Consolidated Document number 42/VBHN-NHNN stipulates on the Fund for Ensuring Safety of the People's Credit Cooperative System

STATE BANK OF VIETNAM VIETNAM --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
Number: 42/VBHN-NHNN	Hanoi, December 5, 2019

CIRCULAR

REGULATIONS ON THE SAFETY GUARANTEE FUND FOR THE SYSTEM OF RURAL CREDIT COOPERATIVES

Circular No. 03/2014/TT-NHNN dated January 23, 2014 of the Governor of the State Bank of Vietnam on the Safety Guarantee Fund for the System of Rural Credit Cooperatives, which took effect from March 15, 2014, was amended and supplemented by:

Circular No. 06/2017/TT-NHNN dated July 5, 2017 of the Governor of the State Bank of Vietnam amending and supplementing some articles of Circular No. 03/2014/TT-NHNN dated January 23, 2014 of the Governor of the State Bank of Vietnam on the Safety Guarantee Fund for the System of Rural Credit Cooperatives and Circular No. 04/2015/TT-NHNN dated March 31, 2015 of the Governor of the State Bank of Vietnam on rural credit cooperatives, which took effect from September 1, 2017.

Circular No. 14/2019/TT-NHNN dated August 30, 2019 of the Governor of the State Bank of Vietnam amending and supplementing some articles in Circulars stipulating the regular reporting system of the State Bank, which took effect from October 15, 2019.

Circular No. 21/2019/TT-NHNN dated November 14, 2019 of the Governor of the State Bank of Vietnam amending and supplementing some articles of Circulars stipulating cooperative banks, rural credit cooperatives, and the Safety Guarantee Fund for the System of Rural Credit Cooperatives, which took effect from January 1, 2020.

Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

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

Pursuant to the Law on Cooperatives No. 23/2012/QH13 dated November 20, 2012;

Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam promulgates this Circular on the Safety Guarantee Fund for the System of Rural Credit Cooperatives[1]^,[2]^,[3].

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular stipulates the payment, management, and use of fees for participation in the Safety Guarantee Fund for the System of Rural Credit Cooperatives (hereinafter referred to as the Safety Fund) with the aim of supporting the security of operations for the system of rural credit cooperatives.

2. The Safety Fund is a financial fund of the credit cooperative system (including cooperative banks and rural credit cooperatives) established by the cooperative bank based on the fees paid by the cooperative bank and member rural credit cooperatives, placed at the cooperative bank and managed and used according to this Circular and relevant laws.

Article 2. Applicability

1. Cooperative banks.

2. Rural credit cooperatives.

3. Organizations and individuals related to the payment, management, and use of the Safety Fund.

Article 3. Principles of Operation

1. The Safety Fund is a financial fund owned jointly by members (cooperative banks and rural credit cooperatives), managed and used by the cooperative bank according to this Circular.

2. The Safety Fund is used to provide loans with repayment to rural credit cooperatives when they face financial difficulties and need support to return to normal operations.

3. The operation of the Safety Fund is not for profit purposes, following the principle of self-management and self-responsibility.

4. Operating costs of the Safety Fund are covered by interest from loans and investments made by the Safety Fund.

5. Idle funds of the Safety Fund are used on the principle of ensuring capital safety and meeting loan support requirements for rural credit cooperatives.

Chapter II

SPECIFIC PROVISIONS

Article 4. Payment into the Safety Fund

1. Cooperative banks and rural credit cooperatives (except those under special control measures) shall be responsible for fully and timely paying the participation fee into the Safety Fund once a year before January 31 of the following year. The payment of the participation fee into the Safety Fund by cooperative banks and rural credit cooperatives according to this Circular shall begin from the 2014 fiscal year.

2. [4] The payment into the Safety Fund as stipulated in Clause 1 of this Article shall be carried out as follows:

a) The annual fee rate (starting from the 2019 fiscal year) is 0.05% of the average outstanding loan balance of the previous year, calculated as the total outstanding loan balance (categories 1 and 2 according to the classification of debts by the State Bank of Vietnam) at the end of each month during the year divided by the actual number of months to be counted. For cooperative banks, the outstanding loan balance at the end of each month shall exclude the portion of loans for capital adjustment to member rural credit cooperatives;

b) The payment into the Safety Fund for the fiscal year can only be carried out if the total operating capital of the Safety Fund before payment is lower than 1.5% of the total assets of the system of rural credit cooperatives.

In case the total operating capital of the Safety Fund exceeds or equals 1.5% of the total assets of the system of rural credit cooperatives after payment for the fiscal year, the cooperative bank and rural credit cooperatives still have to pay into the Safety Fund for that fiscal year;

c) The amount paid into the Safety Fund shall be recorded as operational expenses of the cooperative bank and rural credit cooperatives..

3. Any surplus from interest income and expenses in the operation of the Safety Fund, and profits retained from state support funds at the cooperative bank according to the law shall be used to supplement the Safety Fund.

Article 5. Management of the Preservation Fund

1. The Preservation Fund shall be managed in accordance with the Management and Utilization Regulation of the Preservation Fund established and promulgated by the cooperative bank after being approved by the Members' Congress of the cooperative bank to implement throughout the entire system of people's credit funds. Any amendments or supplements to the Management and Utilization Regulation of the Preservation Fund must be approved by the Members' Congress of the cooperative bank.

2. The Management and Utilization Regulation of the Preservation Fund must at least include the following contents:

a) The principles for organizing and managing the utilization of the Preservation Fund are to provide support loans with repayment to people's credit funds when they encounter financial difficulties and payment difficulties to return to normal operations; not for profit-making purposes, self-management, and self-responsibility;

b) Specific provisions on the utilization of the Preservation Fund, including:

- People's credit funds may borrow support loans as stipulated in Clause 1, Article 6 of this Circular;

- Procedures, formalities, and application files for requesting support loans;

- The amount of support loans; the term of support loans; the interest rate on support loans; commitments upon receiving support loans.

c) Mechanism for disbursing capital for support loans;

d) Measures for monitoring, correcting, and consolidating the activities of people's credit funds that have borrowed support loans; mechanisms for inspecting and supervising the use of borrowed capital by people's credit funds that have received support;

đ) Principles, conditions, and authority for handling risks related to support loans that cannot recover capital;

e) The use of temporarily idle capital of the Preservation Fund;

g) Financial revenue and expenditure mechanisms serving the operation of the Preservation Fund in accordance with relevant laws;

h) Regulations on reporting requirements for people's credit funds that have borrowed support loans.

Article 6. Utilization of the Preservation Fund

1. The Preservation Fund shall be utilized to provide support loans to people's credit funds when they encounter financial difficulties and payment difficulties to return to normal operations.

2. On the basis of ensuring the safety of capital and meeting the requirements for providing support loans to people's credit funds, the temporarily idle capital of the Preservation Fund shall be:

a) Deposited in cooperative banks or commercial banks in accordance with the Management and Utilization Regulation of the Preservation Fund;

b) Purchased government bonds, treasury bills, and State Bank of Vietnam bills.

Article 7. Documents, Procedures, Formalities, Terms, and Interest Rates for Support Loans from the Preservation Fund

Documents, procedures, formalities, terms, and interest rates for support loans shall be implemented in accordance with the Management and Utilization Regulation of the Preservation Fund established by the cooperative bank.

Article 8. Termination and Liquidation of the Preservation Fund

The termination and liquidation of the Preservation Fund shall be carried out according to the decision of the State Bank of Vietnam.

Chapter III

REPORTING AND INSPECTION, SUPERVISION

Article 9. Reporting to the State Management Authority

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1. Annually, no later than July 15, the cooperative bank shall be responsible for submitting a report on the six-month operational situation of the Preservation Fund to the State Bank of Vietnam (Bank Inspection and Supervision Authority) using Form No. 01 issued together with this Circular.

2. Annually, no later than 45 days after the end of the fiscal year, the cooperative bank shall be responsible for submitting the following reports to the State Bank of Vietnam (Bank Inspection and Supervision Authority):

a) A report on the operational situation and financial status of the Preservation Fund for the previous year using Form No. 02 issued together with this Circular;

b) A report on the results of internal audit supervision by the Audit Committee of the cooperative bank regarding the operational situation and financial results of the Preservation Fund using Form No. 03 issued together with this Circular.

3. Ad hoc reports upon request of the State Bank of Vietnam.

4. The reports under Clauses 1, 2, and 3 of this Article shall be prepared in writing and submitted directly or through postal services to the State Bank of Vietnam (Bank Inspection and Supervision Authority).

Article 10. Internal Report

The cooperative bank shall be responsible for submitting reports on the operation status and financial situation of the Reserve Fund to members no later than January 31 each year; at the same time, it shall bear responsibility for reporting and explaining according to the requirements of members regarding the aforementioned reports.

Article 11. Management and Supervision by State Management Agencies

The State Bank of Vietnam shall inspect and supervise cooperative banks in the establishment, management, and use of the Reserve Fund.

Chapter IV

RESPONSIBILITIES OF RELATED UNITS

Article 12. Responsibilities of the State Bank of Vietnam

1. The Banking Inspection and Supervision Authority:

Inspect and supervise cooperative banks in the establishment, management, and use of the Reserve Fund in accordance with this Circular.

2. Units under the State Bank of Vietnam:

Coordinate with the Inspection and Supervision Agency to handle issues and difficulties arising during the implementation of the establishment, management, and use of the Reserve Fund.

Article 13. Responsibilities of Cooperative Banks

1. Establish the Reserve Fund in accordance with this Circular.

2. Calculate and pay the participation fee for the Reserve Fund on time and in full.

3. Check the calculation and payment of fees and urge people's credit funds to pay the participation fee for the Reserve Fund on time and in full.

4. Manage, use, and be responsible for the use of the Reserve Fund.

5. Develop regulations on the management and use of the Reserve Fund, submit them to the General Assembly of cooperative bank members for approval and implementation throughout the system of people's credit funds in accordance with Clause 2, Article 5 of this Circular and relevant laws.

6. Report on the operation status and financial situation of the Reserve Fund at the General Assembly of cooperative bank members.

7. Strictly implement the reporting system with state management agencies.

Article 14. Responsibilities of People's Credit Funds

1. Calculate and pay the participation fee for the Reserve Fund on time and in full.

2. Strictly implement the regulations on the management and use of the Reserve Fund and relevant laws.

3. Use the loan support from the Reserve Fund for its intended purpose.

Chapter V

IMPLEMENTATION

[6]^,[7]^,[8]

Article 15. Transitional Provisions

1. Transfer the entire amount of fees paid by people's credit funds participating in the pilot System Safety Fund into the Reserve Fund. The fees paid by people's credit funds participating in the pilot System Safety Fund will be deducted from the fees payable in 2014 and subsequent years.

2. Transfer the entire outstanding balance of loans made during the pilot period of the System Safety Fund into the Reserve Fund. People's credit funds with outstanding balances during the pilot period of the System Safety Fund must recognize and repay the loans borrowed from the Reserve Fund.

3. The cooperative bank shall provide specific guidance on the procedures and formalities for the transfer as stipulated in Clauses 1 and 2 of this Article.

Article 16. Effective Date

This Circular takes effect from March 15, 2014.

Article 17. Implementation Organization

The Director of the Office, the Chief Inspector and Supervisor of Banks, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally governed cities, Chairmen of the Board of Directors, General Managers (Directors) of cooperative banks and people's credit funds are responsible for organizing the implementation of this Circular./.

Form No. 01

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COOPERATIVE BANK --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
No.:...	(Province/City).... day..... month..... year...

REPORT

Operation Status of the Reserve Fund in the First Half of the Year

(From January 1, .... to June 30, ....)

Respected: State Bank of Vietnam

1. Management of the Reserve Fund (number of members of the Reserve Fund Management Board).

2. Total fees collected by the Reserve Fund.

3. Operating expenses of the Reserve Fund.

4. Usage for providing loans to support people's credit funds when they face financial difficulties and have difficulty making payments to return to normal operations.

5. Report on the use of Reserve Fund capital:

a) Deposited in cooperative banks or commercial banks in accordance with the Management and Utilization Regulation of the Preservation Fund;

b) Purchase of government bonds, treasury bills, and State Bank of Vietnam bills.

LEGAL REPRESENTATIVE (Sign, write full name, position and stamp)

Form No. 02

[10]

COOPERATIVE BANK --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
No.:...	(Province/City).... day..... month..... year...

REPORT

Operation Status and Financial Situation of the Reserve Fund in the Previous Year

(From January 1, ... to December 31, ...)

Respected: State Bank of Vietnam

1. Management of the Reserve Fund (number of members of the Reserve Fund Management Board).

2. Total fees collected by the Reserve Fund:

- Number of people's credit funds that have participated in paying the Reserve Fund fee.

- Number of people's credit funds that have not participated in paying the Reserve Fund fee.

3. Operating expenses of the Reserve Fund.

4. Financial collection and expenditure mechanisms serving the activities of the Reserve Fund.

5. Usage for providing loans to support people's credit funds when they face financial difficulties and have difficulty making payments to return to normal operations.

- Number of people's credit funds requesting loans from the Reserve Fund; Number of people's credit funds approved for loans from the Reserve Fund; Support loan amount; Support loan term; Support loan interest rate;

- Measures to monitor, correct, and strengthen the operations of people's credit funds receiving support loans;

- Implementation of the inspection and supervision mechanism for the use of support loan capital by people's credit funds;

- Handling risks related to support loans that cannot be recovered;

6. Usage of Reserve Fund capital:

- Deposited at cooperative banks and commercial banks in accordance with the regulations on the management and use of the Reserve Fund; Deposit interest rate.

- Purchase of government bonds, treasury bills, and State Bank of Vietnam bills.

LEGAL REPRESENTATIVE (Sign, write full name, position and stamp)

Implementation Report of Production Projects of Supporting Industry Products Confirmed with Incentives

[11]

COOPERATIVE BANK --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
No.:...	(Province/City).... day..... month..... year...

REPORT

Results of internal audit and supervision by the Supervisory Board of the cooperative bank on the operation status and financial results of the Reserve Fund

(From January 1, ... to December 31, ...)

Respected: State Bank of Vietnam

1. Management of the Reserve Fund (number of members of the Reserve Fund Management Board).

2. Time period for internal audit and supervision by the Supervisory Board of the cooperative bank on the operation status and financial results of the Reserve Fund (Frequency and duration of internal audit)

3. Content and results of internal audit and supervision by the Supervisory Board of the cooperative bank on the operation status and financial results of the Reserve Fund.

LEGAL REPRESENTATIVE (Sign, write full name, position and stamp)

CERTIFIED CONSOLIDATED DOCUMENT DIRECTOR DEPUTY DIRECTOR Dao Minh Tu