 in implementing policy credit; in which it is necessary to focus state resources on the VBSP, promptly and fully allocate capital to implement social policy credit programs in the medium-term and annual public investment plans submitted to competent authorities for approval according to the provisions of the State Budget Law and the Public Investment Law, the charter capital is supplemented annually corresponding to the growth rate of outstanding policy credit assigned by the Prime Minister.

From the above situation, based on the provisions of the Law on Credit Institutions, the tasks and solutions in Decision No. 05/QD-TTg, inheriting the provisions in Decision No. 30/2015/QD-TTg and based on the actual situation, in order to enhance the capacity of the VBSP to perform the State's social security tasks, the Ministry of Finance proposes to amend and complete the regulations on the charter capital of the VBSP in the draft Decree in the direction: The VBSP is provided with additional charter capital by the State budget every year to achieve a charter capital growth rate equal to the maximum policy credit growth plan assigned annually by the Prime Minister to the VBSP. In addition to the above-mentioned State budget source, the VBSP is provided with additional charter capital from the development investment fund and the reserve fund to supplement the bank's charter capital; Accordingly, every 3 years, the People's Credit Fund will develop a plan to supplement charter capital from these funds and report to the Prime Minister for approval based on the opinions of the Ministry of Finance and the State Bank.

On credit risk provisioning

According to the Ministry of Finance, according to current regulations, the Social Policy Bank: (i) sets aside a general provision of 0.75% of outstanding loans, excluding frozen debts and overdue debts; (ii) decides to set aside specific provisions based on the results of debt classification and the financial capacity of the Social Policy Bank; (iii) the maximum balance of the credit risk reserve fund is equal to the frozen debts and overdue debts of the bank.

With the current debt classification mechanism of the VBSP, according to the report of the VBSP as of June 30, 2025, the total credit risk reserve fund of the bank is VND 2,303 billion, accounting for only 0.53% of total outstanding debt; accordingly, it may not ensure enough resources to handle risks for bad debts of the VBSP if risks occur on a large scale due to natural disasters and epidemics (according to the report of the VBSP, with the impact of the recent typhoon Yagi, the total outstanding debt at risk has reached nearly VND 2,400 billion).

From the above situation, to ensure safety for operations, towards full provisioning of credit risk provisions and in accordance with the actual operating situation of the People's Credit Fund, the Ministry of Finance proposes regulations on provisioning of credit risk provisions in the following direction:

For loans to the poor and other policy beneficiaries at the VBSP: Every year, the VBSP sets aside and maintains a general credit risk reserve of 0.75% of the total outstanding balance of these loans. For specific credit risk reserves, the VBSP will consider and decide on the specific additional credit risk reserve based on the financial situation, ensuring that the total balance of credit risk reserves for these loans does not exceed the required reserve level according to the regulations of the Governor of the State Bank of Vietnam (SBV) (In Decision No. 1560/QD-TTg, the Prime Minister assigned the SBV to preside over the completion of debt classification regulations in accordance with the characteristics and operations of the VBSP).

For loans from the Social Policy Bank implemented under the trust document: The Social Policy Bank uses revenue from the trust activities to make provisions for credit risks according to the trust document. In case the trust document does not stipulate the setting up of credit risk provisions, the Social Policy Bank uses revenue from the trust activities to make provisions for credit risks as prescribed for loans to the poor and other policy subjects at the Social Policy Bank mentioned above.

The Social Policy Bank is responsible for separately managing credit risk provisions for loans to the poor and other policy beneficiaries at the Social Policy Bank and loans made by the Social Policy Bank according to the trust documents.

The Ministry of Finance is soliciting comments on this draft on the Ministry's Electronic Information Portal.

PV (synthesis)

Source: https://baohaiphong.vn/de-xuat-moi-ve-co-che-tai-chinh-doi-voi-ngan-hang-chinh-sach-xa-hoi-518752.html