Decree No. 57/2012/ND-CP on financial regime for credit institutions and foreign bank branches

DECREE

On the financial regime for credit institutions and foreign bank branches

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Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Enterprise Law dated November 29, 2005;

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

At the proposal of the Minister of Finance,

The Government issues a Decree on the financial regime for credit institutions and foreign bank branches.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree stipulates the financial regime for credit institutions and foreign bank branches established, organized, and operating in accordance with the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010.

Article 2. Principles of Financial Management

1. Credit institutions and foreign bank branches shall be financially autonomous, bear responsibility for their business operations, fulfill their obligations, and honor their commitments in accordance with the law.

2. Credit institutions and foreign bank branches shall implement financial transparency in accordance with the law.

Article 3. Responsibility Regime

The Chairman of the Board of Directors or the Chairman of the Board of Members or the General Director (Director) of credit institutions and foreign bank branches shall be responsible under the law and before state management agencies for compliance with the financial, accounting, and auditing regimes of credit institutions and foreign bank branches.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Article 4. Operating capital of credit institutions

1. Shareholders' equity:

a) Registered capital;

b) Differences arising from asset revaluation and exchange rate differences as prescribed by law;

c) Surplus of share capital;

d) Additional reserve funds to increase charter capital, investment development funds, and financial reserve funds;

đ) Undistributed profits;

e) Other lawful capital belonging to credit institutions and foreign bank branches.

2. Raised capital:

a) Deposits raised from organizations and individuals;

b) Entrusted investment capital;

c) Loans from domestic and foreign credit institutions, financial organizations;

d) Loans from the State Bank of Vietnam;

đ) Issuance of securities.

3. Other capital as prescribed by law.

Article 5. Credit institutions and foreign bank branches must maintain the actual value of their charter capital or authorized capital at a minimum level as prescribed by the Government. When there is a change in charter capital or authorized capital, credit institutions and foreign bank branches must publicly announce the new charter capital or authorized capital.

The actual value of the charter capital or authorized capital is determined by the contributed charter capital, authorized capital, plus (minus) undistributed profits (losses not yet resolved), reserves extracted from post-tax profits (excluding rewards and welfare funds, executive bonus funds).

Article 6. Use of capital and assets

1. Credit institutions and foreign bank branches may use their operating capital for business activities in accordance with the Law on Credit Institutions, ensuring safety and capital development principles.

2. Credit institutions and foreign bank branches have the right to adjust their capital structure and assets to serve the development of business activities.

3. Credit institutions may use up to 50% of their charter capital and additional reserve funds to invest in constructing and purchasing fixed assets directly serving their operations and must comply fully with all legal regulations on investment management and construction.

The transfer of capital and assets between branches or independent subsidiaries of credit organizations shall be carried out in accordance with the Charter of the credit organization.

4. Foreign bank branches may use up to 50% of their authorized capital and additional reserve funds to invest in constructing and purchasing fixed assets directly serving their operations and must comply fully with all Vietnamese legal regulations on investment management and construction.

Article 7. Capital contribution and purchase of shares in credit institutions

1. Credit institutions may only use their charter capital and reserve funds to contribute capital and purchase shares of enterprises and other credit institutions in accordance with the Law on Credit Institutions.

2. The Shareholders' Meeting and the Board of Directors of joint-stock credit institutions approve plans for capital contributions and purchases of shares of enterprises and other credit institutions in accordance with the law and the Articles of Association of the credit institution.

3. The Board of Members of limited liability credit institutions decides on plans for capital contributions and purchases of shares of enterprises and other credit institutions in accordance with the law and the Articles of Association of the credit institution.

4. Credit institutions are not allowed to contribute capital or purchase shares of enterprises and other credit institutions that are shareholders or capital contributors of the same credit institution.

Article 8. Ensuring Safety of Capital

Credit organizations and foreign bank branches are responsible for implementing regulations on ensuring the safety of operational capital as follows:

1. Managing and using capital and assets in accordance with the law.

2. Implementing provisions to ensure safety in operations as prescribed by the Law on Credit Institutions and other relevant laws.

3. Purchasing insurance for assets in accordance with the law.

4. Participating in organizations for deposit protection and insurance in accordance with the law and publicly disclosing participation in such organizations at headquarters and branches.

5. Accounting for and setting aside risk provisions in business operations according to guidelines issued by the State Bank after consultation with the Ministry of Finance.

6. Other measures for capital preservation as prescribed by the law.

Article 9. Inventory and Revaluation of Assets

1. Inventory of Assets:

a) Credit institutions and foreign bank branches shall conduct inventory of assets in the following cases:

- At the end of the fiscal year;

- Upon division, merger, consolidation, or conversion of legal form;

- After natural disasters, enemy attacks, or any other cause leading to changes in the assets of credit institutions and foreign bank branches;

- As prescribed by competent state authorities.

b) For excess or missing assets, the causes and responsibilities of those involved must be clearly identified and handled accordingly.

2. Revaluation of Assets:

a) Credit institutions and foreign bank branches shall conduct asset revaluation in the following cases:

- As decided by competent state authorities;

- When converting legal form or diversifying ownership forms;

- Using assets for external investments;

- Recovering assets when terminating external investments;

- Other cases as prescribed by law.

b) The revaluation of assets and accounting treatment for increases or decreases in value due to revaluation of assets as specified in Point a Clause 2 of this Article shall be carried out in accordance with the law for each specific case.

Article 10. Depreciation of Fixed Assets

Credit institutions and foreign bank branches shall implement depreciation of fixed assets in accordance with the provisions of the law for enterprises. Credit institutions and foreign bank branches may use funds obtained from depreciation of fixed assets to reinvest in replacement, modernization of fixed assets, and for other business requirements in accordance with the provisions of the law.

Point 11. Handling Losses on Assets

When suffering asset losses, credit organizations and foreign bank branches must identify the cause, responsibility, and handle them as follows:

1. If the loss is due to subjective reasons, the person causing the loss must compensate. The Board of Directors or the Board of Members or the General Director (Director) of credit institutions and foreign bank branches shall decide on the amount of compensation in accordance with the provisions of the law and shall be responsible for their decision.

2. If the asset has been insured, it shall be handled according to the insurance contract.

3. Utilize the provision fund established in expenses to offset the loss as prescribed by law.

4. The value of the loss after being offset by compensation from individuals, organizations, insurance organizations, and reserves established in expenses, if insufficient, shall be offset by the financial reserve fund of credit institutions and foreign bank branches. In cases where the financial reserve fund is insufficient to offset the loss, the shortfall shall be recorded as other expenses for the period.

Article 12. Leasing, Pledging, and Hypothecation of Assets

Credit institutions and foreign bank branches are permitted to lease, pledge, and hypothecate assets under their management and use in accordance with the provisions of the law, ensuring effectiveness, safety, and capital development.

Article 13. Sale of Assets

1. Credit institutions and foreign bank branches may sell assets to recover capital for more effective business purposes.

2. The sale of assets by credit institutions and foreign bank branches shall be carried out in accordance with the provisions of the law and the Charter of the credit institution or foreign bank branch.

3. The sale of assets by credit institutions that are limited liability companies wholly owned by the State shall be conducted in accordance with the provisions of the law regarding the sale of assets for limited liability companies wholly owned by the State.

Article 14. Liquidation of Assets

1. Credit institutions and foreign bank branches may liquidate assets that are substandard, have lost quality; assets that are damaged and cannot be restored; technologically obsolete assets that are not needed or used without efficiency and cannot be sold in their original condition; assets that have exceeded the prescribed usage period and cannot continue to be used.

The authority to decide on the liquidation of assets of credit institutions that are limited liability companies wholly owned by the State shall be implemented in accordance with the provisions of the law regarding the liquidation of assets for limited liability companies wholly owned by the State.

The authority to decide on the liquidation of assets for other credit institutions and foreign bank branches shall be implemented in accordance with the provisions of the law and the Charter of the credit institution.

2. When liquidating assets, credit institutions and foreign bank branches must establish a Liquidation Committee. For assets that the law requires to be auctioned when liquidated, credit institutions and foreign bank branches must organize auctions in accordance with the provisions of the law.

Chapter III

REVENUE AND EXPENSES

Article 15. Revenue

1. Revenue from the business operations of credit organizations and foreign bank branches includes:

a) Revenue from business activities includes:

- Revenue from lending activities: Interest income from deposits, interest income from loans, interest income from financial leasing, other revenue from lending activities;

- Revenue from service activities;

- Revenue from foreign exchange and gold trading activities;

- Revenue from interest on capital contributions and share purchases;

- Revenue from exchange rate differences;

- Other business income.

b) Other revenues include:

- Income from the sale and liquidation of fixed assets;

- Revenue from amounts that have been processed using risk provisions;

- Other income.

2. The Ministry of Finance shall specify the conditions and timing for determining revenue.

Article 16. Expenses

1. Expenses of credit organizations and foreign bank branches are actual expenses incurred related to the business operations of credit organizations and foreign bank branches, including:

- Lending activity expenses: Interest paid on deposits, interest paid on loans, other expenses for lending activities;

- Service activity expenses;

- Foreign exchange and gold trading activity expenses;

- Capital contribution and share purchase expenses;

- Exchange rate difference expenses;

- Other business activity expenses;

- Tax payment and fee expenses;

- Asset expenses including: Depreciation of fixed assets; rental expenses for assets; maintenance and repair expenses for assets; expenses for purchasing tools and equipment; asset insurance expenses;

- Employee expenses: Wages and salaries; social security, health insurance, unemployment insurance, personal accident insurance, trade union fees, meal expenses, labor protection expenses, transaction attire expenses, and other employee expenses as prescribed by law;

- Management and public service activity expenses: Electricity, water, telephone, material, printing paper, office supply expenses; consulting, auditing, commission, brokerage, agency expenses; expenses for hiring domestic and foreign experts; scientific research, technological innovation research expenses; training expenses; incentive awards for productivity improvement, cost-saving initiatives; environmental protection work expenses; publicity, advertising, marketing, promotional expenses; conference, reception, ceremonial, transaction, diplomatic and other expenses;

- Risk reserve, deposit guarantee, and insurance expenses;

- Other expenses: Membership association fee expenses that credit organizations and foreign bank branches participate in; party and mass organization work expenses at credit organizations and foreign bank branches (expenses outside the budget of the party and mass organizations funded from designated sources); expenses for selling off, liquidating assets and residual values of liquidated, sold-off fixed assets (if any); expenses for recovering written-off debts, bad debt recovery costs; expenses for processing remaining losses on assets after compensation from sources specified in Clause 4, Article 11 of this Decree; expenses for items recorded as revenue but not actually received; social work expenses as prescribed by law; other expenses.

2. The Ministry of Finance and the State Bank of Vietnam shall provide detailed guidance on certain specific expense items of credit organizations and foreign bank branches.

Article 17. Items Not Allowed to be Recorded as Expenses

Credit organizations and foreign bank branches are not allowed to record the following items as expenses:

1. Administrative fines for violations include: Traffic law violations, business registration system violations, accounting and statistics system violations, tax law violations, and other administrative violations as prescribed by law.

2. Expenses unrelated to the business operations of credit organizations and foreign bank branches.

3. Expenses without valid vouchers,

4. Expenses covered by other funding sources.

Article 18. Accounting Currency

1. Economic activities are reflected in accounting books, financial statements, and final accounts in Vietnamese Dong.

2. In cases where accounting units mainly deal in foreign currencies, they may choose a foreign currency specified by the Ministry of Finance as the monetary unit for accounting records, preparation, and presentation of financial statements.

Article 19. Credit organizations and foreign bank branches must accurately record revenue and expenses according to prescribed regulations, bear legal responsibility for the accuracy of revenues and expenses, and comply with regulations on invoice and accounting voucher systems.

Chapter IV

PROFITS AND RESERVE FUNDS

Article 20. Taxable Income for Corporate Income Tax

Income for calculating corporate income tax of credit organizations and foreign bank branches shall be carried out in accordance with laws on corporate income tax.

Article 21. Profit after corporate income tax

The profit after corporate income tax of credit organizations and foreign bank branches is the difference determined by subtracting total reasonable expenses incurred during the period from total revenue generated during the period, including corporate income tax.

Article 22. Distribution of profit after corporate income tax for credit organizations that are limited liability companies with the State as the sole owner

1. Distribute dividends to associated capital contributors according to the provisions of the contract (if applicable).

2. Cover previous year losses that have exceeded the allowable period for deduction from pre-tax profit.

3. Allocate 5% into the supplementary charter capital reserve fund, with the maximum level of this fund not exceeding the charter capital of the credit organization.

4. Allocate 10% into the financial reserve fund, with the maximum level of this fund not exceeding 25% of the charter capital of the credit organization.

5. The remaining profit after deducting the amounts specified in Clause 1, 2, 3, and 4 of this Article shall be distributed as follows:

a) Allocate 50% into the business development investment fund;

b) Allocate the management board reward fund of the credit organization according to the general regulations for limited liability companies with the State as the sole owner;

c) Allocate up to three months' salary of employees into the reward and welfare fund;

d) The remaining profit after deducting the amounts specified at Point a, b, and c of this Clause shall be added to the business development investment fund.

Article 23. Distribution of post-tax profit for other credit organizations and foreign bank branches

1. Distribute dividends to associated parties according to the provisions of the contract (if applicable).

2. Cover previous year losses that have exceeded the allowable period for deduction from pre-tax profit.

3. Allocate 5% into the supplementary charter capital reserve fund of the credit organization, or into the supplementary reserve fund of the foreign bank branch. The maximum level of this fund shall not exceed the charter capital of the credit organization or the allocated capital of the foreign bank branch.

4. Allocate 10% into the financial reserve fund; the maximum balance of this fund shall not exceed 25% of the charter capital of the credit organization or 25% of the allocated capital of the foreign bank branch.

5. The distribution of the remaining profit shall be decided by the credit organization, foreign bank branch. For credit organizations that are joint-stock commercial banks with state ownership over 50% of the charter capital, the representative of the state-owned capital at the bank must seek the opinion of the State Bank of Vietnam and coordinate with the Ministry of Finance on the distribution of the remaining profit for voting at the shareholders' meeting.

Article 24. Principles for using funds

1. The supplementary capital reserve fund, the capital contribution fund for supplementary registered capital, and the capital contribution fund shall be managed.

2. The financial reserve fund is used to cover the remaining losses and damages to assets occurring during the course of business operations after compensation has been provided by the organizations or individuals causing the loss, insurance organizations, and reserves established in expenses; it may also be used for other purposes as prescribed by law.

3. The business development investment fund is used to expand the scale of business operations and modernize equipment and working conditions of credit organizations.

Based on investment needs and the capacity of the fund, the credit organization decides on the form and methods of investment according to the principles of efficiency, safety, and capital development.

4. The management board reward fund of the credit organization is used to reward members of the Board of Members, the management board of the credit organization. The level of rewards is decided by the owner based on the performance of the credit organization's business activities, upon the proposal of the Chairman of the Board of Members of the credit organization.

5. The incentive fund shall be used for:

a) Year-end or regular bonuses for staff within the credit organization. The level of bonus is decided by the Board of Members of the credit organization based on the proposal of the General Director (or Director) and the trade union of the credit organization, based on the labor productivity and work achievements of each staff member within the credit organization;

b) Special bonuses for individuals or groups within the credit organization who have innovative ideas improving technology or business processes that bring about benefits in business operations. The level of bonus is decided by the Board of Members of the credit organization;

c) Bonuses for individuals or units outside the credit organization that have economic relations and have fulfilled contractual conditions effectively contributing to the credit organization's business activities. The level of bonus is decided by the Board of Members of the credit organization.

6. The welfare fund shall be used for:

a) Investment in constructing or repairing, supplementing construction capital for welfare facilities of the credit organization, investing capital in constructing common welfare facilities within the industry or with other units according to agreed contracts;

b) Expenditure on sports, cultural, and public welfare activities for the collective of staff of the credit organization;

c) Providing regular and emergency assistance to staff, including retired and disabled staff of the credit institution;

d) Expenditure on other welfare activities.

The Board of Members, General Director (or Director) of the credit organization cooperate with the Executive Committee of the Trade Union of the credit organization to manage and utilize this fund.

Chapter V

ACCOUNTING REGIME, STATISTICAL RECORDS AND AUDITING

Article 25. Accounting and Statistics

1. Credit organizations and foreign bank branches shall implement accounting and statistical systems in accordance with the provisions of the law.

2. The fiscal year of credit institutions and foreign bank branches begins on January 1 and ends on December 31 of each calendar year.

Article 26. Reporting System

At the end of each accounting period (quarter, year), credit organizations and foreign bank branches must prepare and submit financial reports and statistical reports as prescribed by law. The Chairman of the Board of Directors or the Chairman of the Board of Members or the General Director (Director) of the credit organization or foreign bank branch shall be responsible for the accuracy and truthfulness of these reports.

Article 27. Audit

1. Credit organizations must establish internal audit in accordance with the provisions of Article 41 of the Law on Credit Organizations.

2. The auditing of financial reports of credit organizations and foreign bank branches shall be carried out in accordance with current laws on accounting and auditing. The results of the auditing of financial reports of credit organizations must be sent to the Ministry of Finance and the State Bank of Vietnam.

Article 28. Public Disclosure of Financial Reports

Within 120 days from the end of the fiscal year, credit organizations and foreign bank branches must publicly disclose financial reports as prescribed by law.

Article 29. Financial Regulations

Based on guiding documents on financial regulations, credit organizations shall develop their own financial regulations to be submitted to the Board of Directors or the Board of Members for approval as a basis for implementation.

Article 30. Financial Plan

1. Credit organizations that are wholly state-owned commercial banks and joint-stock commercial banks where the state owns more than 50% of the charter capital must prepare annual financial plans in accordance with the guidelines of the Ministry of Finance. The financial plan of credit organizations includes:

a) The plan for sources of funds and the use of funds of the credit organization;

b) The plan for income, expenses, business results, and budgetary expenditures of the credit organization;

c) The plan for labor and wages of the credit organization.

These plans must be approved by the Board of Directors or the Board of Members of the credit organization and submitted to the Ministry of Finance and the State Bank of Vietnam before November 15th of the year preceding the planning year.

2. For other credit organizations and foreign bank branches, the preparation of financial plans shall be carried out in accordance with the articles of association of the credit organization or foreign bank branch.

Chapter VI

RESPONSIBILITIES OF THE BOARD OF DIRECTORS, BOARD OF MEMBERS, GENERAL DIRECTOR, AND DIRECTOR OF CREDIT ORGANIZATIONS AND FOREIGN BANK BRANCHES

Article 31. Responsibilities of the Board of Directors and Board of Members of Credit Organizations

1. Implement, inspect, and supervise the financial activities of credit organizations within their authority as prescribed by law.

2. Accept capital, land, natural resources, and other resources transferred by the state, owners, and contributing parties for the credit organization's use.

3. Decide or approve within their authority as prescribed by law and the articles of association of the credit organization:

a) Capital mobilization plans;

b) Plans for the use, preservation, and development of capital, investment projects, and asset purchases and sales of the credit organization; plans for capital contributions and share purchases in other enterprises and credit organizations;

c) Annual financial reports and long-term financial plans, annual financial plans of the credit organization;

d) Annual financial reports of independent subsidiary companies under the credit organization;

đ) Appoint representatives of the credit organization's capital invested in other businesses.

4. Implement public disclosure of financial reports as prescribed.

5. Inspect and supervise the General Director (Director) of the credit organization and the Director of independent member companies in the use, preservation, and development of capital, organizing business operations according to plans and schemes that have been approved, and fulfilling obligations to the state budget.

6. Bear responsibility for the accuracy and truthfulness of the credit organization's financial reports.

7. Fulfill other responsibilities as prescribed by law.

Article 32. Responsibilities of the General Director (Director) of Credit Organizations

1. Directing the operations of credit organizations and being responsible before the Board of Directors, Board of Members, and the law for directing the operations of credit organizations.

2. Be responsible for managing the use of capital in business operations according to the capital utilization, preservation, and development plan approved by the Board of Directors or the Board of Members; implement the profit distribution plan after fulfilling tax obligations and other financial obligations as prescribed by law.

3. Being responsible for mobilizing and using various sources of capital for business activities; bearing material responsibility for losses caused by subjective fault to credit organizations.

4. Establishing appropriate cost standards in accordance with the business conditions of credit organizations.

5. Prepare and submit to the Board of Directors or the Board of Members for approval financial reports; be responsible for the accuracy and truthfulness of financial reports, statistical reports, final accounts figures, and other financial information.

6. Developing annual financial plans consistent with business plans and submitting them to the Board of Directors, Board of Members for approval.

7. Decide on investment projects, capital contributions, and share purchases of other enterprises and credit organizations within the authority delegated by the Board of Directors or the Board of Members of the credit organization.

8. Fulfill other responsibilities as prescribed by law.

Article 33. Responsibilities of the General Director (Director) of Foreign Bank Branches

1. Represent the foreign bank branch before the law, be responsible for all activities of the foreign bank branch, and manage daily operations in accordance with the rights and obligations stipulated by current laws.

2. In cases where a foreign bank has two or more branches operating in Vietnam and implements consolidated financial systems, accounting, and reporting, the foreign bank must delegate authority to one General Director (Director) of the branch to be legally responsible for all activities of the foreign bank branches in Vietnam.

Chapter VII

RESPONSIBILITIES OF THE SUPERVISORY AUTHORITY

Article 34. Responsibilities of the Ministry of Finance

1. Guide credit organizations and foreign bank branches to implement financial systems in accordance with the provisions of this Decree.

2. Conduct inspections and audits of credit organizations' compliance with financial systems as prescribed by law on inspection.

3. Coordinate with the State Bank of Vietnam to handle financial issues of credit organizations that are limited liability companies wholly owned by the State and credit organizations that are commercial banks with over 50% state-owned equity.

Article 35. Responsibilities of the State Bank of Vietnam

1. Conduct comprehensive inspections, audits, and supervision of credit organizations and foreign bank branches; quarterly and annually report to the Ministry of Finance the financial situation of credit organizations and foreign bank branches and violations of financial systems discovered during inspections, audits, and supervision to promptly coordinate measures for handling.

2. Perform the function of representing the State's ownership interest in credit organizations with state capital assigned.

a) Make decisions and be responsible for such decisions within the scope of authority of the State's representative in credit organizations with state capital as prescribed by law;

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

Chapter VIII

IMPLEMENTING PROVISIONS

Article 36. Effective Date

1. This Decree takes effect from September 15, 2012.

2. This Decree replaces Decree No. 146/2005/NĐ-CP dated November 23, 2005 of the Government on financial systems for credit organizations and the provisions on financial systems of foreign bank branches in Decree No. 22/2006/NĐ-CP dated February 28, 2006 of the Government on the organization and operation of foreign bank branches, joint venture banks, wholly foreign-owned banks, and representative offices of foreign credit organizations in Vietnam.

Article 37. The Ministry of Finance shall take the lead and coordinate with the State Bank of Vietnam to guide the implementation of this Decree.

The Ministers, Heads of ministerial-level agencies, Heads of government-attached agencies, Chairpersons of provincial People's Committees under the central city shall be responsible for implementing this Decree./.