Hanoi (VNA) – Credit institutions in which the State controlsover 50 percent of charter capital will now be subject to assessment, accordingto a circular drafted by the Ministry of Finance.

The assessment will be based on five criteria: total revenue, after-tax profitand after-tax profit margin over equity, bad debt ratio and potentiallyirrecoverable debt ratio, observance of legal regulations and Government’spolicies; and implementation of public utility products and services.

For the first criterion, the circular states that the total turnover isdetermined according to the balance in the bookkeeping accounts of the creditinstitution.

Under the second criterion, after-tax profit is the net profit from businessactivities after deducting expenses for provisioning risky loans and corporateincome tax. The ratio of after-tax profit to the owner’s equity is determinedby the percentage of after-tax profit divided by the average equity in theyear.

For the third criterion, the draft regulates that the non-performing loan (NPL)ratio is the ratio of outstanding NPLs (including subprime debt, doubtful debtand potentially irrecoverable debt) against total outstanding loans (includingstandard debt, debt needing special attention, subprime debt, doubtful debt andpotentially irrecoverable debt.

For the ratio of potentially irrecoverable debt, the draft circular states thatit is the ratio of outstanding potentially irrecoverable loans to the totaloutstanding loans.

Debts in Vietnam are classified into five groups based on their risk status:standard debt, debt needing special attention, subprime debt, doubtful debt andpotentially irrecoverable debt.-VNA