The State Bank of Vietnam (SBV) is collecting opinions from the people on the draft Circular guiding the implementation of environmental risk management in credit extension activities of credit institutions, bank branches. Foreign goods.
The draft explains: Environmental risk is the possibility of loss of assets, capital and income of the implementer of production and business projects and plans with adverse impacts on the environment, arising environmental incidents or violations of regulations on environmental protection shall be handled by agencies in accordance with law.
Environmental risk in credit granting activities is the credit risk of a credit institution due to customers experiencing environmental risks as prescribed in this Circular.
Environmental risk assessment in lending activities is the measurement of environmental risks of investment projects, production and business plans proposed for loans and loans for investment projects. , production – business plans of customers must assess environmental risks as prescribed in this Circular.
Environmental risk management in credit extension activities is the classification, identification and measurement of environmental risks in credit granting activities and the monitoring, control, and proposal of solutions to overcome and limit risks. risk arises.
The SBV said that the draft Circular aims to create a common legal framework that requires credit institutions to manage environmental risks in credit extension activities. Accordingly, credit institutions base on the size and management capacity of the bank and the guidance of the State Bank to issue and implement regulations on environmental risk management through two forms: credit institutions integrate into the lending process. existing credit risk management; or a credit institution to issue an independent environmental risk management process.
Principles of environmental risk management
The draft outlines four principles of environmental risk management in credit granting activities:
1- Credit institutions build an environmental risk management system in credit extension activities independently or integrated in internal regulations on credit granting and internal control, but ensuring the principle of separation of responsibilities with decide to grant credit in accordance with the law on credit granting activities.
2- Credit institutions assess environmental risks, environmental risks in credit extension activities and manage environmental risks in credit granting activities according to internal processes developed by credit institutions in accordance with regulations.
3- Credit institutions conduct environmental risk assessment to determine the risk of credit extension, which is the basis for customer credit rating, determining interest rates, credit extension costs and appropriate credit granting conditions. In case or supplement the conditions for credit extension, warn customers about environmental risks in credit granting activities when there is an environmental incident or incident.
4- Credit institutions shall classify, make provision for risks and manage credit risks for credits with environmental risks in credit granting activities in accordance with current regulations of the State Bank.
In addition, the draft clearly states that credit institutions develop and publish their own environmental policies, which include commitments to manage environmental risks in credit granting activities. The environmental policy of the credit institution must be approved by the Board of Directors or the Board of Members or the Executive Board of the credit institution.
The credit is subject to environmental risk assessment
The draft also clearly states that credit institutions implement environmental risk management in credit extension activities, except for the following forms of credit extension and loans to meet the following borrowing needs of customers:
1- Credit grants in the form of discounts; factoring; Bank guarantee; financial leasing; lending through credit card issuance.
2- Loans to meet the following capital needs: serving daily life needs, consumer loans of consumer finance companies; loans for investment projects and business plans in the fields of commerce, services, and goods circulation that do not emit waste and emissions as prescribed in the Law on Environmental Protection; investments, purchase of fixed assets to serve the management of borrowers.
3- Loans to owners of investment projects and production establishments in Group IV that do not have the risk of adverse impacts on the environment as prescribed in the Law on Environmental Protection.