Consolidated Document number 65/VBHN-BTC Circular guiding the financial regime for the Asset Management Company of Vietnam's Credit Institutions (VAMC)

MINISTRY OF FINANCE --------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------------
Number: 65/CONSOLIDATED DOCUMENT - MINISTRY OF FINANCE	HANOI, December 31, 2020

CIRCULAR[1]

GUIDELINES ON THE FINANCIAL REGIME FOR VIETNAMESE ASSET MANAGEMENT COMPANIES

Circular No. 01/2017/TT-BTC dated January 5, 2017 of the Ministry of Finance guiding the financial regime for Vietnamese Asset Management Companies, effective from February 21, 2017, 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 finance and banking, effective from November 15, 2020.

Pursuant to the Enterprise Law No. 68/2014/QH13 dated November 26, 2014;

Pursuant to Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of Vietnamese Asset Management Companies;

Pursuant to Decree No. 34/2015/NĐ-CP dated March 31, 2015 of the Government amending and supplementing certain provisions of Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of Vietnamese Asset Management Companies;

Pursuant to Decree No. 18/2016/NĐ-CP dated March 18, 2016 of the Government amending and supplementing certain provisions of Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government stipulating the establishment, organization, and operation of Vietnamese Asset Management Companies;

Pursuant to Decree No. 91/2015/NĐ-CP dated October 13, 2015 of the Government on state capital investment in enterprises and management and use of capital and assets at enterprises;

Pursuant to Decree No. 87/2015/NĐ-CP dated October 6, 2015 of the Government on supervision of state capital investment in enterprises; financial supervision, evaluation of operational efficiency, and public disclosure of financial information of state-owned enterprises and enterprises with state capital;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013, promulgated 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 hereby issues this Circular guiding the financial regime for Vietnamese Asset Management Companies.[2]

Article 1. Scope of Regulation and Applicability

1. This Circular guides the financial regime for the Vietnamese Asset Management Company (hereinafter referred to as VAMC).

2. The financial regime of VAMC shall be implemented in accordance with the provisions of Decree No. 53/2013/NĐ-CP dated May 18, 2013 of the Government on the establishment, organization, and operation of Vietnamese Asset Management Companies (hereinafter referred to as Decree No. 53/2013/NĐ-CP); Decree No. 34/2015/NĐ-CP dated March 31, 2015 of the Government amending and supplementing certain provisions of Decree No. 53/2013/NĐ-CP (hereinafter referred to as Decree No. 34/2015/NĐ-CP); Decree No. 18/2016/NĐ-CP dated March 18, 2016 of the Government amending and supplementing certain provisions of Decree No. 53/2013/NĐ-CP (hereinafter referred to as Decree No. 18/2016/NĐ-CP), and the specific guidance provided in this Circular. For financial mechanisms not specified in the aforementioned Decrees, VAMC shall implement according to the Law applicable to a limited liability company wholly owned by the State.

3. This Circular applies to VAMC, credit institutions implementing debt sales to VAMC, and related organizations and individuals.

Article 2. Operating Capital of VAMC

1. The owner's investment capital includes:

1.1. Registered capital of 2,000 billion VND.

1.2. Development investment fund.

1.3. Other sources of owner's capital as prescribed by law for a limited liability company wholly owned by the State.

2. Raised capital:

2.1. Bonds issued by VAMC to purchase non-performing debts at market value and special bonds issued by VAMC according to the regulations of the State Bank of Vietnam.

2.2. Other sources of raised capital as prescribed by law for a limited liability company wholly owned by the State.

Article 3. Use of Capital and Assets

1. VAMC is responsible for managing, using, and monitoring all current assets and capital, implementing accounting in accordance with the current accounting system; fully, accurately, and promptly reflecting the situation of capital and asset usage and changes during business operations; determining responsibility and handling methods for each department and individual in cases of damage or loss of VAMC's assets and capital.

2. VAMC may use operating capital to serve business activities as stipulated in Decree No. 53/2013/NĐ-CP, Decree No. 34/2015/NĐ-CP, Decree No. 18/2016/NĐ-CP, and other amending and supplementing documents (if any), specifically guided by this Circular and relevant laws under the principle of ensuring safety and development of capital:

2.1. Special bonds can only be used to purchase non-performing debts of credit institutions as stipulated in Clause 1, Article 7 of Decree No. 53/2013/NĐ-CP.

2.2. VAMC may use legitimate sources of VAMC's capital, excluding special bonds as stipulated in Clause 1, Article 7 of Decree No. 53/2013/NĐ-CP, to purchase debts at market value as stipulated in Clause 2, Article 7 of Decree No. 53/2013/NĐ-CP and Clause 5, Article 1 of Decree No. 34/2015/NĐ-CP. The debt purchased by VAMC at market value when converted into contributed capital or shares shall be considered an investment. VAMC shall follow and account for this investment in accordance with the law.

2.3. VAMC may use capital to invest in and purchase fixed assets to serve VAMC's operations based on the principle of equipping in line with operational needs, efficiency, thrift, and compliance with state regulations for a limited liability company wholly owned by the State regarding basic construction investment and fixed asset procurement.

2.4. VAMC may only use capital to invest externally (not through debt and asset purchases and sales) in the following forms:

a) Depositing money in commercial banks to ensure capital safety and efficiency;

b) Participating in capital contributions and purchasing shares as stipulated in point g, Clause 1, Article 12 of Decree No. 53/2013/NĐ-CP.

2.5. Repairing and upgrading collateral assets already collected by VAMC as stipulated in point d, Clause 1, Article 12 of Decree No. 53/2013/NĐ-CP with the aim of increasing value and facilitating asset disposal to recover debts.

2.6. VAMC may use capital to invest and provide finance to borrowers to address temporary financial difficulties and restore production and business operations as stipulated in Clause 3, Article 17 of Decree No. 53/2013/NĐ-CP.

2.7. VAMC shall establish provisions for risk reserves in operating expenses as stipulated in Article 4 of this Circular.

3. Leasing of operating assets; management and use of fixed assets; leasing, mortgaging, pledging of assets; liquidation and sale of fixed assets of VAMC shall be carried out in accordance with state regulations for a limited liability company wholly owned by the State.

Article 4. Establishment and use of provisions

1. For non-performing debts purchased at market value: VAMC shall establish and use provisions in accordance with the regulations of the State Bank of Vietnam.

2. For guarantees as stipulated in Clause 4, Article 17 of Decree No. 53/2013/ND-CP, investments and financial provision to customers under guarantee forms or loans: VAMC shall establish and use provisions in accordance with the State Bank of Vietnam's regulations on classification of debts, establishment and use of risk provisions in banking operations of credit organizations.

3. For inventory write-down provisions, investment loss provisions, doubtful receivables provisions (excluding receivables from credit organizations): VAMC shall establish and use provisions in accordance with general regulations applicable to enterprises.

Article 5. Management of revenue and expenses of VAMC

1. The Board of Members of VAMC is responsible before the State Bank of Vietnam and the law for organizing strict management, ensuring the accuracy, honesty, and legality of VAMC’s revenues and expenses.

2. All revenues and expenses arising from VAMC's activities must have complete documentation and vouchers in accordance with the law and be fully reflected in VAMC's accounting books.

3. VAMC's revenues and expenses are determined in Vietnamese Dong; in cases where income or expenditure is in foreign currency, it must be converted into Vietnamese Dong according to current laws.

4. The recording of VAMC's revenues and expenses must comply with the principle of matching revenues and expenses.

Article 6. Revenue

1. The content of VAMC's revenue is implemented in accordance with Clause 1, Article 23 of Decree No. 53/2013/ND-CP, Clause 13, Article 1 of Decree No. 34/2015/ND-CP, and Clause 1, Article 1 of Decree No. 18/2016/ND-CP.

2. Regarding the revenue as stipulated in Clause 1, Article 1 of Decree No. 18/2016/ND-CP, VAMC shall implement as follows:

2.1. VAMC's revenue is calculated based on the remaining principal balance at the end of the period of the debt purchased through special bonds.

a) Annually, VAMC records into revenue a sum of money calculated based on the remaining principal balance at the end of the period of the debt being recorded on the internal ledger of VAMC's balance sheet according to the ratio prescribed by the State Bank of Vietnam after consultation with the Ministry of Finance.

b) The remaining balance at the end of the period of the non-performing debt purchased through special bonds is the book value of the remaining principal balance of the non-performing debt at VAMC on December 31 of the year determining the revenue, or on the date when the special bond is settled.

2.2. VAMC's revenue from the amount recovered from non-performing debts purchased through special bonds.

a) VAMC records into revenue a sum of money calculated based on the amount recovered from non-performing debts purchased through special bonds according to the ratio prescribed by the State Bank of Vietnam after consultation with the Ministry of Finance, minus the amount VAMC has collected annually based on the remaining principal balance at the end of the period of the same debt as stipulated in Subpoint a, Point 2.1, Clause 2 of this Article.

In case this amount is smaller than the amount VAMC has collected annually as stipulated in Subpoint a, Point 2.1, Clause 2 of this Article, VAMC does not need to refund credit organizations the amount already collected.

b) The amount recovered from non-performing debts purchased through special bonds of VAMC is the amounts VAMC receives through implementing measures to handle non-performing debts as stipulated in Article 16 of Decree No. 53/2013/ND-CP and Decree No. 34/2015/ND-CP.

3. Principles for recognizing revenue

3.1. For VAMC's revenue calculated based on the remaining principal balance at the end of the period of the debt purchased through special bonds: VAMC records into income on December 31 each year or at the time when the special bond is settled.

3.2. For VAMC's revenue from the amount recovered from non-performing debts purchased through special bonds: VAMC records into income no later than the end of the month when the debt is recovered.

3.3. For revenue from selling debts, selling collateral assets for debts purchased at market value: VAMC records into income at the time of transferring rights and obligations to the buyer.

3.4. For revenue from capital contribution and share purchase activities: revenue is the profit distributed upon resolution or decision to distribute profits.

3.5. For revenue from other activities (including revenue from advisory, brokerage services for buying, selling, and handling debts and assets; revenue from leasing and exploiting assets; revenue from financial activities; revenue from asset auctions and other revenues): Revenue is the total amount accepted for payment by customers regardless of whether the payment has been received or not.

3.6. For receivables from credit organizations that have been recorded as revenue but remain unpaid beyond the due date, VAMC records them into expenses and tracks them off-balance-sheet to urge collection. When collected, they are recorded into business operation revenue. Remaining receivables, VAMC establishes provisions in accordance with corporate law regulations.

Article 7. Expenses

1. The contents of expenses of VAMC shall be carried out in accordance with the provisions of Clause 2, Article 23 of Decree No. 53/2013/NĐ-CP.

2. Principles for recognizing expenses

2.1. For expenses incurred in purchasing non-performing loans at market value, they shall be recorded when income from handling such loans is generated as follows:

a) In cases where the loan is recovered in multiple installments:

- If the revenue obtained during the period from handling the debt (recovering debt from borrowers; selling debt; exploiting and selling collateral assets of the loan) is greater than or equal to the cost of purchasing the loan: the entire cost of purchasing the loan shall be transferred to the current period's expenses.

- If the revenue obtained during the period from handling the debt (recovering debt from borrowers, obligors, and guarantors; selling debt; exploiting and selling collateral assets of the loan) is less than the cost of purchasing the loan:

A portion of the cost of purchasing the loan shall be transferred to the current period's expenses, equivalent to the actual amount received from handling the loan.

When the loan continues to be recovered, the remaining cost of purchasing the loan shall continue to be transferred to expenses according to the principle stated above.

When the final remaining part of the loan is recovered, the entire remaining cost of purchasing the loan shall be transferred to the current period's expenses.

b) In cases where the loan is recovered in a single installment: the entire cost of purchasing the loan shall be transferred to the current period's expenses at the time of recovery.

2.2. For expenses related to repairing and upgrading assets:

a) In cases where non-performing loans are purchased at market value: VAMC may record advance expenses (detailed by each loan) corresponding to the costs for repairing and upgrading assets. When the asset is sold or the non-performing loan associated with the asset is recovered, or money is obtained from exploiting the asset, the proceeds must be recorded as revenue, while the settlement of the advance expenses corresponding to the costs VAMC has used for repairing and upgrading the asset shall be carried out in accordance with the provisions of this Clause.

b) In cases where non-performing loans are purchased through special bonds: VAMC may record advance expenses (detailed by each loan) corresponding to the costs for repairing and upgrading assets. When the asset is sold or the non-performing loan associated with the asset is recovered, or money is obtained from exploiting the asset, VAMC shall gradually settle the receivable corresponding to the costs VAMC has used for repairing and upgrading the asset.

2.3. For other expenses (including debt collection costs; advisory and brokerage fees for buying, selling, and handling debts and assets; costs for selling debts, shares, and equity transfers; risk reserve costs; salary, bonus, and allowance costs for staff; auction costs; company management costs; interest payment costs; property costs, and other costs): VAMC shall only recognize actual expenses incurred based on valid and reasonable invoices and supporting documents for each expense.

3. VAMC shall not include the following items in expenses:

3.1. Expenses unrelated to VAMC's business activities.

3.2. Administrative fines that individuals must pay according to the law.

3.3. Expenses without valid supporting documents.

3.4. Expenses that have been recorded but not actually paid.

3.5. Expenses covered by other sources of funding.

3.6. Other unreasonable and invalid expenses.

Article 8. Distribution of profits and establishment of funds.

1. The profit of VAMC is determined by subtracting total reasonable expenses incurred during the period from the total revenue generated during the period as prescribed.

2. Distribution of profits and establishment of funds for VAMC.

After covering previous year's losses, fulfilling financial obligations to the State as stipulated by law, the remaining profit shall be distributed in the following order:

2.1. Allocate up to 30% into the development investment fund.

2.2. Allocate funds for employee awards and welfare at VAMC. The allocation of funds for employee awards and welfare shall be carried out in accordance with the provisions of the law on the allocation of funds for employee awards and welfare for joint-stock companies with 100% state-owned charter capital.

2.3. Allocate funds for management bonuses and supervisory board members' bonuses at VAMC. The allocation of funds for management bonuses and supervisory board members' bonuses shall be carried out in accordance with the provisions of the law on the allocation of funds for management bonuses and supervisory board members' bonuses for joint-stock companies with 100% state-owned charter capital.

2.4. In cases where the remaining profit after allocating the development investment fund as stipulated in Point 2.1 of this Clause is insufficient to allocate funds for employee awards and welfare, management bonuses, and supervisory board members' bonuses according to the prescribed levels, VAMC may reduce the amount allocated to the development investment fund to supplement the sources for fully allocating funds for employee awards and welfare, management bonuses, and supervisory board members' bonuses according to the prescribed levels, but the maximum reduction shall not exceed the amount allocated to the development investment fund in the fiscal year.

2.5. Any remaining profit after allocations as stipulated in Points 2.1, 2.2, 2.3, and 2.4 of this Clause shall be remitted to the state budget.

Article 9. Management and utilization of funds.

VAMC manages and utilizes funds in accordance with current regulations of the State for joint-stock companies with 100% state-owned charter capital.

Article 10. Financial plans, financial oversight, performance evaluation and classification; accounting, statistics, auditing systems; reporting and financial disclosure.

1. Financial plans, financial oversight, performance evaluation, and classification of VAMC shall be implemented in accordance with current regulations of the State for joint-stock companies with 100% state-owned charter capital and the specific provisions of this Circular regarding the characteristics of VAMC, specifically:

1.1. VAMC is responsible for preparing and submitting to the State Bank of Vietnam and the Ministry of Finance a draft financial plan before March 1st of the planning year.

1.2. The State Bank of Vietnam shall take the lead and coordinate with the Ministry of Finance to review the financial plan prepared by VAMC to provide formal comments in writing and assign VAMC the financial plan indicators, performance evaluation indicators, and classification indicators for VAMC before April 30th of the planning year. These performance evaluation and classification indicators shall not be adjusted throughout the implementation period (except in cases of major force majeure).

1.3. Based on the financial plan indicators assigned by the State Bank of Vietnam, the Chairman of VAMC's Board of Members shall approve detailed financial plans for implementation.

2. VAMC shall organize accounting and statistical work in accordance with current laws; prepare, record initial vouchers, update accounting books to ensure full, timely, truthful, accurate, and objective reflection of economic and financial activities.

3. VAMC's fiscal year begins on January 1st and ends on December 31st of the Gregorian calendar year.

4. At the end of each accounting period (quarterly or annually), VAMC shall prepare and submit financial reports to the State Bank of Vietnam and the Ministry of Finance in accordance with current laws.

5. VAMC shall submit the audited annual financial report by the State Audit Agency or independent auditor along with the audit report to the Ministry of Finance and the State Bank of Vietnam simultaneously posting this report on VAMC's official website immediately upon receipt of the audit report.

6. In addition to regular financial and statistical reports required to be prepared and submitted, VAMC must also prepare and submit ad hoc reports when requested by the State Bank of Vietnam and relevant government agencies.

7.[3] Ttime for closing data and method of submitting reports:

a) Ttime for closing data:

- Time for closing financial plan data as stipulated in Clause 1 of this Article: From January 1st to December 31st of the planning year.

- Time for closing quarterly and annual financial report data as stipulated in Clause 4 of this Article:

+ For quarterly financial reports: From the first day of the quarter being reported to the last day of the quarter being reported (for cumulative data, it is the first day of the reporting year).

+ For annual financial reports: From January 1st to December 31st of the reporting year.

b) Methods of submitting reports shall be implemented through one of the following methods:

- Submit directly in paper form;

- Sending via postal service in paper form;

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

- Other methods as prescribed by law.

c) Content, time for closing data, and deadline for submitting ad hoc reports as stipulated in Clause 6 of this Article shall be carried out according to the requirements of the State Bank of Vietnam and relevant government agencies.

Article 11. Responsibilities of the management agency

1. Responsibilities of the Ministry of Finance:

1.1. Perform state management functions over VAMC's financial matters in accordance with the provisions of the law;

1.2. Coordinate with the State Bank of Vietnam to handle financial issues of VAMC.

2. Responsibilities of the State Bank of Vietnam:

2.1. Carry out state management functions over all activities of VAMC in accordance with the provisions of the law. Quarterly and annually (no later than thirty days from the end of each quarter or year), the State Bank of Vietnam shall notify the Ministry of Finance about VAMC's financial situation and any violations of its financial regulations discovered during inspections, audits, and supervision (if any) for timely coordinated handling.

2.2. Perform the role of the state owner towards VAMC:

a) Decide and be responsible for decisions within the scope of authority of the state owner 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.

c) Based on the provisions of the law and the specific nature of VAMC's operations, establish guidelines and implement financial oversight, evaluate operational effectiveness, and classify VAMC, and send the Ministry of Finance plans for financial oversight and reports on the results of financial oversight in accordance with the law applicable to state-owned enterprises.

d) Chair and coordinate with the Ministry of Finance to submit to the Prime Minister for decision on changing VAMC's charter capital based on the proposal of VAMC's Board of Members.

Article 12. Implementation Provisions

[4]

1. This Circular takes effect from February 21, 2017, and applies from the fiscal year 2016.

2. This Circular replaces Circular No. 209/2013/TT-BTC dated December 27, 2013, issued by the Ministry of Finance guiding financial regulations for VAMC, and Circular No. 171/2015/TT-BTC dated November 9, 2015, issued by the Ministry of Finance amending and supplementing certain articles of Circular No. 209/TT-BTC.

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

CERTIFIED CONSOLIDATED DOCUMENT DEPUTY MINISTER DEPUTY MINISTER Huynh Quang Hai