Decision No. 03/1998/QĐ-NHNN3 Issuing the Model Regulation on the Organization and Operation of Internal Audit in Credit Institutions Operating in Vietnam

Pursuant to …;

Issuing a model regulation on the organization and operation of internal audit and internal control activities in credit organizations operating in Vietnam. OF NATIONAL

Article 2 is amended as follows: in Vietnam

 GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Credit Cooperative and Financial Company Ordinance dated May 24, 1990;

Pursuant to the Government Decree No. 15/CP dated March 2, 1993 on the tasks, powers, and responsibilities for state management of Ministries and agencies at the ministerial level;

To strengthen internal audit and control activities, contributing to improving the quality of operations of credit organizations;

At the proposal of the Chairman of the State Bank Inspectorate,

DECISION:

Article 1. We hereby issue the "Model Regulation on the Organization and Operation of Internal Audit and Control Activities in Credit Organizations Operating in Vietnam."

Article 2. This Decision shall take effect fifteen days from the date of issuance. Previous regulations regarding the supervisory department in joint-stock credit organizations shall cease to be effective.

Article 3. The Chairman of the Board of Directors of credit organizations shall be responsible for issuing regulations on the organization and operation of internal audit and control activities that are appropriate to the characteristics of their organizational models and operations.

Article 4. Chairman of the Board of Directors; General Director (Director) of Credit Organizations; Chairman of the State Bank Inspectorate; Heads of Departments and Bureaus under the State Bank; Directors of State Bank Branches in provinces and cities shall be responsible for implementing this Decision.

MODEL REGULATION ON THE ORGANIZATION AND OPERATION OF INTERNAL AUDIT,
INTERNAL CONTROL ACTIVITIES IN CREDIT ORGANIZATIONS OPERATING IN VIETNAM

(Issued together with Decision No. 03/1998/QĐ-NHNN3 of the Governor of the State Bank dated January 3, 1998)

of the Governor of the State Bank of Vietnam on January 3, 1998)

I. GENERAL PROVISIONS

Article 1. Concepts, objectives of internal audit and internal control:

Internal audit and internal control (hereinafter referred to collectively as internal audit) in credit organizations (COs) involve COs implementing various methods of supervision, inspection, and internal auditing aimed at ensuring compliance with legal provisions, industry management regulations, and internal regulations of COs; mitigating risks in operations and protecting asset safety; ensuring the comprehensiveness and reliability of accounting data.

Article 2. Objectives and scope of application:

This regulation applies to state-owned banks (including poverty service banks and Mekong Delta housing development banks), commercial joint-stock banks; financial companies (including wholly foreign-owned financial companies, foreign joint venture financial companies in Vietnam, and leasing companies); joint venture banks; and foreign bank branches in Vietnam; Central People's Credit Funds.

For internal control bodies established by the Board of Directors or elected by the Shareholders' Meeting (referred to hereafter as the Supervisory Board), they shall operate in accordance with relevant laws.

Article 3. Requirements for conducting internal audit and internal control:

Credit organizations must ensure the following requirements during the implementation of internal audit:

1. Organizing and directing strict adherence to legal provisions, rules, and systems issued by the State Bank (SB).

2. Issuing comprehensive regulations on business management, governance, and operations; on authority delegation and internal inspection and auditing procedures for business activities. Based on these, COs must strictly organize pre-, during-, and post-completion inspections for all operational stages of each business unit and affiliated units, ensuring effective and safe business operations.

Article 4. Principles for organizing and operating dedicated internal audit machinery:

1. Establishing dedicated internal audit machinery and personnel independent in operation from business units and affiliated units. Personnel within the internal audit machinery shall not concurrently hold other positions within the CO.

2. Being independent in evaluating, concluding, and recommending during internal audit and auditing activities. Evaluations, conclusions, and recommendations made by the internal audit body and auditors concerning the strengths, weaknesses, issues, or violations of business units and staff within the CO must be definitive, clear, and accurate.

II. ORGANIZATION OF DEDICATED INTERNAL AUDIT MACHINERY IN COs

Article 5. Organization structure:

1. All COs specified in Article 2, Clause 1 of this Regulation must establish dedicated internal audit machinery at headquarters and affiliated units. This machinery is directly subordinate to the General Director (Director).

2. For state-owned banks, the dedicated internal audit machinery operates according to the charter on organization and operation of each bank approved by the Governor of the SB.

3. For other COs, based on scale and operational characteristics, arrange the internal audit system appropriately.

Article 6. Ranks and positions in the dedicated internal audit machinery:

1. Auditor: individuals meeting the criteria stipulated in Article 11 of this Regulation, appointed by the General Director (Director) to specialize in internal audit and auditing within the CO.

2. Head of the Internal Audit Department (or Team Leader), appointed and relieved of duty by the Board of Directors (BOD) upon recommendation of the General Director (Director). For foreign bank branches, appointment and relief of duty are conducted by the General Director.

3. Deputy Heads of the Internal Audit Department (Deputy Team Leaders), appointed and relieved of duty by the General Director (Director) upon recommendation of the Head of the Internal Audit Department (Team Leader) and the Head of the Human Resources Department.

III. TASKS, POWERS, AND RESPONSIBILITIES OF THE DEDICATED INTERNAL AUDIT MACHINERY

RESPONSIBILITY

, Clause 1, Clause 2 Article 7a of this Regulation.. Tasks of the internal audit organization:

The internal audit organization of COs has the responsibility to implement supervision, inspection, and internal auditing of COs and affiliated units. Specifically:

1. Drafting for the General Director (Director) to submit to the BOD for approval the methods, contents, and procedures for internal audit and auditing of COs;

2. Developing and submitting to the General Director (Director) for review and implementation plans for regular or ad hoc internal audit and auditing;

3. Directly or in collaboration with the Supervisory Board to conduct inspections of management and operations in accordance with banking laws and internal regulations of COs;

4. Inspecting compliance with business operation procedures as prescribed by banking laws and internal regulations of COs and affiliated units;

5. Monitor the strict compliance with the State Bank of Vietnam's regulations on ensuring safety in banking operations;

6. Evaluate the level of safety in banking operations and recommend measures to enhance the ability to ensure safety in the operations of credit institutions;

7. Perform internal audit functions;

8. Report to the General Director (Director) and the Board of Supervisors the results of regular or ad hoc inspections and propose recommendations to address deficiencies and issues;

9. Within the scope of functions and authority prescribed by law, examine and resolve complaints and reports related to credit institutions, or inspect the handling of complaints and reports by units under the credit institution. For credit institutions that establish a separate department for complaint resolution, the business of handling complaints and reports and anti-corruption activities shall be carried out by this department;

10. Review the system of safety regulations in business operations, identify loopholes and unreasonable aspects to recommend supplements and amendments;

11. Carry out other tasks assigned by the General Director (Director);

Article 8. Powers of the internal audit organization:

1. Require business units and employees of credit institutions to explain their work performed, ongoing work, present directive documents, vouchers, ledgers, and other relevant materials (if necessary) to serve monitoring, inspection, or auditing activities;

2. Propose to the General Director (Director) to establish inspection teams to conduct regular or ad hoc inspection and auditing activities according to approved plans and contents;

3. The Head of the Internal Audit Department (or Team Leader) may attend meetings convened by the General Director (Director);

4. Recommend the General Director (Director) to handle units or individuals who violate laws, regulations of the State Bank of Vietnam, or credit institutions, which harm operations or lead to unsafe business conditions;

Article 9. Responsibilities of internal auditors in credit institutions:

1. If violations of inspection and auditing regulations are discovered during the performance of internal supervision, inspection, and auditing duties and not reported fully and promptly, they must bear responsibility before the General Director (Director); if serious, they will also bear legal responsibility;

2. Bear responsibility for evaluations, conclusions, and recommendations made during the inspection and auditing process;

3. Implement data and document confidentiality in accordance with state, State Bank of Vietnam, and credit institution regulations;

4. Serve as the point of contact when inspection teams from the State Bank of Vietnam or external inspection and auditing teams conduct inspections at credit institutions;

IV. INTERNAL INSPECTION METHODS IN CREDIT INSTITUTIONS

Article 10. Inspection methods:

The Chairman of the Board of Directors is responsible for specifying the methods and contents of inspections in accordance with the organizational structure and operational characteristics of each credit institution, but must comply with the following regulations:

Monitoring activities: conducted based on analyzing financial reports, statistical reports, and internal directive documents sent according to credit institution regulations;

Direct inspections: carried out through internal inspections or audits based on relevant files, vouchers, and documents at units within the credit institution;

V. STANDARDS, LEVELS, AND ALLOWANCES FOR AUDITORS IN CREDIT INSTITUTIONS
COMMON STANDARDS FOR AUDITORS:

Article 11. In addition to general standards for bank employees, internal auditors must meet the following standards:

1. Understanding of laws and proficiency in the business areas they oversee;

2. Knowledge of banking credit, accounting-finance, and economic auditing. Specifically, the Head of the Department (Team Leader) must have a university degree in banking, economics, or accounting finance;

3. At least three years of banking work experience (five years for state-owned banks);

Levels and allowances for auditors are determined by the Chairman of the Credit Institution's Board of Directors in accordance with current laws;

Article 12. VI. OTHER PROVISIONS

Specialized internal inspection organizations are responsible for regularly reporting to the State Bank of Vietnam's Inspectorate and the credit institution's Board of Supervisors on internal inspection and auditing programs and key outcomes of inspection activities;

Article 13. Annually, the State Bank of Vietnam's Inspectorate evaluates the implementation of internal inspection and auditing programs and outcomes of each credit institution. Based on this, the General Director (Director) determines the need to strengthen, supplement, and adjust the organization and activities of internal inspections and audits;

Article 14. Specialized internal inspection organizations of credit institutions are guided and assisted by the State Bank of Vietnam's Inspectorate in supervisory, inspection, and auditing practices;

Article 15. The Chief Inspector of the State Bank of Vietnam is responsible for:

VII. IMPLEMENTATION PROVISIONS

Article 16. 1. Guiding the implementation of Articles 13 and 14 of this Regulation;

2. Supervising and inspecting the implementation of regulations stipulated in this Regulation;

Any supplementation or amendment to this Regulation is decided by the Governor of the State Bank of Vietnam./.

Article 17. Any supplementation or amendment to this Regulation shall be decided by the Governor of the State Bank of Vietnam./.