Circular No. 209/2013/TT-BTC guiding the financial regime for Vietnam Asset Management Company

CIRCULAR

Guidelines on financial regime for Asset Management Company

Management of assets of Vietnamese credit organizations

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Pursuant to Law on Enterprises No. 60/2005/QH11 dated November 29, 2005;

Pursuant to the Law on Credit Organizations No. 47/2010/QH12 dated June 16, 2010;

Pursuant to Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of Vietnamese Asset Management Companies;

Pursuant to Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government on State capital investment in enterprises and financial management of enterprises wholly owned by the State

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating 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 issues this Circular guiding the financial regime for the Asset Management Company of Vietnamese Credit Organizations.

Article 1. Scope of Regulation and Applicability

1. This Circular guides the financial regime for the Vietnamese Asset Management Company (hereinafter referred to as VAMC).

2. The financial regime of VAMC shall be implemented in accordance with the provisions of the law applicable to a limited liability company wholly owned by the State, Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of the Asset Management Company of Vietnamese Credit Organizations (hereinafter referred to as Decree No. 53/2013/NĐ-CP), specific guidance contents in this Circular, and related legal documents.

Article 2. Operating Capital of VAMC

1. The owner's investment capital includes:

1.1. Registered capital of 500 billion VND;

1.2. Development investment fund shall be allocated according to the prescribed regulations;

1.3. Other sources of owner's capital as prescribed by law for a limited liability company wholly owned by the State.

2. Raised capital:

2.1. Special bonds issued by VAMC in accordance with the regulations of the State Bank of Vietnam;

2.2. Other sources of raised capital as prescribed by law for a limited liability company wholly owned by the State.

Article 3. Use of Capital and Assets

1. VAMC shall be responsible for managing, using, monitoring all existing assets and capital, conducting accounting in accordance with current accounting regulations; fully, accurately, and promptly reflecting the situation of capital and asset usage and changes during business operations; determining responsibility and forms of handling for each department and individual in cases of damage or loss of assets and capital of VAMC.

2. VAMC may use operating capital to serve business activities in accordance with the provisions of Decree No. 53/2013/NĐ-CP, specific guidelines in this Circular, and relevant legal provisions under the principle of ensuring safety and development of capital:

2.1. Special bonds can only be used to purchase non-performing debts of credit institutions as stipulated in Clause 1, Article 7 of Decree No. 53/2013/NĐ-CP.

2.2. VAMC may use legitimate sources of capital other than special bonds to purchase non-performing debts at market value as stipulated in Clause 2, Article 7 of Decree No. 53/2013/NĐ-CP. The debt purchased by VAMC at market value when converted into equity contribution or shares shall be considered an investment. VAMC shall follow and account for this investment in accordance with the law.

2.3. VAMC may use capital to invest in and purchase fixed assets to serve its operations under the principle of equipping in line with the operational needs of VAMC, efficiently, economically, and in compliance with state regulations applicable to a limited liability company wholly owned by the State regarding basic construction investment and fixed asset procurement.

2.4. VAMC may only use capital to invest externally (not through debt and asset purchases and sales) in the following forms:

a) Depositing money at state-owned commercial banks;

b) Participating in capital contributions and purchasing shares in accordance with point g, Clause 1, Article 12 of Decree No. 53/2013/NĐ-CP.

2.5. Repairing and upgrading collateral assets already recovered by VAMC in accordance with point d, Clause 1, Article 12 of Decree No. 53/2013/NĐ-CP with the aim of increasing value and facilitating the disposal of assets to recover debts.

2.6. VAMC may use capital to invest and provide finance to borrowers to address temporary financial difficulties and restore production and business operations in accordance with Clause 3, Article 17 of Decree No. 53/2013/NĐ-CP.

3. VAMC shall establish risk reserve accounts from operating expenses in accordance with Article 4 of this Circular.

Article 4. Establishment and use of provisions

1. For non-performing debts purchased at market value: VAMC shall establish and use provisions in accordance with the regulations of the State Bank of Vietnam.

2. For guarantees stipulated in Clause 4, Article 17 of Decree No. 53/2013/NĐ-CP, investments, and provision of finance to borrowers in the form of guarantees or loans: VAMC shall establish and use reserves in accordance with the regulations of the State Bank of Vietnam on loan classification, reserve establishment, and utilization in banking operations of credit institutions.

3. For inventory write-down reserves, investment loss reserves, doubtful receivables reserves (excluding receivables from credit institutions): VAMC shall establish and utilize reserves in accordance with general provisions applicable to enterprises.

4. For other financing: VAMC shall establish and utilize reserves as for financial investments.

Article 5. Management, use, and repayment of advance payments from credit institutions selling non-performing loans

1. VAMC shall receive an advance payment in cash from credit institutions when purchasing debts with special bonds to have funds to cover costs related to handling non-performing loans. The specific amount of the advance payment shall be determined according to the regulations of the Governor of the State Bank of Vietnam after consultation with the Minister of Finance.

2. VAMC must track each advance payment separately to repay it to the credit institution that sold the debt.

3. VAMC shall use legitimate revenues to repay advance payments received from credit institutions selling debts when such debts are resolved or when the special bonds mature.

Article 6. Revenue and Expenses

1. The contents of revenue and expenses of VAMC shall be implemented according to the provisions of Clause 1 and Clause 2 of Article 23 of Decree 53/2013/NĐ-CP.

2. All revenue and expense items of VAMC must have invoices or valid receipts and must be fully recorded and reported promptly in accordance with the accounting laws.

3. The recording of revenue and expenses must comply with the principle of matching revenue and expenses; it must also conform to the regulations on corporate income tax.

Article 7. Principles for Recording Revenue

1. For the recording of revenue from fees earned by VAMC due to recovering debts, selling debts, or selling collateral assets for debts purchased with special bonds: VAMC records this income at the time it receives the aforementioned fee.

2. For the recording of revenue from amounts recovered from debtors or customers paying off debts for debts purchased at market prices: VAMC records this income at the time it receives the debt or when the customer pays off the debt.

3. For the recording of revenue from sales of debts or collateral assets for debts purchased at market prices: VAMC records this revenue at the time it receives payment from the sale of debts or collateral assets.

4. For revenue from capital contribution and share purchase activities: revenue is the amount of profit distributed upon resolution or decision to distribute profits.

5. For revenue from other activities (including advisory and brokerage services for buying, selling, and managing debts and assets; rental and exploitation of assets; financial activities; auctioning of assets, and other revenues): Revenue is the total amount accepted for payment by customers regardless of whether the payment has been received or not.

6. For receivables recorded as revenue but not collected by the due date, VAMC shall reduce revenue if within the same fiscal year or record it as an expense if in a different fiscal year and monitor it off-balance sheet to urge collection. When collected, it shall be recorded as business operation revenue.

Article 8. Principles of Expense Recognition

1. For expenses incurred in purchasing non-performing debts at market value, they shall be recorded when there is income generated from handling such non-performing debts as follows:

1.1. In cases where the debt is recovered in multiple installments:

a) Where the revenue obtained during the period from handling the debt (recovering debt from debtors; selling debt; exploiting and selling collateral assets of the debt) is greater than or equal to the cost of purchasing the debt: the entire cost of purchasing the debt shall be transferred to the current period's expenses.

b) Where the revenue obtained during the period from handling the debt (recovering debt from debtors; selling debt; exploiting and selling collateral assets of the debt) is less than the cost of purchasing the debt:

- Transfer a portion of the cost of purchasing the debt to the current period's expenses with the amount being the actual revenue obtained from handling the debt;

- When the debt continues to be recovered, the remaining cost of purchasing the debt shall continue to be transferred to the current period's expenses according to the above principle;

- When the final remaining part of the debt is recovered, the entire remaining cost of purchasing the debt shall be transferred to the current period's expenses.

1.2. In cases where the debt is recovered in a single installment: the entire cost of purchasing the debt shall be transferred to the current period's expenses at the time the debt is recovered.

2. For expenses related to repairing and upgrading assets:

2.1. In cases where non-performing debts are purchased at market value: VAMC may record prepayment expenses (detailed by each debt) corresponding to the costs for repairing and upgrading assets. When the asset is sold or the non-performing debt tied to the asset is recovered or money is obtained from exploiting the asset, the revenue obtained must be recorded as income, while the settlement of the prepayment expense corresponding to the cost VAMC used for repairing and upgrading the asset shall be carried out according to the provisions of Clause 1 of this Article;

2.2. In cases where non-performing debts are purchased with special bonds: VAMC may record prepayment expenses (detailed by each debt) corresponding to the costs for repairing and upgrading assets. When the asset is sold or the non-performing debt tied to the asset is recovered or money is obtained from exploiting the asset, VAMC gradually settles the receivable corresponding to the cost VAMC used for repairing and upgrading the asset.

3. For other expenses (including debt recovery costs; advisory and brokerage costs for buying, selling, and managing debts and assets; costs for selling debts, selling shares, and transferring capital contributions; risk reserve provision costs; salary, bonus, and allowance costs for staff; asset auction costs; company management costs; interest payment costs; costs for assets, and other costs): VAMC shall only recognize actual expenses incurred based on valid invoices and receipts for each expense item.

4. The Company shall not include the following items in its expenses:

4.1. Administrative fines that individuals must pay according to the law;

4.2. Costs unrelated to VAMC’s business operations;

4.3. Costs without valid receipts;

4.4. Costs that have been recorded but not actually paid;

4.5. Costs covered by other sources of funding;

4.6. Other unreasonable or invalid costs.

Article 9. Distribution of profits and establishment of funds.

1. The profit of VAMC is determined by subtracting total reasonable expenses incurred during the period from the total revenue generated during the period according to the prescribed regulations.

2. Distribution of profits and establishment of funds for VAMC.

After fulfilling its financial obligations to the State as stipulated by law, the remaining profit of VAMC shall be distributed as follows:

2.1. To cover losses from previous years;

2.2. Any remaining profit after covering losses as provided for in Point 2.1 of this Clause (if any) shall be considered as 100% and distributed as follows:

a) Allocate 30% into the development investment fund.

b) To establish a fund for rewarding VAMC management staff and a reward and welfare fund. The establishment of the fund for rewarding VAMC management staff and the reward and welfare fund of VAMC shall be carried out in accordance with the provisions of the law on establishing the fund for rewarding management staff and the reward and welfare fund for a limited liability company wholly owned by the State;

c) Any remaining profit (if any) after establishing the funds as provided for in Subparagraphs a and b of this Point shall be remitted to the Enterprise Restructuring and Development Fund.

Article 10. Handling Special Cases

In the event that at the end of the fiscal year, VAMC incurs a loss and there are special bonds due in that fiscal year where the total fees on the amount recovered from debts by VAMC received during the year are less than the amounts temporarily advanced by credit institutions which must be repaid during the year, VAMC shall report to the Ministry of Finance and the State Bank of Vietnam to report to the Prime Minister for permission to handle the portion of the temporarily advanced amounts received from credit institutions in such a way that VAMC records the income and credit institutions record it as an expense.

Article 11. Responsibilities of the management agency

1. Responsibilities of the Ministry of Finance:

1.1. Perform state management functions over VAMC's financial matters in accordance with the provisions of the law;

1.2. Coordinate with the State Bank of Vietnam to handle financial issues of VAMC.

2. Responsibilities of the State Bank of Vietnam:

2.1. Implement state management functions over all activities of VAMC as prescribed by law. Quarterly and annually (no later than 30 days from the end of the quarter or year), the State Bank of Vietnam shall notify the Ministry of Finance of VAMC's financial situation and any violations of financial regulations discovered during inspections, audits, and supervision (if any) to take timely coordinated measures;

2.2. Perform the role of the state owner towards VAMC:

a) Decide and be responsible for decisions made within the scope of authority of the state owner as stipulated by law;

b) Chair and coordinate with the Ministry of Finance to submit to the Prime Minister for consideration and decision on financial issues exceeding their authority.

2.3. Quarterly and annually, the State Bank of Vietnam shall evaluate VAMC's operational effectiveness and notify the Ministry of Finance and the Ministry of Planning and Investment (no later than 30 days from the end of the quarter or year) to perform supervisory functions.

Article 12. Accounting, Auditing, Reporting, and Financial Disclosure System

1. VAMC shall implement the accounting system as prescribed by law, record original vouchers fully, update accounting books, and truthfully, accurately, objectively, and promptly reflect all economic and financial activities.

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

3. VAMC shall settle its finances, prepare, and submit financial reports to the State Bank of Vietnam and the Ministry of Finance in accordance with the legal provisions applicable to a limited liability company wholly owned by the State.

4. VAMC shall send the audited annual financial report (Audit Report) to the Ministry of Finance and the State Bank of Vietnam simultaneously and publish this report on VAMC's official website immediately after the audit is completed.

Article 13. Implementation Provisions

1. This Circular takes effect from February 15, 2014, and is applied from the fiscal year 2013.

2. Any difficulties encountered during implementation should be reported to the Ministry of Finance for study, consideration, and resolution./.