Consolidated Document number 50/VBHN-BTC Circular guiding certain provisions on financial regime for credit organizations and foreign bank branches

MINISTRY OF FINANCE --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
Number: 50/CONSOLIDATED DOCUMENT - MINISTRY OF FINANCE	HANOI, December 31, 2020

 

CIRCULAR[1]

GUIDELINES ON CERTAIN PROVISIONS REGARDING THE FINANCIAL REGIME FOR CREDIT ORGANIZATIONS AND FOREIGN BANK BRANCHES

Circular No. 16/2018/TT-BTC dated February 7, 2018 of the Ministry of Finance guiding certain provisions regarding the financial regime for credit organizations and foreign bank branches, which took effect from March 26, 2018, has been amended and supplemented by:

Circular No. 84/2020/TT-BTC dated October 1, 2020 of the Ministry of Finance amending and supplementing regulations on periodic reporting within the authority of the Minister of Finance in the field of banking finance, which took effect from November 15, 2020.

Pursuant to the Enterprise Law dated November 26, 2014;

Pursuant to the Law on Credit Organizations dated June 16, 2010;

Pursuant to the Law on Management and Use of State Capital for Investment in Production and Business at Enterprises dated November 26, 2014;

Pursuant to the Law Amending and Supplementing Certain Provisions of the Law on Credit Organizations dated November 20, 2017;

Pursuant to the Law on Information Technology dated June 29, 2006;

Pursuant to Decree No. 93/2017/NĐ-CP dated August 7, 2017 on the financial regime for credit organizations and foreign bank branches and financial supervision, evaluation of the effectiveness of state capital investment at credit organizations wholly owned by the State and credit organizations with state capital;

Pursuant to Decree No. 64/2007/NĐ-CP dated April 10, 2007 of the Government on the application of information technology in the activities of state agencies;

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017 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 promulgates this Circular guiding certain provisions on the financial regime for credit organizations and foreign bank branches.[2]

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides certain provisions on the financial regime for credit organizations and foreign bank branches as prescribed in Decree No. 93/2017/NĐ-CP dated August 7, 2017 of the Government on the financial regime for credit organizations and foreign bank branches and financial supervision, evaluation of the effectiveness of state capital investment at credit organizations wholly owned by the State and credit organizations with state capital (hereinafter referred to as Decree No. 93/2017/NĐ-CP).

Article 2. Applicability

1. This Circular applies to:

a) Credit organizations and foreign bank branches established, organized, and operated in accordance with the Law on Credit Organizations dated June 16, 2010 and the Law Amending and Supplementing Certain Provisions of the Law on Credit Organizations No. 17/2017/QH14 dated November 20, 2017 and any subsequent amendments, supplements, or replacements (if any) (hereinafter referred to as the Law on Credit Organizations).

b) Other relevant authorities, organizations, and individuals.

2. This Circular does not apply to credit organizations that are microfinance institutions, policy banks, cooperative banks, and people's credit funds.

Chapter II

SPECIFIC PROVISIONS

Article 3. Management and Use of Capital and Assets

1. Credit organizations and foreign bank branches shall be responsible for managing and using capital and assets in accordance with Chapter II of Decree No. 93/2017/NĐ-CP, related laws, and specific guidelines set forth in this Circular.

2. For real estate held due to debt recovery as provided for in Clause 3, Article 132 of the Law on Credit Organizations:

a) For real estate temporarily held by credit organizations for sale or transfer to recover capital within three years, credit organizations shall not record an increase in assets and shall not depreciate.

b) For real estate purchased by credit organizations to directly serve business operations, credit organizations shall record an increase in assets and depreciate according to the law and must ensure the limit on investment in fixed assets as stipulated in Clause 3 and Clause 4, Article 6 of Decree No. 93/2017/NĐ-CP.

3. Throughout their business operations, credit organizations and foreign bank branches must maintain the investment and purchase limits of fixed assets directly serving business operations based on the principle that the remaining value of fixed assets shall not exceed 50% of the charter capital and additional reserve fund recorded in accounting books for credit organizations; and shall not exceed 50% of the authorized capital and additional reserve fund recorded in accounting books for foreign bank branches.

1. The Vietnam Stock Exchange manages revenue and other income in accordance with Article 30 of Decree No. 91/2015/NĐ-CP dated October 13, 2015 of the Government on investment of state capital in enterprises and management and use of capital and assets at enterprises and related guiding documents, amendments, supplements, or replacements (if any). The revenue of the Vietnam Stock Exchange includes:

Revenue of credit organizations and foreign bank branches includes income items specified in Article 16 of Decree No. 93/2017/NĐ-CP. Some income items of credit organizations and foreign bank branches are implemented as follows:

1. Income from other service activities: Income from providing asset storage services, renting safety deposit boxes, consulting, and brokerage services; income from other services.

2. Income from other activities as prescribed by law, including income from leasing assets, excluding amounts received from leasing real estate temporarily held to offset loan debts as provided for in Clause 3, Article 132 of the Law on Credit Organizations to recover debts.

3. Other income:

a) Income from debts owed by unknown or unidentifiable creditors as prescribed by law shall be recorded as increased revenue;

b) Penalties from customers and compensation payments from customers for breach of contract shall be recorded as income;

c) Insurance compensation income shall be recorded as income after deducting losses covered by insurance;

d) Other income as prescribed by law.

Article 5. Principles for Recognizing Revenue

Principles for recognizing revenue for income items of credit organizations and foreign bank branches as stipulated in Article 16 of Decree No. 93/2017/NĐ-CP are as follows:

1. Determination of revenue for corporate income tax purposes shall be carried out in accordance with the Law on Corporate Income Tax and its implementing regulations.

2. For interest income and similar income items:

a) Interest income from lending activities: Credit organizations and foreign bank branches shall be responsible for assessing the ability to recover loans and classifying debts in accordance with the regulations of the State Bank of Vietnam to serve as the basis for recording interest receivable and shall implement the following:

- Credit organizations and foreign bank branches shall record interest receivable arising during the period in income for loans classified as standard non-specific risk loans as prescribed by the State Bank of Vietnam.

- The interest receivable on Non-performing Loans that remain in the standard category due to the implementation of state policies and the interest receivable generated during the period for the remaining Non-performing Loans shall not be recorded as income; credit institutions and foreign bank branches shall monitor such items off-balance sheet to urge collection; when collected, they shall record it as income.

b) Interest on deposits: is the interest receivable within the period.

3. For the revenue from exchange rate differences arising from revaluation of foreign currencies and gold, credit institutions and foreign bank branches shall record according to the accounting standards and relevant laws.

4. Revenue from securities trading activities (excluding shares):

a) For trading securities: Credit institutions and foreign bank branches shall record the income according to the enterprise accounting regulations concerning trading securities.

b) For investment securities, excluding those classified as loans and provisioned for risk: Credit institutions and foreign bank branches shall record expected interest income.

5. For dividend income from capital contributions: Dividends and profits distributed from capital contribution activities are the amounts distributed based on resolutions or decisions to distribute.

6. For revenues from other activities: Revenue is the total amount of goods and services provided during the period accepted by customers for payment, regardless of whether the payment has been received or not.

7. For receivables that have been recorded as income but later assessed as uncollectible or not collected by the due date, credit institutions and foreign bank branches shall reduce revenue if in the same accounting period or record it as expense if in a different accounting period and monitor off-balance sheet to urge collection; when collected, they shall record it as income.

Article 6. Expenses

The expenses of credit institutions and foreign bank branches include the items specified in Article 17 of Decree No. 93/2017/NĐ-CP. Some expenses of credit institutions and foreign bank branches are guided as follows:

1. Commission expenses for brokerage activities as follows:

a) Credit institutions and foreign bank branches may incur commission expenses for brokerage activities permitted by law.

b) Brokerage commissions paid to third parties (as intermediaries) shall not apply to agents of credit institutions and foreign bank branches; management positions, employees of credit institutions and foreign bank branches, and related persons of credit institutions and foreign bank branches as stipulated by the Law on Credit Institutions and any amendments, supplements, or replacements thereof (if any).

c) The payment of brokerage commissions must be based on a contract or confirmation between the credit institution, foreign bank branch, and the recipient of the brokerage commission, which must include basic contents such as: name of the recipient; nature of the expense; amount; method of payment; time of execution and termination; responsibilities of the parties.

d) For brokerage expenses for leasing assets (including seized assets and pledged assets): the maximum brokerage expense for leasing each asset by credit institutions and foreign bank branches shall not exceed 5% of the total amount received from leasing that asset through brokerage in a year.

đ) For brokerage expenses for selling collateral and pledged assets: the maximum brokerage commission for selling each collateral or pledged asset by credit institutions and foreign bank branches shall not exceed 1% of the actual value received from selling that asset through brokerage.

e) The Board of Directors or the Board of Members or General Director (Director) of credit institutions and foreign bank branches shall issue a regulation on brokerage commission expenses to be uniformly applied and publicly disclosed.

2. Expenses for staff as specified in point h Clause 2 Article 17 of Decree No. 93/2017/NĐ-CP. Some staff expenses are specifically guided as follows:

a) Safety equipment expenses: can only be incurred for individuals who need safety equipment while working.

b) Meal expenses: State-owned credit institutions holding 100% of the charter capital and credit institutions with over 50% state ownership shall provide meal expenses according to the level set for state-owned enterprises.

c) Medical expenses include regular health check-up expenses for employees, purchase of preventive medicines, and other medical expenses under the responsibility of the enterprise as stipulated by current laws.

d) Other expenses include: annual leave pay, additional expenses for female workers as stipulated by labor laws, and other expenses as stipulated by laws.

3. Expenses for management and public service activities as specified in point i Clause 2 Article 17 of Decree No. 93/2017/NĐ-CP, including:

a) Research and application of science and technology expenses include:

- Establishment of a fund for scientific and technological development according to the law. The use of the fund shall be carried out according to current regulations;

- Expenses for the shortfall in cases where the balance of the scientific and technological development fund is insufficient to cover research and application expenses in the year.

b) Awards for innovation initiatives, increased productivity, and cost-saving measures shall be made in accordance with the principle of being commensurate with the actual benefits achieved; credit institutions and foreign bank branches must establish and publicly disclose award regulations and form a Committee to verify innovations.

4. Expenses for assets:

a) Depreciation expenses for fixed assets used in business operations shall be carried out according to the management, use, and depreciation rules for fixed assets of enterprises.

In case of purchasing fixed assets on installment: credit institutions and foreign bank branches shall record the difference between the total amount to be paid and the immediate purchase price of the fixed asset as an expense over the payment period, except when that difference is capitalized into the original cost of the fixed asset according to accounting standards.

b) Leasing of fixed assets: Leasing costs for fixed assets shall be implemented according to the leasing contract. In cases where payment for leasing assets is made in one lump sum for multiple years, the leasing cost shall be gradually allocated to business expenses over the number of years of asset usage.

c) Leasing management and operation services of assets and buildings shall be carried out according to the leasing contract.

5. Other costs as stipulated at point n Clause 2 Article 17 Decree No. 93/2017/ND-CP, including:

a) Costs for paying association fees of the industry that credit institutions and foreign bank branches participate in.

b) Costs for recovering written-off debts, bad debt recovery costs include costs for recovering debts, including costs for paying service fees for debt recovery from organizations permitted to perform debt recovery services under the law, and costs for implementing debt purchases and sales.

c) Other costs include:

- Costs for debts that have been identified as lost owners and recorded as income but later identified as having owners;

- Costs for paying fines and compensation due to violations of economic contracts within the responsibility of credit institutions and foreign bank branches;

- Administrative penalty payments except for amounts of fines that individuals must pay according to the law;

- Court fees and execution fees;

- Other costs as prescribed by law.

Article 7. Principles for Recording Expenses

1. Expenses of credit institutions and foreign bank branches are actual expenses incurred related to the business operations of credit institutions and foreign bank branches; they comply with the principle of matching revenue and expenses; they must be supported by valid invoices and documents as prescribed by law. Credit institutions and foreign bank branches shall not record expenses funded by other sources. The determination and recording of expenses shall be carried out in accordance with Vietnamese accounting standards and other relevant laws.

2. The determination of expenses when calculating corporate income tax shall be carried out in accordance with the provisions of the Corporate Income Tax Law and guiding documents.

3. Credit institutions holding 100% state capital and credit institutions holding more than 50% state capital may only record deductible expenses as prescribed by the Corporate Income Tax Law in their business expenses. Specifically, regarding the portion of risk reserve contributions exceeding the prescribed limit which can be deducted when determining corporate income tax due to differences between the regulations on risk reserve contributions in the Corporate Income Tax Law and those of the State Bank of Vietnam (if applicable); costs for paying association fees of industries abroad that credit institutions participate in and administrative penalty payments (except for administrative penalty amounts that individuals must pay according to the law), credit institutions holding 100% state capital and credit institutions holding more than 50% state capital may use post-tax profits to offset these costs.

Article 8. Content of Reports, Report Forms, Reporting Periods, Deadline for Submitting Reports, and Receiving Authorities

1. Credit institutions and foreign bank branches shall implement reporting systems as prescribed in Article 25 and Article 26 of Decree No. 93/2017/ND-CP and guided by this Circular.

2. Annual financial plan report: Credit institutions holding 100% state capital and credit institutions holding more than 50% state capital shall submit annual financial plan reports as prescribed in Article 25 of Decree No. 93/2017/ND-CP.

3. Financial reports, including:

a) Interim and annual balance sheets;

b) Interim and annual operating results reports;

c) Interim and annual cash flow statements;

d) Interim and annual financial statement notes;

đ) Other reports, including:

- Monthly balance sheet;

- Report on certain financial safety indicators for the year;

- Report on the income situation of managers, staff, and employees for the year.

Financial reports of credit institutions and foreign bank branches shall be implemented in accordance with the legal regulations on financial reporting systems for credit institutions; specifically, the report on certain financial safety indicators and the report on the income situation of managers, staff, and employees of credit institutions and foreign bank branches shall be implemented according to Appendix 1 and Appendix 2 attached to this Circular.

4. Deadline for submitting reports:

a) Deadline for submitting annual financial plan reports as prescribed in Article 25 of Decree No. 93/2017/ND-CP.

b) Deadline for submitting monthly reports: no later than the 10th day of the following month.

c) Deadline for submitting interim financial reports: no later than the 30th day of the first month of the next quarter.

d) Deadline for submitting unaudited annual financial reports: no later than 180 days for foreign credit institutions and 90 days for other credit institutions from the end of the fiscal year.

đ) Deadline for submitting audited annual financial reports accompanied by the independent auditor's conclusion (audit report): immediately upon completion of the audit.

e) If the last day of the deadline for submitting financial reports falls on a public holiday, a Tet holiday, or a weekend, the latest submission date shall be the next working day after that date.

5. Receiving Authority for Reports:

Credit institutions and foreign bank branches shall submit financial reports to the State Bank of Vietnam to oversee the implementation of financial systems by credit institutions and foreign bank branches; simultaneously, they shall also submit to the Ministry of Finance.

Article 9. Reporting Methods

Credit institutions and foreign bank branches shall submit reports to the Ministry of Finance through the following methods:

1. Written Reports:

Credit institutions and foreign bank branches shall submit written financial reports for the year that have been audited in accordance with points a, b, c, and d of Clause 3, Article 8 of this Circular.

2. Electronic Reports:

a) Credit institutions and foreign bank branches shall submit electronic reports as stipulated in Article 8 of this Circular.

b) Various Credit institutions and foreign bank branches shall connect with the Ministry of Finance through the Ministry of Finance's electronic portal to submit electronic financial reports to the Ministry of Finance in accordance with specific guidelines provided by the Ministry of Finance..

c) In cases where credit institutions and foreign bank branches the conditions for connecting to the Ministry of Finance's data transmission network are not met, they shall send report files via portable storage media or submit written reports to the Ministry of Finance (Department of Banking and Financial Organization Finance) to update the report data.

d) In cases where there are issues with the data transmission system, reporting units must send report files stored on portable storage media or submit written reports to the Ministry of Finance (Department of Banking and Financial Organization Finance) at the Ministry of Finance headquarters – No. 28 Tran Hung Dao Street - Hoan Kiem District - Hanoi.

Article 10. Responsibilities of Regulatory Authorities

1. The responsibility of the Ministry of Finance is to guide credit institutions and foreign bank branches in submitting reports through electronic methods.

2.[3] Responsibilities of the State Bank of Vietnam:

a) Annually (before April 30 of the following year) and every six months (before August 31), the State Bank of Vietnam shall notify the Ministry of Finance about the financial situation of credit institutions and foreign bank branches in accordance with Clause 2, Article 38 of Decree No. 93/2017/ND-CP, specifically according to the following indicators (separated by type of credit institution):

- Number of credit institutions and foreign bank branches.

- Total charter capital, owner's equity, assets, total loans, total capital raised, non-performing loan ratio, and other safety ratios in the operations of credit institutions and foreign bank branches.

- Total profit (loss) and number of credit institutions and foreign bank branches operating profitably (incurring losses).

- Financial status and operational efficiency of state-owned credit institutions holding more than 50% of the charter capital.

- Other relevant indicators and contents.

- Violations of financial regulations discovered during inspection and supervision of credit institutions and foreign bank branches.

b) Data cut-off period:

- For six-month reports: From January 1 of the reporting period to June 30 of the reporting period (excluding data reflecting a specific point in time).

- For annual reports: From January 1 of the reporting year to December 31 of the reporting year (excluding data reflecting a specific point in time).

c) Reporting methods shall be carried out through one of the following methods:

- Direct submission in paper form; - Submission via postal service

- Other methods as prescribed by law in paper form; - Submission via postal service

- Sending via email systems or specialized information reporting software systems;

- Other methods as provided for by law.

Article 11. Responsibilities of Credit Institutions and Foreign Bank Branches

Implement financial systems as prescribed by the Law on Credit Institutions; Decree No. 93/2017/ND-CP; specific guidance contents in this Circular and other regulatory legal documents related to financial management.

Chapter III

IMPLEMENTATION

Article 12. Implementation Provisions

[4]

1. This Circular shall take effect from February 2.6 the 3 Article 2. The receipt, handling of reflections and petitions from individuals and organizations concerning administrative regulations shall be carried out in accordance with Decree No. 20/2008/NĐ-CP dated February 14, 2008 of the Government on the receipt, handling of reflections and petitions from individuals and organizations concerning administrative regulations (amended and supplemented by Decree No. 48/2013/NĐ-CP dated May 14, 2013 on amending and supplementing certain articles of decrees related to administrative procedure control and Decree No. 92/2017/NĐ-CP dated August 7, 2017 on amending and supplementing certain articles of decrees related to administrative procedure control).8.

2. This Circular replaces Circular No. 05/2013/TT-BTC dated January 9, 2013, issued by the Ministry of Finance, guiding financial regulations for credit organizations and foreign bank branches.

3. During the period when there is no guidance from the Ministry of Finance on the implementation of electronic reporting, credit organizations and foreign bank branches shall submit in writing the financial reports (excluding the Monthly Accounting Balance Sheet) as prescribed in Clause 3, Article 8 of this Circular.

4. In the course of implementation, if there are difficulties, they should be reported to the Ministry of Finance for study, consideration, and resolution./.

 

CERTIFIED CONSOLIDATED DOCUMENT DEPUTY MINISTER DEPUTY MINISTER Huynh Quang Hai

 

ANNEX 1

(Announced together with Circular No. 16/2018/TT-BTC dated February 7, 2018, issued by the Ministry of Finance)

Reporting entity:...

Address:…

Some financial safety indicators

Unit: million dong/percent

Serial number	Index	Individual	Consolidated
1	Total assets
2	Capital (billion VND)
3	Own capital
a	Tier 1 own capital
b	Tier 2 own capital
4	Total Risky assets
5	Capital adequacy ratio (3)/(4)
6	Actual value of charter capital/capital received
7	Net profit after tax/shareholders' equity (ROE)
8	Net profit after tax/Total assets (ROA)
9	Credit growth rate
10	Capital mobilization growth rate
11	Short-term capital usage ratio for medium and long-term loans
12	Total investment in enterprises
13	Loan-to-deposit ratio

 

ASSETS

HEAD OF ACCOUNTING DEPARTMENT

Day Month Year GENERAL DIRECTOR (DIRECTOR) (Signature, stamp)

 

ANNEX 2

(Announced together with Circular No. 16/2018/TT-BTC dated February 7, 2018, issued by the Ministry of Finance)

Reporting entity:...

Address:…

Management personnel income situation (Year...)

Unit: million dong

Serial number	Content	Number of people	Total salary	Total bonus	Total income	Average monthly salary per person	Average monthly income per person
1	Management personnel
1.1	Full-time management personnel
1.2	Part-time management personnel
2	Staff

 

ASSETS

HEAD OF ACCOUNTING DEPARTMENT

Day Month Year GENERAL DIRECTOR (DIRECTOR) (Signature, stamp)