DECREE NO. 166/1999/NĐ-CP ON THE FINANCIAL REGIME FOR CREDIT ORGANIZATIONS

DECREE

Regarding the financial regime for credit organizations

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THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;

Based on the Law on Credit Organizations No. 02/1997/QH10 dated December 12, 1997;

At the request of the Minister of Finance.

DECREE:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application

This Decree stipulates the financial regime for credit organizations established, organized, and operating in accordance with the Law on Credit Institutions.

Article 2. Financial management principles

1. Credit organizations shall be autonomous in finance, bear responsibility for their business operations, and fulfill their obligations and commitments as prescribed by law.

2. Credit organizations must conduct financial transparency.

Article 3. The Chairman of the Board of Directors and the General Director (Director) of credit institutions shall be responsible under the law and before state management agencies for compliance with the financial, accounting, and auditing regimes of credit institutions.

Article 4. The Ministry of Finance shall perform the state management function over the finances of credit institutions, provide guidance and inspect the implementation of the financial regime of credit institutions in accordance with the provisions of the law.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Article 5. The working capital of credit institutions includes the following sources:

1. Registered capital;

2. Capital for construction and acquisition of assets provided by the State (if any);

3. Differences arising from asset revaluation and exchange rate differences;

4. Supplementary capital reserve funds, business development investment funds, financial reserve funds, unemployment assistance reserve funds, reward funds, welfare funds;

5. Undistributed profits;

6. Borrowed capital in the form of deposits from individuals and economic organizations, issuance of securities, borrowing from domestic and foreign credit institutions, borrowing from the State Bank;

7. Other capital as prescribed by law.

Article 6. During their operations, credit institutions must ensure that the actual paid-in registered capital does not fall below the statutory level set by the Government for each type of credit institution. When there is a change in the registered capital, the credit institution must publicly announce the new amount of registered capital.

Article 7.

1. Credit institutions may use working capital to serve business activities in accordance with the Law on Credit Institutions, ensuring the principles of safety and capital development. When using capital and reserves for investment in construction and acquisition of fixed assets, credit institutions can only use up to 50% of their own capital and must comply fully with the State's regulations on investment and construction management.

2. Credit organizations have the right to adjust their capital and asset structure to serve the development of business activities.

3. The transfer of capital and assets between member units of credit institutions shall be carried out by the General Director (Director) based on a plan approved by the Board of Directors.

Article 8.

1. Credit institutions may use registered capital and reserve funds to contribute capital, purchase shares of enterprises and other credit institutions in accordance with the provisions of the law.

2. The Board of Directors of credit institutions decides on plans for capital contribution, share purchases, and joint ventures with domestic economic organizations, but must not exceed the maximum limit set by the State Bank.

3. In cases of contributing capital, purchasing shares, or forming joint ventures with foreign investors, the Chairman of the Board of Directors of credit institutions must submit to the Governor of the State Bank for approval.

Article 9. Credit institutions are responsible for implementing the provisions on ensuring the safety of working capital as follows:

1. Implementing the financial management and usage system in accordance with the Law on Credit Institutions and this Decree.

2. Maintaining all ratios required for safe operation of credit institutions as prescribed by law.

3. Purchasing insurance for assets as prescribed by law.

4. Participating in deposit insurance schemes or deposit preservation organizations to protect the legitimate rights and interests of depositors and contribute to maintaining the stability of credit organizations.

5. Being allowed to include the following provisions in operational costs:

a) Provisions for risks in the operations of credit institutions. The levels of establishment and use of these provisions to address risks in banking operations are regulated by the Governor of the State Bank after consultation with the Minister of Finance.

b) Provisions for inventory write-downs;

c) Provisions for reductions in the value of securities.

Article 10. Inventory taking and asset revaluation

1. Credit institutions must conduct inventory and asset revaluation in the following situations:

a) Inventory and revaluation of assets periodically and at the end of the fiscal year. Accurately determine surplus and shortage of assets, accounts receivable, overdue debts, uncollectible debts; identify causes and responsibilities for handling;

b) Inventory and revaluation of assets as decided by authorized state agencies;

c) Implementing shareholding or diversifying ownership forms;

d) Using assets for joint ventures, share purchases, or recovering assets when joint ventures cease operations.

2. Asset inventory and revaluation must comply with legal regulations. Any increases or decreases in asset values due to revaluation shall be recorded as increases or decreases in the capital of credit institutions.

Article 11. Credit institutions must implement depreciation of fixed assets according to the regulations applicable to enterprises. Credit institutions may use the depreciation of fixed assets for reinvestment, modernization of fixed assets, and other business needs in accordance with the law.

Article 12. When suffering asset losses, credit organizations must determine the cause, responsibility, and handle them as follows:

1. If assets are lost due to the fault of groups or individuals, those groups or individuals must compensate according to the law.

2. If the asset has been insured, it shall be handled according to the insurance contract.

3. Utilize the provision established in expenses to offset in accordance with the provisions of the law.

4. The loss value after being offset by compensation from individuals, groups, insurance organizations, and provisions deducted from expenses, if still insufficient, shall be covered by the financial reserve fund of the credit institution. If the financial reserve fund is insufficient, the shortfall shall be recorded as extraordinary expenses for the period.

Article 13.

1. Credit institutions may lease, mortgage, or pledge assets under their management according to the principle of efficiency, safety, and capital development as stipulated by the Civil Code and other laws.

2. When credit institutions lease, mortgage, or pledge assets related to the business operations of the entire system, they must obtain written consent from the State Bank.

Article 14.

1. Credit institutions may sell assets to recover capital for more effective business purposes. For assets related to the technology of the entire system's business operations, written consent from the State Bank is required when selling them.

2. When selling assets, credit institutions must appraise the assets and organize auctions where the law requires it.

3. The difference between the proceeds from selling off assets and the remaining value of the sold assets and the costs of selling off assets shall be recorded in the operating results of the credit institution.

Article 15.

1. Credit institutions may liquidate obsolete, deteriorated, or non-repairable assets; technologically outdated assets that are not needed or are not used effectively and cannot be sold in their current condition. For assets related to the technology of the entire system's business operations, written consent from the State Bank is required when liquidating them.

When liquidating assets, credit institutions must establish a Liquidation Board; in cases of selling liquidated assets, they must organize auctions in accordance with the provisions of the law.

3. The difference between the proceeds from liquidating assets and the remaining value of the liquidated assets and the costs of liquidating assets shall be recorded in the operating results of the credit institution.

Chapter 3:

REVENUE, EXPENSES AND OPERATING RESULTS

Article 16. Revenue from business operations of credit institutions is the amount of receivables generated during the period, including:

1. Income from business activities

a) Interest income from loans;

b) Interest income from deposits;

c) Income from financial leasing activities;

d) Other income from credit activities;

đ) Service fee income;

e) Guarantee fee income;

f) Treasury service fee income;

g) Discounting business fee income;

h) Income from other banking-related services.

2. Income from other activities

a) Dividend and share purchase income;

b) Income from participating in the money market;

c) Income from gold and foreign currency trading;

d) Entrusted and agency business income;

đ) Insurance service fee income;

e) Consulting service fee income;

f) Income from inter-credit institution debt buying and selling activities;

g) Rental income from property;

h) Income from other services.

3. Refunds of previously set aside provisions according to current regulations; recoveries of capital that have been processed through risk reserves; exchange rate differences from foreign exchange transactions according to regulations.

4. Other income.

Article 17. Expenses of credit institutions are reasonable costs incurred during the period, including:

1. Costs for business operations of credit institutions:

a) Interest payable on deposits; interest payable on loans; bank service fees.

b) Depreciation of fixed assets used for business operations and services at levels prescribed generally for enterprises.

c) Wages, salaries, and other payments of a wage or salary nature that credit institutions must pay to employees, including allowances for those who hold concurrent positions as stipulated by regulations. The level of wage and salary payments is based on legal provisions and labor contracts signed between credit institutions and employees, but must ensure the principle:

For state-owned credit institutions, the wage and salary system shall be implemented according to general regulations applicable to state-owned enterprises.

For other credit institutions, the wage level paid to employees is determined by the Board of Directors based on the agreement in the labor contract between the credit institution and the employee, in accordance with the Labor Code and not exceeding the maximum allowable wage when determining taxable income as specified by local authorities.

d) Social insurance, health insurance, and trade union fees that credit institutions must pay according to legal provisions;

đ) Outsourced service costs: such as transportation, electricity, water, telephone, materials, printed documents, office supplies, tools, repairs of fixed assets, fire prevention and extinguishing, consulting, auditing, asset insurance purchases, commission fees, brokerage and agency fees, and other services.

e) Other expenses:

Business license tax, land use tax or land rental fees, real estate taxes, various taxes, fees, and charges.

Advertising, marketing, promotional, reception, ceremonial, transaction, external affairs, conference, and other expenses. These expenses in the first two years shall not exceed 7% of total expenses in the year for newly established credit institutions, and not more than 5% in subsequent years.

Labor protection expenses.

Severance pay for employees in accordance with the prescribed system.

Costs for female workers according to prescribed regulations.

Meal allowance for credit institution staff, the expense level not exceeding the minimum wage stipulated by the State for civil servants.

Costs for industry associations that credit institutions participate in.

Setting up reserve funds as prescribed and costs for participating in insurance organizations or paying deposit insurance premiums as provided for in Article 9 of this Decree.

Costs for innovation awards and savings awards as prescribed.

Scientific research costs, technological innovation research costs, innovation award costs, labor training costs, skill enhancement or management capacity improvement costs, educational support costs (if any), and healthcare costs for credit institution employees according to prescribed regulations.

Security costs for the office.

Cashier and vault operation costs.

Environmental protection costs. If the cost in a year is large and has effects over multiple years, it can be allocated to future years.

Penalties for breach of economic contracts.

2. Other operating costs of credit institutions include:

a) Foreign currency and gold trading costs.

b) Costs for purchasing and selling stocks and bonds.

c) Rental costs for leasing and renting assets.

d) Costs for selling off and liquidating assets (including residual asset values and selling-off and liquidation costs).

đ) Costs for joint ventures, cooperative ventures, and equity investments.

e) Costs for inter-credit institution debt buying and selling activities.

g) Costs for recovering written-off debts and penalty collection costs.

h) Losses remaining after compensation from sources as stipulated in Point 4, Article 12 of this Decree.

i) Other allowable costs.

Article 18. Credit institutions shall not record the following items as business operation expenses:

1. Penalties that groups or individuals must pay due to violations of the law while performing their duties.

2. Costs unrelated to credit institution business operations, such as basic construction investment costs, hardship allowances for employees, and support costs for other organizations and individuals.

3. Overseas travel costs exceeding the prescribed limit.

4. Costs covered by other funding sources: public welfare costs, reward costs, welfare costs, regular and emergency hardship allowances, and other costs covered by other funding sources.

5. Other unreasonable costs.

Article 19.

1. Economic activities must be recorded in accounting books and final reports in Vietnamese currency.

2. In cases where economic activities occur in foreign currencies, they must be converted into Vietnamese currency according to the regulations of the Ministry of Finance.

Article 20. Credit institutions must accurately record revenues and expenses in accordance with prescribed regulations and bear legal responsibility for the accuracy of revenue and expense items and comply with invoice and accounting voucher regulations.

Chapter IV

PROFIT AND ESTABLISHMENT OF FUNDS

Article 21. Profit realized in the year is the result of credit institution operations, including business activity profit and other activity profit. Credit institution profit is the difference determined by subtracting total reasonable and legitimate expenses from total revenue.

Article 22. Distribution of profits for state-owned credit institutions:

After paying corporate income tax according to legal provisions, the profit of state-owned credit institutions is distributed as follows:

1. Establishing a supplementary capital reserve fund at 5%, the maximum level of this fund shall not exceed the actual paid-in capital of the credit institution.

2. Make up losses from previous years for losses that cannot be deducted from pre-tax profit.

3. Pay money received from using state budget capital.

4. Deduct fines for violations of laws that are the responsibility of credit institutions.

5. Profit remaining after deducting the above items shall be distributed as follows:

a) Set aside 10% for the financial reserve fund, with the balance of this fund not exceeding 25% of the charter capital of the credit institution.

b) Development business investment fund 50%.

c) Fund for unemployment assistance 5%, with the balance of this fund not exceeding six months' salary.

d) Establish two funds for rewards and welfare. The maximum amount to be set aside for both funds shall be based on the rate of profit (calculated on state capital) as follows:

Three months' salary if the rate of profit this year is not lower than last year.

Two months' salary if the rate of profit this year is lower than last year's rate of profit.

The Board of Directors of the credit institution, after consulting the trade union of the credit institution, decides the ratio of distribution to each fund.

đ) The remaining profit after setting aside amounts for the two reward and welfare funds shall be added to the development business investment fund.

Article 23. Distribution of profit for other credit institutions:

After paying corporate income tax according to the law, the profit of the credit institution shall be distributed as follows:

1. Establish a supplementary capital reserve fund, make up losses from previous years, deduct fines for violations of laws, as stipulated in Clause 1, 2 and 4 of Article 22 of this Decree.

2. Remaining profit shall be distributed as follows:

a) Set aside 10% for the financial reserve fund, with the balance of this fund not exceeding 25% of the charter capital of the credit institution.

b) Unemployment assistance reserve fund 5%, with the balance of this fund not exceeding six months' salary.

3. The division of the remaining profit after establishing the funds as stipulated in Clause 1 and Clause 2 of this Article shall be decided by the credit institution itself.

Article 24. Principles for using funds:

1. The supplementary charter capital reserve fund is used to increase the charter capital.

2. The business development investment fund is used to invest in expanding the scale of business operations and modernizing technology and equipment, working conditions of credit institutions.

Based on investment needs and the capacity of the fund, the Board of Directors of the credit institution decides on the form and methods of investment according to the principles of efficiency, safety, and capital growth.

3. The financial reserve fund is used to cover the remaining losses and damages to assets occurring during the course of business after being compensated by the organizations or individuals causing the loss, by insurance organizations, and by using reserves established in expenses.

4. The unemployment assistance reserve fund is used to provide assistance to employees who have worked at the credit institution for one year or more and are temporarily unemployed according to the law; training costs for employees due to changes in technology or new jobs; vocational training for female employees of the credit institution and upgrading the professional skills of staff working in the credit institution.

5. The reward fund is used for:

a) Year-end bonus or regular bonus for cadres and employees of the credit institution. The level of bonus is determined by the Board of Directors of the credit institution based on the proposal of the General Director (Director) and the trade union of the credit institution, based on labor productivity and work achievements of each cadre and employee in the credit institution.

b) Special bonuses for individuals or groups within the credit institution who have innovative ideas improving techniques or procedures that bring about efficiency in business operations. The level of bonus is determined by the Board of Directors of the credit institution.

c) Bonuses for individuals or units outside the credit institution that have economic relations and have fulfilled the conditions of contracts effectively contributing to the business activities of the credit institution. The level of bonus is determined by the Board of Directors of the credit institution.

6. The welfare fund is used for:

a) Invest in building or repairing, supplementing construction capital for welfare facilities of the credit institution, contribute capital to build common welfare facilities in the industry or with other units according to agreed contracts.

b) Expenses for sports, cultural, public welfare activities of the collective of cadres and employees of the credit institution.

c) Contributions to social welfare funds.

d) Regular and emergency hardship allowances for cadres and employees of the credit institution.

đ) Other welfare expenses.

The General Director (Director) of the credit institution shall coordinate with the Executive Committee of the Trade Union of the credit institution to manage and use this fund.

Chapter V

ACCOUNTING SYSTEM, STATISTICS, AND AUDIT

Article 25.

1. Credit institutions must implement accounting and statistical systems in accordance with the law, record all original vouchers, update accounting books, and fully, promptly, truthfully, accurately, and objectively reflect all financial activities.

2. The fiscal year of credit institutions begins on January 1 and ends on December 31 of each calendar year.

Article 26.

1. Credit institutions are responsible for preparing and submitting financial reports to state financial agencies, statistical agencies, tax authorities, and the State Bank on a quarterly and annual basis, including the following reports:

a) Summary table of assets of the credit institution accompanied by detailed explanations of the situation of increases and decreases, fluctuations in sources of capital, and use of capital.

b) Report on business results and implementation of state budget revenue payments.

c) Report on labor implementation and wage levels of the credit institution.

2. The deadline for submitting these reports shall be carried out in accordance with the regulations of the Ministry of Finance and the General Statistics Office.

3. The Chairman of the Board of Directors and the General Director (Director) of the credit institution are responsible for the accuracy and truthfulness of these reports.

Article 27.

1. Credit institutions must establish internal audit to audit their own financial reports.

2. At least thirty days before the end of the fiscal year, the credit institution must hire an independent auditing organization legally operating in Vietnam to audit its financial statements. The selected auditing organization must be approved by the State Bank. The audit results of the credit institution's financial statements must be submitted to the state financial agency and the State Bank.

Article 28. Within 120 days from the end of the fiscal year, credit organizations must disclose their financial statements in accordance with the provisions of the law.

Article 29. Based on guiding documents on financial systems, credit institutions establish their own financial regulations to be approved by the Board of Directors as a basis for implementation. For state-owned credit institutions, the financial regulations must be approved by the Ministry of Finance.

Chapter VI

RESPONSIBILITIES OF THE BOARD OF DIRECTORS, GENERAL DIRECTOR, AND DIRECTOR OF CREDIT INSTITUTIONS

Article 30. Responsibilities of the Board of Directors of credit organizations

1. The Board of Directors performs the management function of credit organizations within its scope of authority and is responsible for organizing the implementation, inspecting, and supervising the financial activities of credit organizations.

2. Accept capital, land, resources, and other resources transferred to the credit institution by the state and shareholders.

3. Submit plans for capital contribution, purchase of shares, joint ventures with foreign investors to the Governor of the State Bank for examination, decision-making, and reporting to the financial management authority at the same level.

4. Approve the capital mobilization plan, usage, preservation, development, and profit distribution plans after tax submitted by the General Director (Director) of the credit institution and be responsible for their decisions.

5. Approve the annual financial reports of the credit institution and publicly disclose them in accordance with regulations; approve the long-term financial plan and the annual financial plan submitted by the General Director (Director) of the credit institution.

6. Supervise and monitor the General Director (Director) of the credit institution in the use, preservation, development of capital, implementation of business operations according to approved plans and schemes by the Board of Directors, and fulfill obligations to the state budget.

7. Be responsible for the accuracy and honesty of the credit institution's business results reports, and distribute and use post-tax profits in accordance with regulations.

8. Fulfill other responsibilities as prescribed by law.

Article 31. Responsibilities of the General Director (Director) of the credit institution

1. Represent the legal entity of the credit institution, manage its operations, and be accountable to the Board of Directors, Governor of the State Bank, and financial authorities regarding the management of the credit institution's operations.

2. Jointly with the Chairman of the Board of Directors, accept capital, land, natural resources, and other resources assigned by the State and shareholders.

3. Be responsible for managing the use of capital in business operations according to the approved capital usage, preservation, and development plan; implement the profit distribution plan after paying state budget contributions.

4. Be responsible for mobilizing and using sources of capital for business activities; appoint personnel to manage investment, joint ventures, and partnerships with other enterprises; bear material responsibility for losses caused by subjective fault to the credit institution.

5. Establish appropriate cost standards in line with the operating conditions of credit organizations.

6. Be responsible for the accuracy and honesty of financial reports, statistical reports, final accounts figures, and other financial information.

7. Develop an annual financial plan consistent with the business plan, submit it for approval by the Board of Directors, and send it to the state financial authority in accordance with the Ministry of Finance's regulations.

8. Fulfill other responsibilities as prescribed by law.

Chapter VII

FINANCIAL PLANNING AND AUDITING

Article 32.

1. Credit institutions establish annual financial plans in accordance with the Ministry of Finance's guidelines and submit them to the state financial authority and the State Bank. The financial plans of credit institutions include:

a) The capital mobilization and usage plan of the credit institution.

b) The income, expense, business result, and state budget contribution targets plan of the credit institution.

c) Labor and salary plans of credit organizations.

2. These plans of the credit institution must be approved by the Board of Directors and simultaneously sent to the state financial authority and the State Bank before November 15 of the year preceding the planning year.

Article 33. The Ministry of Finance conducts audits and inspections of the compliance with financial systems by credit organizations.

Chapter IIX

IMPLEMENTING PROVISIONS

Article 34. This Decree takes effect 15 days from the date of signature. Previous regulations on the financial system for credit institutions that conflict with this Decree are no longer in effect.

Article 35. The Ministry of Finance shall take the lead in coordinating with the State Bank to guide the implementation of this Decree.

Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial and centrally governed city People's Committees are responsible for implementing this Decree.