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Official Gazette

Saturday, July 4, 2020

CIRCULAR No. 05/2013/TT-BTC OF JANUARY 9, 2013: Guiding the financial regime applicable to credit institutions and foreign bank branches

Updated: 17:24’ - 26/04/2013

THE MINISTRY OF FINANCE

Circular No. 05/2013/TT-BTC of January 9, 2013, guiding the financial regime applicable to credit institutions and foreign bank branches

Pursuant to the November 29, 2005 Law on Enterprises;

Pursuant to the June 16, 2010 Law on Credit Institutions;

Pursuant to the Government’s Decree No. 57/2012/ND-CP of July 20, 2012, on the financial regime applicable to credit institutions and foreign bank branches;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Director of the Department of Banking and Financial Institutions;

The Minister of Finance promulgates the Circular guiding the financial regime applicable to credit institutions and foreign bank branches.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular guides the implementation of the financial regime applicable to credit institutions and foreign bank branches in Vietnam.

Financial operations of credit institutions and foreign bank branches comply with the June 16, 2010 Law on Credit Institutions, the Government’s Decree No. 57/2012/ND-CP of July 20, 2012, on the financial regime applicable to credit institutions and foreign bank branches (below referred to as Decree No. 57/2012/ND-CP), this Circular, and other relevant legal documents on financial management.

Article 2. Subjects of application

This Circular applies to credit institutions and foreign bank branches established, organized and operating under the June 16, 2010 Law on Credit Institutions.

This Circular does not apply to credit institutions being microfinance institutions, policy banks, cooperative banks and people’s credit funds.

Chapter II

SPECIFIC PROVISIONS

Article 3. Equity capital of credit institutions

1. Charter capital.

2. Exchange rate differences:

a/ Differences arising from the consolidation of financial statements of credit institutions (parent companies) and subsidiary companies using an accounting currency other than Vietnam dong;

b/ Differences arising in the process of incomplete capital construction investment which is accounted in the equity capital in accordance with law.

3. Asset revaluation difference, which means the difference between the book value of assets and the value of assets revaluated under a decision of the State or when assets are used as joint -venture or stock capital contributions.

4. Stock capital surplus, which means the difference between the face value of stocks and the value actually earned from the issuance of stocks (if any).

5. Charter capital addition reserve fund, operational development investment fund and financial provisions fund.

6. Undistributed profits.

7. Other capital under the ownership of credit institutions, including the value of fund stocks (if any) recognized under the securities law and other lawful sources of capital.

Article 4. Use of capital and assets

1. Credit institutions and foreign bank branches shall manage, use and monitor all existing assets and capital and conduct accounting strictly according to the current accounting regime; fully, accurately and promptly report on the use of and changes in capital and assets in the business process; clearly define responsibilities of and handling measures for each division and individual in case of damage or loss of their assets or capital.

2. Credit institutions and foreign bank branches may use operating capital for their business activities in accordance with the Law on Credit Institutions, Decree No. 57/2012/ND-CP and this Circular while ensuring capital safety and development.

a/ Throughout the business process, credit institutions and foreign bank branches shall maintain the limits of construction investment and procurement of fixed assets directly for business activities on the principle that the residual value of fixed assets must not exceed 50% of the charter capital and charter capital addition reserve fund, for credit institutions, or must not exceed 50% of the allocated capital and allocated capital addition reserve fund, for foreign bank branches.

b/ For real estate held for handling loan debts under Clause 3, Article 132 of the Law on Credit Institutions:

- For real estate temporarily held by credit institutions for sale or transfer to recover capital, they shall neither account such real estate as an increase in assets nor depreciate such real estate.

- For real estate bought by credit institutions directly for their business activities, they shall account such real estate as an increase in assets and depreciate such real estate in accordance with law while ensuring the limits of construction investment and procurement of fixed assets under Item a, Clause 2 of this Article.

c/ Credit institutions and foreign bank branches shall take measures to assure capital safety specified in Article 8 of Decree No. 57/2012/ND-CP. They shall set up provisions in expenditures specifically as follows:

- For risk provisions in banking operations, credit institutions and foreign bank branches shall set up and use risk provisions according to the State Bank of Vietnam Governor’s regulations after reaching agreement with the Minister of Finance.

- For inventory price reduction provisions, long-term investment loss provisions (including securities price reduction provisions) and bad debt provisions (in addition to risk provisions in banking operations), credit institutions and foreign bank branches shall set up provisions according to common regulations applicable to enterprises.

d/ Lease, mortgage or pledge of assets

- Credit institutions and foreign bank branches may lease, mortgage or pledge their assets in accordance with the Civil Code, the Law on Credit Institutions and other laws to ensure capital efficiency, safety and development.

- For financial-leasing assets, credit institutions and foreign bank branches shall comply with the law on financial leasing activities in Vietnam.

dd/ For assets rent or assets received by credit institutions and foreign bank branches for mortgage, pledge or preservation on clients’ behalf, credit institutions and foreign bank branches shall manage, preserve or use such assets as agreed with clients in accordance with law.

e/ Sale or liquidation of assets

- Credit institutions and foreign bank branches shall sell or liquidate their assets in accordance with law and their charters.

- Credit institutions and foreign bank branches may sell assets for recovering capital for more effective business activities.

- Credit institutions and foreign bank branches may liquidate poor or deteriorated quality assets; irrecoverably damaged assets; technically outdated assets which are no longer needed or are inefficiently used and cannot be sold; and assets which have been used beyond their lifetime and cannot be further used. When liquidating assets, credit institutions and foreign bank branches shall set up liquidation councils.

- For assets subject to auction as prescribed by law upon sale or liquidation, credit institutions and foreign bank branches shall hold auctions in accordance with law.

- Credit institutions being state-owned single-member limited liability companies shall sell or liquidate their fixed assets under Decree No. 57/2012/ND-CP, Article 4 of this Circular and the law on sale and liquidation of assets of state-owned single-member limited liability companies.

Article 5. Revenue management

1. Revenues of credit institutions and foreign bank branches include the revenues specified in Article 15 of Decree No. 57/2012/ND-CP, specifically:

a/ Revenues from business activities, including:

- Revenues from credit activities: Revenue from deposit interests, revenue from interests on credit extension activities, and other revenue from credit activities;

- Revenues from service activities: Revenue from payment services; revenue from treasury services; revenue from entrustment and agency operations; revenue from the services of asset preservation, lease of safes and currency counseling and brokerage; and revenue from other service charges;

- Revenues from foreign currency and gold trading: Revenue from spot foreign-currency trading; revenue from gold trading; and revenue from monetary derivative financial instruments;

- Revenue from profits from capital contribution;

- Revenue from exchange rate differences;

- Revenues from other business activities, including revenue from trading in securities of various types (except stocks); revenue from debt purchase and sale; revenue from asset lease; revenue from card and e-banking service provision; and revenue from other business activities.

b/ Other revenues, including:

- Revenue from the sale and liquidation of fixed assets;

- Revenue from loans handled with risk provisions (including debts which have been written off but are now collected);

- Revenue from payable debts the creditors of which no longer exist or cannot be identified and which are accounted as income increase;

- Revenue from fines or compensations paid by clients due to their breaches of contracts;

- Revenue from insurance compensation;

- Revenue from tax amounts which have been paid but are now partially or wholly reduced or refunded;

- Revenue from refund of the surplus amount from risk provisions (the amount required to be deducted is lower than the amount already deducted) which is not accounted as expenditure decrease according to regulations on risk provisions;

- Revenue from other derivative financial instruments;

- Other revenues.

2. Principles of revenue accounting

a/ For credit activities

- Revenue from interests on credit extension activities:

Credit institutions and foreign bank branches shall account as incomes receivable interests arising in a period on debts which are classified as qualified and do not require deduction of risk provisions as prescribed.

For receivable interests arising in a period on the remaining debts, credit institutions and foreign bank branches are not required to account them as incomes but shall monitor such interests out of balance sheet and urge their collection. Once collected, these interests must be accounted as revenues from business activities.

- Revenue from deposit interests which are receivable in a period.

b/ Revenues from trading in securities (except stocks)

Credit institutions and foreign bank branches shall account as projected revenues profits expected to be earned from trading in securities (except stocks). By the collection deadline, if credit institutions and foreign bank branches cannot collect such profits, they shall not account projected profits for the subsequent period.

c/ For revenue from profits from capital contribution: Dividends and profits divided from capital contribution are the profits divided according to a resolution or decision on such division.

d/ Revenues from exchange rate differences resulting from foreign currency and gold revaluation are recognized according to current accounting standards and law.

dd/ Revenues from other activities include all the proceeds from the sale of products and goods and provision of services arising in a period and accepted to be paid by clients, after subtracting (-) commercial discount, price reductions of goods sold and the value of sold goods which are returned (if accompanied with valid documents), regardless of whether money has been collected or not.

e/ For receivable revenues which have been accounted as incomes but cannot be collected by the collection deadline, credit institutions and foreign bank branches shall account them as revenue decrease if they arise in the same accounting period or as expenditure if they arise not in the same accounting period, and monitor them out of balance sheet and urge their collection. Once collected, these amounts must be accounted as revenues from business activities.

3. Revenues of credit institutions and foreign bank branches arising in a period must have valid invoices or documents and fully accounted.

Article 6. Expenditure management

1. Expenditures of credit institutions and foreign bank branches include the expenses specified in Article 16 of Decree No. 57/2012/ND-CP. For a number of expenses, credit institutions and foreign bank branches shall comply with the following guidance:

a/ Expenses for business activities:

- Expense for credit activities: Payment of deposit interests, payment of loan interests, payment of interests on issued valuable papers, and other expenses for credit extension activities.

- Expenses for the provision of banking services: Expense for payment services; expense for treasury services; expense for entrustment and agency services; expense for telecommunications services for payment activities, and other expenses.

- Expenses for foreign currency and gold trading: Expense for spot foreign currency trading; expense for gold trading; and expense for monetary derivative financial instruments and other derivative financial instruments.

- Expense for capital contribution.

- Expense for exchange rate differences according to current accounting standards and law.

- Expenses for other business activities, including expense for loss from trading in securities permitted by law for trading, expense for debt purchase and sale, and expense for other business activities.

b/ Expense for taxes, charges and fees, including those related to land rents (except enterprise income tax) in accordance with law.

c/ Expenses for assets

- Expense for depreciation of fixed assets used for business activities under regulations on management, use and depreciation of fixed assets of enterprises.

In case of purchase of fixed assets on deferred payment: Credit institutions and foreign bank branches shall account the difference between the payable total amount and the promptly paid purchase price of fixed assets as expenditure according to the payment period, unless such difference is included in the historical cost of fixed assets (capitalized) according to accounting standards.

- Expense for leasing fixed assets: This expense complies with lease contracts. In case the rent for the assets is paid in lump sum for many years, such rent is gradually allocated to business expenditures according to the number of years of using assets. For land rent-related expenses not included in the rent, credit institutions and foreign bank branches shall allocate them to expenditures according to the time of using leased land.

- Expense for maintenance of fixed assets.

- Expense for repair of fixed assets.

- Expense for procurement and repair of instruments and tools.

- Expense for asset insurance.

d/ Expenses for employees as prescribed by law, including:

- Salary, wage and amounts of salary nature.

- Salary-based contributions: Social insurance, health insurance and unemployment insurance premiums, and trade union dues.

- Job severance allowance for laborers of enterprises in accordance with the enterprise law.

- Purchase of human accident insurance.

- Shift meal expenses. For credit institutions being state enterprises, shift meal expenses comply with regulations on shift meal expenses for state-owned single-member limited liability companies.

- Labor protection expense for persons who need labor protection equipment during work.

- Expense for employee uniforms.

- Expense for female laborers as prescribed by law.

- Medical expenses, including expense for regular health checks for laborers, expense for buying reserve medicines and other medical expenses to be paid by enterprises under current law.

- Expense for annual leaves in accordance with law.

- Other expenses for laborers as prescribed by law.

dd/ Expenses for managerial and public duty activities, including:

- Work-trip expenses.

- Expenses for electricity, water, telephone, materials, printing paper and stationery.

- Expenses for treasury operations.

- Expenses for hiring consultants and domestic and foreign experts.

- Expenses for audit.

- Agency commission and entrustment expenses, which must be shown in agency or entrustment contracts with adequate valid, lawful documents.

- Deductions for the scientific and technological development fund as prescribed by law. This fund must be used under current regulations.

- Expense for scientific and technological research, which is the remaining expense after using up the scientific and technological development fund.

- Expense for professional training as prescribed by law.

- Expense for reward for innovations and improvements to increase labor productivity and reward for cost saving, which must suit the actually achieved benefits. Credit institutions and foreign bank branches shall formulate and publicize regulations on reward and set up councils for testing innovations before recognition.

- Expense for fire prevention and fighting.

- Expense for environmental protection work.

- Expense for public information work, advertising, marketing, sale promotion, conferences, reception and protocol and external relations, and other expenses as prescribed, which must have invoices or documents as prescribed by the Ministry of Finance and suit business results of credit institutions and foreign bank branches.

- Brokerage commission expenses: Credit institutions and foreign bank branches shall pay brokerage commissions based on economic benefits brought about by the brokerage. They shall base themselves on the Ministry of Finance’s guidelines on brokerage commission expenses and their practical conditions and characteristics to formulate their regulations on brokerage commission expenses for unified and public application in their institutions or branches, which must be approved by boards of directors or members’ councils or directors general (directors).

Eligible brokerage commission recipients include domestic and foreign organizations and individuals that provide brokerage services for credit institutions and foreign bank branches. Brokerage commission is not paid to agents of credit institutions or foreign bank branches, designated clients, holders of managerial titles and employees of credit institutions and foreign bank branches.

Brokerage commission must be paid based on the contract or written certification between a credit institution or a foreign bank branch and a brokerage commission recipient, indicating the name of the recipient; spending content and rate; method of payment; time of implementation and completion; and responsibilities of the parties.

For brokerage expenses for asset lease (including foreclosed assets and assets used for payment of debts): Credit institutions and foreign bank branches may not pay higher than 5% of the total proceeds from asset lease brought about by the brokerage in a year.

For brokerage expenses for selling mortgaged or pledged assets: Credit institutions and foreign bank branches may not pay higher than 1% of the value actually earned from the sale of assets via brokerage.

- Expense for office protection; expense for national defense and security work.

e/ Expenses for risk provision and deposit preservation and insurance

- Expense for provisions in the operations of credit institutions and foreign bank branches as specified at Item c, Clause 2, Article 4 of this Circular.

- Fee of membership of the deposit preservation and insurance organization as prescribed by law.

g/ Other expenses

- Fee of membership of domestic and foreign professional associations joined in by credit institutions and foreign bank branches at the rate prescribed by such associations.

- Expense for activities of Party and mass organizations in credit institutions and foreign bank branches (outside the funds of Party and mass organizations paid from prescribed sources).

- Expense for amounts already accounted as revenues but actually not collected and not accounted as revenue decrease.

- Expense for payable debts the creditors of which have been identified as no longer existing and which have been accounted as income but then these creditors can be identified.

- Expense for sale or liquidation of assets (if any), including the residual value of sold or liquidated fixed assets.

- Charges paid for the debt collection service provided by institutions licensed to provide debt collection services in accordance with law; expenses for recovery of written-off debts or bad debts.

- Fines paid for administrative violations; fines or compensation paid for breaches of economic contracts falling within the responsibilities of credit institutions and foreign bank branches.

- Expense for dealing with remaining asset losses after being offset by the sources specified in Article 11 of Decree No. 57/2012/ND-CP.

- Expense for social activities, including expense for health, education, overcoming consequences of natural disasters, building houses for the poor, and other expenses as prescribed by law.

- Legal cost and judgment enforcement fee.

- Other expenses.

2. Principles of expenditure accounting

a/ Expenditures of credit institutions and foreign bank branches are those actually arising in a period which are related to business activities.

b/ Expenditures accounted as business expenditures of credit institutions and foreign bank branches must comply with the principle of turnover-expenditure matching and must have adequate lawful invoices and documents as prescribed by law.

c/ Credit institutions being state enterprises may account only deductible expenditures as expenditures when determining enterprise income tax.

3. Credit institutions and foreign bank branches may not account the following as expenditures:

a/ Fines for administrative violations to be paid by violators themselves, including fines for violations of traffic law, business registration regulations, accounting and statistical regulations and tax laws, and fines for other administrative violations;

b/ Expenses not related to their business activities;

c/ Expenses without valid documents;

d/ Amounts already accounted as expenditures but actually not paid;

dd/ Expenses covered by other funding sources;

e/ Other invalid, unlawful expenses.

Article 7. Accounting currency

The determination of the accounting currency complies with Article 18 of Decree No. 57/2012/ND-CP.

Credit institutions and foreign bank branches that have economic activities using foreign currency shall convert foreign currency amounts into Vietnam dong in accordance with law.

Article 8. Accounting, audit, reporting and financial publicity

1. Credit institutions and foreign bank branches shall implement the accounting regime in accordance with law, fully record initial documents, update accounting books and fully, promptly, truthfully, accurately and objectively reflect economic and financial activities.

2. A fiscal year of credit institutions and foreign bank branches starts on January 1 and ends on December 31 of the calendar year.

3. Credit institutions and foreign bank branches shall make financial finalization and make and send financial statements to the State Bank of Vietnam and the Ministry of Finance according to this Circular.

Chairpersons of boards of directors or chairpersons of members’ councils or directors general (directors) of credit institutions and foreign bank branches shall take responsibility for the accuracy and truthfulness of the above financial statements.

4. Contents of financial statements

a/ Financial plan reports, covering:

- Plan on capital sources and use;

- Plan on incomes, expenditures, business results and state budget remittance targets;

- Plan on labor and wages.

b/ Financial statements, including:

- Annual financial statements, mid-year financial statements and accounting reports according to the State Bank of Vietnam’s regulations on financial statements of credit institutions.

- Other reports, including report on changes in capital sources and use; report on capital contribution and share purchase in member units; report on the fulfillment of obligations towards the state budget; a report on incomes of the board of directors or members’ council or director general (director), controllers and employees; and report on general criteria (according to the Appendix to this Circular - not translated).

c/ Reports on audit of annual financial statements.

d/ Irregular reports at the request of management agencies.

5. Time limit for submitting reports/statements

a/ Annual financial plan reports must be submitted no later than November 15 of the year preceding the plan year.

b/ Annual financial statements

- The time limit for submitting annual financial statements is within 180 days, for foreign credit institutions, or 90 days, for other credit institutions, after the end of a fiscal year.

- Audited annual financial statements enclosed with conclusions of independent audit institutions (audit reports) must be submitted right after the audit is completed.

c/ Mid-year financial statements

The deadline for submitting mid-year financial statements is the 30th of the first month of the subsequent quarter.

If the last day of the time limit for submitting financial statements falls on a holiday or a weekend, the deadline for submitting financial statements is the working day right following such day.

6. Places for receiving reports/statements

a/ Commercial banks with 100% charter capital owned by the State and joint-stock commercial banks with over 50% charter capital owned by the State shall submit the reports/statements specified in Clause 4 of this Article to the State Bank of Vietnam and the Ministry of Finance.

b/ Credit institutions (excluding those specified at Item a, Clause 6 of this Article) and foreign bank branches shall submit the reports/statements specified at Items b, c and d, Clause 4 of this Article to the State Bank of Vietnam and the Ministry of Finance.

Article 9. Financial examination, handling of financial violations

1. Forms of financial examination

Financial examination takes the following forms:

a/ Periodical or irregular financial examination.

b/ Examination of specific issues as required by administrative management work.

2. Financial examination agencies

a/ The State Bank of Vietnam shall:

- Comprehensively inspect, examine and supervise the operations, including financial operations, of credit institutions and foreign bank branches.

- Notify the Ministry of Finance of violations and problems related to the implementation of financial management regulations by credit institutions and foreign bank branches, which are detected through inspection, examination or supervision, for coordinated handling and improvement of policies.

b/ The Ministry of Finance shall:

- Conduct financial inspection as prescribed by the law on financial inspection.

- Examine issues related to financial management and observance of the financial regime by credit institutions and foreign bank branches with a view to improving financial management mechanisms for credit institutions and foreign bank branches.

- Notify the State Bank of Vietnam of inspection and examination results for coordinated handling.

3. Handling of financial violations

Credit institutions and foreign bank branches violating the prescribed financial regime or financial reporting regime shall be sanctioned in accordance with law.

Article 10. Responsibilities of management agencies

1. The Ministry of Finance and the State Bank of Vietnam shall perform their responsibilities defined in Articles 34 and 35 of Decree No. 57/2012/ND-CP.

2. Quarterly and annually, the State Bank of Vietnam shall notify the Ministry of Finance of the financial situation of credit institutions and foreign bank branches under Clause 1, Article 35 of Decree No. 57/2012/ND-CP, with the following specific indicators (based on types of operation):

a/ Number of credit institutions and foreign bank branches;

b/ Total charter capital, equity capital, assets, total outstanding loans, total capital raised, rate of non-performing loans and safety ratios in the operations of credit institutions and foreign bank branches;

c/ Total profits (or losses) and number of credit institutions and foreign bank branches operating at a profit (or suffering loses);

d/ Amounts remitted into the state budget by credit institutions and foreign bank branches (categorized by tax and charge);

đ/ Violations of the financial regime, committed by credit institutions and foreign bank branches, which are detected through inspection or supervision;

e/ Financial situation and operation results of credit institutions with over 50% charter capital held by the State;

g/ Other relevant indicators and information.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 11. Implementation provisions

1. This Circular takes effect on February 25, 2013, and applies from the 2013 fiscal year on.

2. This Circular replaces the Ministry of Finance’s Circular No. 12/2006/TT-BTC of February 21, 2006, guiding the Government’s Decree No. 146/2005/ND-CP of November 23, 2005, on the financial regime applicable to credit institutions.

3. Any problems arising in the course of implementation should be reported to the Ministry of Finance for study, consideration and settlement.-

For the Minister of Finance
Deputy Minister
TRAN XUAN HA

VNL_KH1 

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