Circular No. 42-TC/CSTC guides the financial management regime for the bank serving the poor

CIRCULAR

||| Guidelines for financial management of the bank serving the poor

||| Guidelines for financial management of the bank serving the poor

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||| Pursuant to Decision No. 525/TTg dated August 31, 1995 of the Prime Minister on the establishment of the Bank Serving the Poor.

||| Pursuant to the State-Owned Enterprise Law promulgated by the President through Decree No. 39/L-CTN dated April 30, 1995.

||| Pursuant to the Ordinance on Banks, Credit Cooperatives, and Financial Companies dated May 23, 1990 issued by the Council of State.

||| Pursuant to the Charter of the Bank Serving the Poor approved by the Government through Circular No. 361/KTTH dated January 22, 1996.

||| The Ministry of Finance issues guidelines for financial management of the Bank Serving the Poor as follows:

||| I. CONTENTS OF FINANCIAL MANAGEMENT REGIME FOR THE BANK SERVING THE POOR

||| The Bank Serving the Poor is a state credit organization, operating independently with economic accounting, self-financing, and bearing full responsibility for its business results under the law. It implements capital preservation and development, self-compensation for operational costs, and business risks.

||| The activities of the Bank Serving the Poor have a special nature aimed at poverty reduction and elimination, not for profit purposes, hence it applies a separate financial management regime.

||| The activities of the Bank Serving the Poor have a special nature aimed at poverty reduction and elimination, not for profit purposes, hence it applies a separate financial management regime.

||| 1. Capital Management and Preservation

||| The Bank Serving the Poor receives statutory capital from the State, accepts credit funds from the State designated for the poor, and other sources permitted by the State. It can mobilize funds from domestic and foreign organizations and individuals to establish a loan fund for the poor aimed at poverty reduction. The Bank Serving the Poor may increase its registered capital according to its scale of operations and has the responsibility to preserve all types of capital based on ensuring effective lending and not losing capital.

||| 1.1. State capital assigned to the Bank Serving the Poor for management, use, and preservation:

||| a. State budget capital: Includes registered capital granted; capital transferred from the State Bank, Foreign Trade Bank, and Vietnam Agricultural Bank pursuant to the Government's decision; state credit capital for the poor transferred from the state budget; capital from the reserve fund for supplementary registered capital; donated and non-repayable aid capital;

||| b. Self-supplemented capital as prescribed: Includes various types of capital accumulated and supplemented by the Bank from profits or having origins from retained profits according to prescribed regulations (such as risk compensation reserve fund, technical and business development fund, basic depreciation from self-supplemented capital left over...).

||| 1.2. Mobilized capital and borrowed capital:

||| In addition to state investment capital and other borrowed capital, the Bank Serving the Poor has the right to mobilize domestic and foreign funds from all organizations and social strata to lend to the poor in forms as stipulated in Article 7 of the Bank Serving the Poor Charter.

||| 1.3. Responsibilities for preserving and developing capital of the Bank Serving the Poor:

||| All state budget capital allocated and mobilized capital must be used for lending in accordance with the intended purpose, target, effectively, and without loss of capital.

||| a. For state budget capital allocated:

||| All state budget capital allocated, transferred from the State Bank, Vietnam Foreign Trade Bank, Vietnam Agricultural Bank, and capital from the reserve fund for supplementary registered capital must be included in the state capital assigned. The Bank Serving the Poor must bear the responsibility for preservation according to the initial book value.

||| b. For mobilized capital:

||| The Bank Serving the Poor must fulfill its obligations and bear legal responsibility for capital mobilization, ensure effective use of mobilized capital, and complete repayment of principal and interest according to the agreed terms in the contract.

||| c. For self-supplemented capital:

||| The Bank Serving the Poor is responsible for preserving self-supplemented capital according to the initial book value. The Bank Serving the Poor has autonomy in using self-supplemented capital for its functions but cannot use it for building houses and welfare facilities, living equipment, and daily necessities.

||| d. Annually, the Ministry of Finance together with the Bank Serving the Poor will re-evaluate the capital that the Bank must preserve up to December 31. These figures will serve as the basis for finalizing the capital preservation settlement and as a basis for checking the level of capital preservation in the following year.

||| The General Director of the Bank Serving the Poor is responsible to the State for managing and using capital. Any losses in capital in each case will be handled according to the State's regulations.

||| The Bank Serving the Poor is subject to financial management and inspection by relevant agencies during the process of implementing its functions of capital mobilization, management, and lending to poor households.

||| 1.4. Principles for Using Capital and Assets:

||| - All capital and assets of the Bank Serving the Poor must be used strictly in accordance with Decision No. 525/TTg dated August 31, 1995 of the Prime Minister. The Bank shall not use capital for joint ventures, investments in purchasing shares, foreign exchange trading, or domestic and international securities trading in any form.

||| 2. Financial Management of "Income - Expenses" for the Bank Serving the Poor

||| 2.1. Income of the Bank Serving the Poor includes:

||| Interest income from loans, interest income from deposits.

||| Fees and commissions from entrusted investment services according to projects funded by domestic and foreign organizations for the poor.

||| Other income from business activities as regulated.

||| 2.2. Operating expenses of the Bank Serving the Poor:

||| a. Business service expenses include:

||| Payment of deposit interest to economic organizations, savings interest to residents, and interest from other sources of mobilization.

Payment of interest on deposits from economic organizations, payment of interest on savings mobilized from residents, and interest on funds raised from other sources.

Costs paid to the Vietnam Agricultural Bank: The costs paid to the Vietnam Agricultural Bank are determined based on expenses related to organizing loans and collecting debts, salaries for dedicated and part-time staff at all levels of the Vietnam Agricultural Bank corresponding to the volume of business undertaken for the Poor People's Bank. Payment of fees to the Vietnam Agricultural Bank shall be carried out according to the Decision of the Chairman of the Board of Directors of the Poor People's Bank after reaching an agreement with the Chairman of the Board of Directors of the Vietnam Agricultural Bank and obtaining the opinion of the Ministry of Finance.

Pay interest on loans from state preferential credit sources.

Other business-related expenses as prescribed by the State.

b. Salaries:

Payment of salaries and allowances to officers within the Poor People's Bank: the salary payment mechanism, allowances... within the Poor People's Bank shall be decided by the Board of Directors of the Poor People's Bank based on the unit price of salaries established according to the salary parameters published and guided by competent state agencies. This salary amount shall be recorded as general expenses of the Poor People's Bank.

Payment of salaries and allowances to officers and employees of the central operation management center and provincial/municipal/district operation management centers: officers and employees of the Vietnam Agricultural Bank working part-time and full-time for the Poor People's Bank shall be paid salaries, bonuses, and other allowances according to the common system of the Vietnam Agricultural Bank. This amount shall not be recorded as expenses of the Poor People's Bank.

c. Management costs include:

Payment of salaries and allowances to officers within the Poor People's Bank (as mentioned in paragraph b above).

Expenses for social insurance, health care, hygiene.

Expenses for labor protection for those provided with labor protection equipment according to the state-prescribed quota.

Expenses for transaction uniforms for civil servants of the Poor People's Bank applied as in state-owned commercial banks.

Travel expenses as prescribed by the State.

Depreciation expenses for fixed assets according to state regulations. - Expenses for purchasing necessary tools for business activities.

Expenses for printing, office materials, transportation, short-term training, postal and communication fees, scientific research, publicity, and advertising expenses.

Maintenance and regular repair expenses for fixed assets, repairs to security systems, money storage facilities... (not included in large-scale repair funds and basic construction funds) based on actual occurrences but the expense level shall not exceed 10% of the average annual value of fixed assets.

Other expenses such as hospitality, meetings, transactions... these expenses must be spent according to the system, with legal invoices and receipts, and can only be settled according to actual expenditures or state-controlled expenditure quotas.

2.3. Financial management of income and expenses of the Poor People's Bank.

The Poor People's Bank shall not record the following items as expenses but must use corresponding capital to cover them according to the regulations:

+ Penalties payable to the State Budget due to violations of budget submission obligations and reporting-statistical-accounting systems. Penalties payable to customers for material losses and other penalties payable due to the Poor People's Bank's negligence and other administrative penalties.

+ Losses and damages to state property caused by individuals or groups within the Poor People's Bank.

+ Fixed asset purchases and basic construction expenses from basic construction funds.

+ Expenses covered by other sources (compensating business risks...).

+ Damages compensated by the Government or by the party causing damage or insurance companies.

+ Expenses for Party organizations, mass organizations, and voluntary contributions.

All the above expenses, if incurred, the Poor People's Bank must use the correct source to cover them; In case of insufficient coverage sources, it must be deducted from the retained profit (profit after setting aside reserve funds).

Annually, along with the development of the financial plan for the year, the Poor People's Bank has the responsibility to develop consumption standards including:

Major repair expenses, regular maintenance expenses, and tool purchase expenses within the system based on state financial regulations suitable for the operational requirements of the Poor People's Bank, to be submitted to the Ministry of Finance. After the Ministry of Finance approves the financial plan and consumption standards for the year, the Poor People's Bank has the responsibility to implement spending according to state regulations within the plan and approved indicators. Other expenses, the Poor People's Bank shall proactively adjust the expenses based on the approved annual total cost budget index reasonably. In case of exceeding the plan, if due to objective reasons, the Poor People's Bank must provide specific explanations attached to the settlement, if due to subjective reasons, the Poor People's Bank must compensate using retained profits.

3. Obligations to the State Budget of the Poor People's Bank

To reduce costs, implement lower lending interest rates for the poor and directly related loan operations aimed at poverty alleviation, the Poor People's Bank is exempted from corporate income tax, exempted from paying revenue from the use of state budget capital, and exempted from paying business activity taxes. In cases where the Poor People's Bank engages in other business activities, it must declare and pay taxes for each activity.

The Poor People's Bank must fully and timely pay to the State Budget the following amounts:

+ Interest payments on state preferential credit loans (if applicable).

+ Due state credit funds that must be repaid to the State Budget.

+ Other amounts payable as prescribed by regulations.

The Bank for the Poor shall not use the amounts paid into the State Budget for other purposes.

4. Distribution of profits and establishment of reserves

Profits from the credit operations of the Bank for the Poor are the difference between income and costs for such activities, specifically:

Profit

of the Bank

for the poor = Income - Reasonable and legitimate expenses

poor people

Profits of the Bank for the Poor shall be distributed in the following order:

+ 30% to establish a financial reserve fund to guard against risks (the reserve fund for risk prevention shall be established until it equals 100% of the charter capital).

+ 20% to establish a supplementary capital reserve fund.

+ 50% of the remaining profit first must be used to pay fines due to subjective reasons (if any), then used to establish three funds of the Bank: technical development fund, welfare fund, and reward fund. The ratio of contributions is determined by the Board of Directors. The maximum amount contributed to the reward fund shall not exceed six months' basic salary of the unit. The maximum amount contributed to the welfare fund shall not exceed three months' basic salary of the unit (as stipulated in Decree No. 197/CP dated December 31, 1994 of the Government guiding the implementation of certain points in the Labor Code). Any remaining profit after establishing the three funds (if applicable) shall be transferred to the supplementary capital reserve fund.

Temporary allocation of reserves is regulated as follows:

Quarterly, after determining the profit results of the Bank for the Poor, sufficient allocations according to the prescribed ratios shall be made to supplement the charter capital and the financial reserve fund to guard against risks. For the three funds, only up to 70% of the remaining profit (after deducting the amounts allocated to the two reserve funds above) may be temporarily allocated.

At the end of the fiscal year, after the annual financial settlement has been reviewed and approved by the Ministry of Finance, the Bank for the Poor may officially allocate to the three funds.

Reserves established from profits shall be used for the following purposes:

Supplementary Capital Reserve Fund: This fund is used to supplement the charter capital and shall be established until it reaches 50% of the actual charter capital at the time of establishing the fund.

Financial Reserve Fund to Guard Against Risks: Used to offset losses and damages to assets or business losses during the course of operations. - Technical Development and Business Operations Fund: Used to invest in expanding and developing business operations and professional skills; to update equipment to support training and improve professional skills for staff within the Bank for the Poor, improving working conditions and environment...

Reward Fund: Used to provide year-end or period rewards to staff within the Bank for the Poor. The level of rewards is decided by the Board of Directors based on the proposal of the director and the trade union, taking into account work productivity and performance of each staff member.

Special rewards for individuals or groups within the unit who have new initiatives that bring significant business benefits. The level of rewards is decided by the General Director - Director.

Rewards for individuals and units outside the scope of the Bank for the Poor who have fulfilled the contractual economic conditions and made significant contributions to the Bank's operations...

Welfare Fund: Used to invest in building or repairing public welfare facilities of the Bank.

Expenses for public welfare activities of the collective staff within the Bank, social welfare.

Contributing part of the capital to invest in building common welfare facilities in the industry.

Unforeseeable risks such as natural disasters, epidemics, borrowers encountering production and business risks leading to inability to repay loans, death or disappearance of debtors without heirs as prescribed by law affecting the ability to recover loaned capital shall be covered by the financial reserve fund to guard against risks.

5. Handling Losses and Risks in the Operations of the Bank for the Poor

The State shall consider providing financial assistance to the Bank for the Poor in the following two cases:

Annual operating results show losses due to implementing lending projects with low interest rates as decided by the Government.

Unforeseeable risks due to natural disasters and floods where borrowers cannot repay debts, after the Bank has used the Risk Compensation Fund but still falls short.

In these cases, the Bank for the Poor must prepare detailed reports explaining the causes and requesting financial support to send to the Ministry of Finance for review and assessment to submit to the Prime Minister for decision-making.

6. Depreciation of Fixed Assets, Construction Expenditures, Purchases, and Management of Fixed Assets

Regarding depreciation and management of fixed assets: The Bank for the Poor bases its provisions for basic depreciation of fixed assets on current regulations.

Sources of funds for new construction, renovation, modernization, and purchase of fixed assets of the Bank for the Poor include:

+ A portion of the charter capital for initial physical infrastructure (the level of charter capital usage for construction is decided by the Board of Directors in accordance with the Governor's regulations of the State Bank).

+ Funds from the technical and business operations development fund.

+ Funds from basic depreciation of fixed assets.

+ Other sources of funds (international organization aid funds under financing projects for banking sector modernization are also considered state budget funds for basic construction investment in the Bank for the Poor).

The Bank for the Poor can only spend on construction and purchasing of fixed assets within the available funds. Welfare assets can only be purchased or constructed using the welfare fund and other welfare-oriented funds.

7. Accounting System, Financial Audit, and Settlement

7.1. Accounting System and Reporting Settlement:

The Bank for the Poor is responsible for opening accounting books, recording vouchers, and conducting financial accounting and settlement in accordance with the regulations of the State as stipulated in the Accounting and Statistics Ordinance and the regulations of the Ministry of Finance. The accounting system of the Bank for the Poor is regulated by the State Bank after consultation with the Ministry of Finance.

The Bank for the Poor implements financial settlement and submits quarterly and annual reports to the Ministry of Finance in accordance with the Accounting and Statistics Ordinance and the State Accounting Organization Charter.

Not later than forty days after the end of each quarter, the Bank for the Poor shall submit financial performance reports to the Ministry of Finance, including:

Summary balance sheet

Income Report

Cost

Profit

Capital Status and Preservation Report

Fund Establishment and Utilization Report

The annual settlement report submitted to the Ministry of Finance not later than March 1 of the following year shall include:

Income Report

Cost

Profit

Capital Status and Preservation Report

Reserve Fund Establishment and Utilization Report and Temporary Fund Allocation Report for the Year

State Budget Payment Status Report

Balance Sheet

The annual settlement report must include an explanation of the implementation of the financial revenue and expenditure plan for the year. In case of losses, the Bank for the Poor must provide specific reasons and propose remedial measures.

7.2. Financial Inspection and Annual Settlement Approval

The Ministry of Finance's accounting inspection work on the Bank for the Poor shall be carried out during the fiscal year according to specialized topics in accordance with the Accounting and Statistics Ordinance.

- The Bank for the Poor is subject to financial inspection and audit by the competent authority in accordance with the Audit Ordinance and other agencies as prescribed by law.

- The Ministry of Finance shall review and approve the annual settlement of the Bank for the Poor to determine the accuracy of the data in the annual settlement report, evaluate the effectiveness of capital utilization, preservation, and development, and compliance with financial discipline by the Bank for the Poor. Based on this, it will handle financial issues in accordance with the law and the provisions of this circular, legally recognizing the obligation to pay the state budget and the right to benefit of the Bank for the Poor. The annual settlement approval process must be completed before March 31 of the following year.

The annual settlement approval work for the Bank for the Poor includes the following main contents:

+ Accurately determining the data on capital fluctuations, capital preservation and development status.

+ Determining income-expense-profit results and profit distribution, obligations to the state budget.

+ Handling financial issues arising during the annual settlement inspection process.

The annual settlement inspection is conducted at the central level Bank for the Poor and spot-checked at some provincial and city-level Bank for the Poor. Based on the inspection report, the Ministry of Finance will issue an annual settlement approval document for the Bank for the Poor.

8. Financial Planning

The Bank for the Poor shall implement financial reporting in accordance with the National Accounting and Statistics Ordinance and the detailed provisions of Circular No. 40-TC/VP dated September 8, 1990 of the Ministry of Finance.

Annually, at the specified time, the Bank for the Poor must prepare and submit to the Ministry of Finance the following documents for the next year:

Capital Source and Utilization Plan

Income-Expense-Profit Plan (with detailed explanations)

Support Plan from the State Budget for Preferential Loan Activities

Basic construction investment plans.

Fixed Asset Depreciation Plan

Staffing and Salary Fund Plan

After the financial plan has been approved by the competent authority (the Board of Directors of the Bank for the Poor), the Bank for the Poor is responsible for promptly submitting the official plan to the Ministry of Finance.

From the 10th to the 15th day of the first month of the following quarter, the Bank for the Poor shall submit a quick report on the implementation of the previous quarter's plan to the Ministry of Finance.

The annual financial report includes the implementation report of the approved financial plan accompanied by the balance sheet of the Bank for the Poor.

III. IMPLEMENTATION

The Bank for the Poor is responsible under the law for the effective use of state assets and funds, people's raised capital, and the preservation and development of state capital.

The Bank for the Poor is responsible for implementing and guiding the execution of this circular.

This circular takes effect from January 1, 1996.