Consolidated Document number 53/VBHN-BTC Circular guiding certain provisions on financial regulations for people's credit funds

MINISTRY OF FINANCE --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
Number: 53/CONSOLIDATED DOCUMENT - MINISTRY OF FINANCE	HANOI, December 31, 2020

 

CIRCULAR[1]

GUIDELINES ON CERTAIN PROVISIONS REGARDING THE FINANCIAL REGIME FOR RURAL CREDIT UNIONS

Circular No. 20/2018/TT-BTC dated February 12, 2018 of the Ministry of Finance guiding certain provisions regarding the financial regime for rural credit unions, which took effect from March 29, 2018, was 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 finance and banking, which took effect from November 15, 2020.

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Law on Cooperatives dated November 20, 2012;

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

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017, issued by 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 certain provisions regarding the financial regime for rural credit unions.[2]

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides certain provisions regarding the financial regime for rural credit unions operating in Vietnam as stipulated in Decree No. 93/2017/NĐ-CP dated August 7, 2017 of the Government on the financial regime for credit organizations, foreign bank branches, and financial supervision, evaluation of state capital investment efficiency 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. Rural credit unions are established, organized, and operate according to the Law on Credit Organizations dated June 16, 2010, the Law Amending and Supplementing Certain Provisions of the Law on Credit Organizations dated November 20, 2017, and related amendments and supplements (if any) (hereinafter referred to as the Law on Credit Organizations).

2. Relevant agencies, organizations, and individuals.

Chapter II

SPECIFIC PROVISIONS

Article 3. Shareholders' Equity of Rural Credit Unions

1. Registered Capital is the total capital contributed by members and recorded in the charter of the rural credit union, accounted for in Vietnamese Dong.

2. Revaluation Surplus is the difference between the book value of assets and their revalued value as determined by the State or other revaluations as prescribed by law.

3. The funds include:

a) Supplementary Capital Reserve Fund;

b) Development Investment Fund;

5. The Vietnam Development Bank must maintain a maximum ratio of outstanding loans to total capital available for lending of 95%."

4. Accumulated undistributed profits; accumulated losses not yet resolved.

5. Other capital belonging to the rural credit union.

Article 4. Management and Utilization of Capital and Assets

1. Rural credit unions are responsible for managing and utilizing capital and assets in accordance with Chapter II of Decree No. 93/2017/NĐ-CP, relevant laws, and specific guidelines set forth in this Circular.

2. Implement accounting in accordance with current accounting regulations; fully, accurately, and promptly reflect the situation of capital and asset usage and changes during business operations; clearly define responsibilities and forms of handling for each department and individual in cases of damage or loss of assets or capital of the credit union.

3. Rural credit unions may purchase and invest in fixed assets directly serving business activities under the principle that the remaining value of fixed assets does not exceed 50% of the registered capital and supplementary capital reserve fund recorded in the books of the rural credit union.

4. For leased, pledged, mortgaged, or held-in-custody assets of customers, rural credit unions are responsible for managing, preserving, or using them in accordance with agreements with customers in compliance with legal provisions.

5. For real estate acquired through debt recovery as stipulated in Clause 3, Article 132 of the Law on Credit Organizations:

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

b) For real estate purchased by rural credit unions to directly serve business activities, rural credit unions shall account for an increase in assets, implement depreciation in accordance with legal provisions, and ensure limits on construction and acquisition of fixed assets as stipulated in Clause 3 of this Article.

Article 5. Revenue

The revenues of credit cooperatives must be determined in accordance with Vietnamese accounting standards and relevant laws, with valid invoices or receipts, and must be fully recorded in revenue. Revenue from credit cooperative business activities includes the following items:

1. Income from interest and similar income:

a) Interest from deposits;

b) Interest income from loans;

c) Interest income from debt buying and selling operations;

d) Other income from credit activities.

2. Income from service activities:

a) Income from payment services including: Income from money transfer services, collection and disbursement services for members;

b) Income from treasury services;

c) Income from agency services related to banking activities and asset management as prescribed by the State Bank of Vietnam;

d) Income from insurance brokerage services;

đ) Income from providing financial advisory services to members;

e) Other service income as prescribed by law.

3. Income from capital contributions to the Vietnam Joint Stock Commercial Bank for Agriculture and Rural Development: Interest income from capital contributions to the Vietnam Joint Stock Commercial Bank for Agriculture and Rural Development.

4. Income from other activities:

a) Income from debts resolved through risk provisions (including debts that have been written off but are now recovered);

b) Income from debt buying and selling operations;

c) Income from property transfers and liquidations;

d) Income from reversal of provisions;

đ) Income from other activities:

- Income from leasing assets excluding amounts received from leasing temporary real estate holdings due to loan recovery as stipulated in Clause 3, Article 132 of the Law on Credit Institutions;

- Other income from activities as prescribed by law.

5. Other income:

a) Income from debts owed by unknown creditors or lost owners as prescribed by law;

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

c) Insurance indemnity income is recorded as income after offsetting losses covered by insurance;

d) Other income as prescribed by law.

Article 6. Principles of Revenue Recognition

The principles of revenue recognition for credit cooperative revenues as stipulated in Article 16 of Decree No. 93/2017/ND-CP are as follows:

1. Determination of revenue for corporate income tax purposes shall be carried out in accordance with the Corporate Income Tax Law and guiding documents.

2. For interest income and similar income;

a) Interest income from lending activities: Credit cooperatives are responsible for assessing the likelihood of debt recovery and classifying debts according to the regulations of the banking law to serve as the basis for recording receivable interest and shall record as follows:

- Credit cooperatives record receivable interest arising during the period in income for debts classified as standard loans not requiring specific risk provisions as prescribed by the State Bank of Vietnam.

- Receivable interest of debts remaining in the standard category due to implementation of state policies and receivable interest arising during the period for the remaining debts shall not be recorded as income; credit cooperatives shall monitor these externally and record them as income when collected.

b) Interest income from deposits: is the receivable interest for the period.

3. For interest income from capital contributions to the Vietnam Joint Stock Commercial Bank for Agriculture and Rural Development: is the interest distributed based on resolutions or decisions of the Board of Directors of the Vietnam Joint Stock Commercial Bank for Agriculture and Rural Development.

4. For revenue from other activities: revenue is the total amount of goods and services provided during the period accepted for payment by customers regardless of whether payment has been received.

5. For receivables already recorded as income but assessed as uncollectible or not collected by the due date, credit cooperatives shall reduce revenue if within the same accounting period or record it as expenses if outside the accounting period and monitor it externally to urge collection. When collected, it shall be recorded as income.

Article 7. Expenses

1. Interest expenses and similar expenses:

a) Payment of deposit interest: Payment of interest on deposits from members, organizations, and individuals;

b) Payment of loan interest including payment for interest on liquidity adjustment loans, loans from other credit institutions, financial organizations, and payment of interest on loans from the Vietnam Cooperative Bank;

c) Other expenses for lending activities.

2. Service activity expenses:

a) Payment for settlement services: Payment for providing money transfer services, performing collection and disbursement services for members; transportation costs; vault and cash box operations expenses;

b) Payment for treasury services

c) Payment for telecommunications services;

d) Payment for agency and trustee services;

đ) Payment for consulting services;

e) Commission expenses:

- Credit cooperatives may pay commission expenses for permitted brokerage activities under the law.

- Brokerage commissions paid to third parties (as intermediaries) shall not be applied to agents of credit cooperatives; management positions, employees of credit cooperatives, and related persons according to the Law on Credit Institutions and any amending, supplementing, or replacing legal documents (if applicable).

- The payment of brokerage commissions must be based on a contract or confirmation between the credit cooperative 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 commencement and completion; responsibilities of the parties.

- For brokerage expenses for leasing assets (including seized assets and debt-for-assets swaps): the maximum brokerage expense for leasing each asset of the credit cooperative shall not exceed 5% of the total income from leasing that asset through brokerage in the year.

- For brokerage expenses for selling collateralized or pledged assets: the brokerage commission for selling each collateralized or pledged asset of the credit cooperative shall not exceed 1% of the actual value received from selling the asset through brokerage.

- The Board of Directors or General Director of the credit cooperative shall issue regulations on the payment of brokerage commissions to apply uniformly and publicly.

3. Capital contribution expenses: Expenses incurred when contributing capital to the Vietnam Cooperative Bank.

4. Other business activity expenses as prescribed by law:

a) Payment for debt buying and selling operations;

b) Other business activity expenses.

5. Tax payment expenses, fees, and charges.

6. Employee expenses as prescribed by law, including:

a) Wages, remuneration, bonuses, and other wage-like payments for staff working at credit cooperatives:

- Salary and allowances for full-time members of the Board of Directors and Supervisory Board. The level of expenditure is determined by the Board of Directors of the credit cooperative based on the resolution of the Member Assembly.

- Salary and allowances for staff of the credit cooperative based on labor contracts or collective labor agreements.

b) Contributions based on wages: Social insurance, health insurance, unemployment insurance, trade union fees;

c) Work attire expenses for staff (if applicable);

d) Safety equipment expenses: Only allowed for those who need safety equipment while working;

đ) Unemployment benefit payments to workers as prescribed by labor laws;

e) Purchase of personal accident insurance;

g) Meal expenses;

h) Medical expenses including regular medical check-up expenses for workers, purchase of preventive medicines, and other medical expenses within the responsibility of the enterprise as prescribed by current laws;

i) Other expenses for workers as prescribed by law:

- Annual leave expenses, additional expenses for female workers as prescribed by labor laws;

- Other expenses as prescribed by law.

7. Management and public service expenses including the following expenses:

a) Stationery and printing material expenses;

b) Travel expenses;

c) Training and professional development expenses as prescribed by law;

d) Research and application of science and technology expenses including:

- Establishment of a scientific and technological development fund as prescribed by law. The use of the fund is carried out according to current laws;

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

đ) Incentive expenses for innovation, increased productivity, and cost savings according to the principle of being commensurate with the actual benefits achieved; credit cooperatives must establish and publicly announce incentive regulations and form a committee to verify innovations;

e) Postage and telephone expenses;

g) Publication expenses, publicity, advertising, marketing, and promotional expenses;

h) Book and newspaper purchase expenses;

i) Expenses for social organization activities;

k) Electricity, water, and office sanitation expenses;

l) Conference, reception, ceremonial, and foreign affairs transaction expenses;

m) Consulting and auditing expenses; expenses for hiring domestic and foreign experts;

n) Fire prevention and firefighting expenses;

o) Environmental protection expenses. If the expenses in the year are large and have effects over multiple years, they can be allocated to subsequent years;

p) Other management and public service expenses:

- Expenses for developing and applying new products and services provided by the Vietnam Cooperative Bank;

- Security expenses; expenses for civilian defense, national defense, and security work;

- Other expenses as prescribed by law.

8. Asset expenses:

a) Depreciation expenses for fixed assets used in business operations are implemented according to the management, use, and depreciation system for enterprises;

b) Maintenance and repair expenses for assets;

c) Purchase and repair expenses for tools and equipment;

d) Asset insurance expenses;

đ) Fixed asset rental expenses: Rental expenses for fixed assets are carried out according to the lease contract. In cases where rental payments are made in one lump sum for multiple years, the rental payments are gradually allocated to business expenses over the number of years of asset usage.

e) Expenses for managing and operating asset and building services carried out according to the lease contract;

g) Other asset expenses.

9. Provision expenses:

a) Provision expenses include:

- Expenses for setting up risk provisions in operations as prescribed in Article 131 of the Law on Credit Institutions;

- Expenses for setting up risk provisions for special bonds issued by the Vietnam Asset Management Company under the provisions of point a, Clause 2, Article 21 of Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of the Vietnam Asset Management Company, and Clause 12, Article 1 of Decree No. 34/2015/NĐ-CP dated March 31, 2015 of the Government amending and supplementing certain articles of Decree No. 53/2013/NĐ-CP; guidelines of the State Bank of Vietnam and other legal documents that amend and supplement (if any);

- Expenses for setting up inventory write-down reserves, doubtful debt reserves, and other reserve items (if any) according to general regulations applicable to enterprises;

b) The portion of expenses for setting up risk provisions deductible when determining corporate income tax shall be implemented in accordance with the legal provisions on corporate income tax;

10. Expenses for deposit preservation and deposit insurance:

a) Deposit insurance expenses: expenses for paying deposit insurance premiums as prescribed by the law on deposit insurance;

b) Deposit preservation expenses: expenses for contributing to the Fund for Ensuring the Safety of the System of People's Credit Funds;

11. Other expenses:

a) Expenses for paying membership fees to industry associations that the people's credit fund participates in, at the rates set by these associations;

b) Expenses for party and mass organization work at the people's credit fund (the portion of expenses outside the organizational budget of the party and mass organizations funded from the specified source);

c) Expenses for selling off, liquidating assets, and the residual value of liquidated, sold-off fixed assets (if any);

d) Expenses for recovering debts that have been written off, including costs for recovering bad debts, which include costs for buying and selling debts and service fees paid to organizations permitted to provide debt recovery services in accordance with the law;

đ) Expenses for processing remaining asset losses: The people's credit fund records the loss value after compensating with personal, collective, or insurance organization compensation; using reserves established in expenses; utilizing the financial reserve fund of the people's credit fund;

e) Expenses for revenues that have been recorded but not actually received;

g) Social work expenses as prescribed by the law on taxation;

h) Administrative penalty payment expenses, excluding fines that individuals must pay according to the law;

i) Other expenses:

- Expenses for debts that were previously determined to be unclaimed, recorded as income, but later identified as having creditors;

- Expenses for paying fines and compensation due to economic contract violations within the responsibility of the people's credit fund;

- Expenses for litigation fees and enforcement fees within the responsibility of the people's credit fund;

- Other expenses as prescribed by law.

Article 8. Principles of Expense Recognition

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

2. Expenses of the people's credit fund are actual expenses incurred related to the business activities of the people's credit fund; they comply with the principle of matching revenue and expenses; they are supported by valid invoices and documents as prescribed by law. The people's credit fund shall not record expenses funded by other sources. The determination and recording of expenses shall be consistent with Vietnamese accounting standards and relevant legal provisions.

Article 9. Distribution of profits, management and use of funds

The People's Credit Cooperative shall distribute profits, manage and use funds in accordance with Articles 22 and 24 of Decree No. 93/2017/NĐ-CP.

Article 10. Financial reporting system

1. At the end of each accounting period, the People's Credit Cooperative must prepare and submit financial reports in accordance with the provisions of the law.

2. The Board of Directors or the Chairman of the Board of Directors or the Director of the People's Credit Cooperative shall be responsible for the accuracy and honesty of these reports.

3. Financial reports

a) Content, forms, and reporting periods shall be carried out in accordance with the financial reporting regulations for credit organizations.

b) Annual audit report on financial statements shall be conducted in accordance with the State Bank of Vietnam's regulations on independent auditing for People's Credit Cooperatives.

4. Deadline for submission of reports

a) Annual financial report: no later than 90 days from the end of the fiscal year.

For People's Credit Cooperatives required to conduct independent audits in accordance with the State Bank of Vietnam's regulations: submit the annual financial report that has been audited along with the conclusion of the independent auditing organization (audit report) immediately after the audit is completed.

b) Interim financial report: no later than the first day of the third month of the following quarter.

5. Recipient of reports

The State Bank of Vietnam branch where the People's Credit Cooperative is located.

Chapter III

IMPLEMENTATION

Article 11. Responsibilities of supervisory agencies and People's Credit Cooperatives

1. The Ministry of Finance and the State Bank of Vietnam shall fulfill their responsibilities as stipulated in Articles 37 and 38 of Decree No. 93/2017/NĐ-CP regarding People's Credit Cooperatives.

2.[3] Responsibilities of State Bank of Vietnam

2.1. Periodically every six months (before the 31st/8) and annually (before the 3rd0/4 of the next year), the State Bank of Vietnam shall have the responsibility to inform the Ministry of Finance about the financial situation of the People's Credit Cooperative system in accordance with Clause 2 of Article 38 of Decree No. 93/2017/NĐ-CP, specifically according to the following indicators:

a) Number of People's Credit Cooperatives (including the number of loss-making cooperatives, non-loss-making cooperatives, and profit-making cooperatives);

b) Total profit; total loss;

c) Financial violations of People's Credit Cooperatives discovered during inspections and supervision (if any).

2.2. Data closing time:

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

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

2.3. Methods of submitting reports shall be carried out in one of the following methods: Direct submission

a) in written form paper; b) Submission through postal service

c) Submission through email systems or specialized information reporting software systems; paper; b) Submission through postal service

c) Transmit via the electronic mail system or specialized information reporting software system; session number)section software reporting system;

d) Other methods as prescribed by law.

3. Responsibilities of People's Credit Cooperatives

Implement the financial system in accordance with the Law on Credit Organizations; Decree No. 93/2017/NĐ-CP; specific guidance provided in this Circular and other regulatory legal documents related to financial management.

Article 12. Effective Date

[4]

1. This Circular takes effect from March 29, 2018.

2. This Circular replaces Circular No. 94/2013/TT-BTC dated July 8, 2013, issued by the Ministry of Finance guiding the implementation of the financial system for People's Credit Cooperatives.

3. In the course of implementation, if there are difficulties or obstacles, please reflect them to the Ministry of Finance for consideration and resolution./.

 

CERTIFIED CONSOLIDATED DOCUMENT DEPUTY MINISTER DEPUTY MINISTER Huynh Quang Hai