Circular No. 93/2013/TT-BTC guiding financial regulations for Credit Cooperatives Banks

CIRCULAR

Guidelines on financial regulations for Cooperative Credit Banks

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

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

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 57/2012/NĐ-CP dated July 20, 2012 of the Government on financial regulations for credit organizations and foreign bank branches;

At the proposal of the Director of the Department of Banking and Financial Institutions;

The Minister of Finance issues this Circular guiding financial regulations for Cooperative Credit Banks,

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular guides the financial regulations for Cooperative Credit Banks.

2. Financial activities of Cooperative Credit Banks shall be carried out in accordance with the provisions of Decree No. 57/2012/NĐ-CP dated July 20, 2012 of the Government on financial regulations for credit organizations and foreign bank branches (hereinafter referred to as Decree No. 57/2012/NĐ-CP); the contents guided in this Circular and other legal documents on financial management related thereto.

Article 2. Applicability

Cooperative Credit Banks (hereinafter referred to as Banks) are established, organized, and operate in accordance with the Law on Credit Organizations No. 47/2010/QH12 dated June 16, 2010.

Chapter II
SPECIFIC PROVISIONS

Article 3. Shareholders' Equity

1. Charter capital, including:

a) Capital contributions from member people's credit funds.

b) State support capital.

c) Capital contributions from other legal entities.

2. Exchange rate differences arising during the process of basic construction investment that have not been completed shall be recorded in shareholders' equity in accordance with the provisions of the law.

3. Revaluation gains or losses are the differences between the book value of assets and their revalued value when there is a decision by the State or when assets are contributed as capital shares.

4. Supplementary charter capital reserve funds, business development investment funds, and financial risk reserve funds.

5. Undistributed profits.

6. Other capital belonging to the Bank.

Article 4. Use of Capital and Assets

1. The Bank is responsible for managing, using, and monitoring all existing assets and capital, conducting accounting in accordance with current accounting regulations; fully, accurately, and promptly reflecting the situation of capital and asset usage and changes during the course of business operations; clearly defining responsibilities and forms of handling for each department and individual in cases of damage or loss of assets or capital of the Bank.

2. The Bank may use operating capital to serve business activities in accordance with the Law on Credit Organizations, Decree No. 57/2012/NĐ-CP, and specific guidelines in this Circular under the principle of ensuring safety and developing capital.

a) Throughout the entire business operation period, the Bank must ensure maintaining limits on construction investment and fixed asset acquisition directly serving business activities according to the principle: the remaining value of fixed assets does not exceed 50% of the charter capital and supplementary charter capital reserve fund.

b) For real estate held due to debt recovery actions implemented in accordance with Clause 3, Article 132 of the Law on Credit Organizations:

- For real estate temporarily held by the Bank for sale or transfer to recover capital, the Bank does not record an increase in assets and does not perform depreciation accruals.

- For real estate acquired by the Bank to directly serve business activities, the Bank records an increase in assets and performs depreciation accruals in accordance with the law and ensures limits on construction investment and fixed asset acquisition as stipulated in point a, Clause 2 of this Article.

c) The Bank implements measures to ensure capital safety in accordance with Article 8 of Decree No. 57/2012/NĐ-CP. The establishment of reserve items in expenses, the Bank implements according to the following specific provisions:

- For risk reserves in banking activities: The Bank implements the establishment and use of risk reserves according to the general regime for credit organizations.

- For inventory write-down reserves, long-term investment loss reserves (including securities price declines), doubtful receivables reserves (excluding credit risk reserves in banking activities): The Bank establishes reserves according to the general provisions applicable to enterprises.

d) Leasing, mortgaging, pledging assets.

The Bank has the right to lease, mortgage, or pledge its assets in accordance with the Civil Code, the Law on Credit Organizations, and other laws to ensure effectiveness, safety, and capital development.

đ) For assets leased, pledged, mortgaged, or entrusted for safekeeping by customers, the Bank is responsible for managing, safeguarding, or using them in accordance with agreements with customers in compliance with the law.

e) Sale, liquidation of assets

- The sale and liquidation of the Bank's assets shall be carried out in accordance with the law and the Articles of Association of the Bank.

- The Bank may sell assets to recover capital for more effective business purposes.

- The Bank may liquidate assets that are obsolete, deteriorated, irreparable, technologically outdated, unused, or ineffective and cannot be sold in their original condition; assets that have exceeded their prescribed service life and cannot continue to be used. When liquidating assets, the Bank must establish a liquidation committee.

- For assets that must be auctioned when sold or liquidated according to the law, the Bank must organize auctions in accordance with the law.

Article 5. Revenue Management

1. Revenue of the Bank includes income items specified in Article 15 of Decree No. 57/2012/NĐ-CP, specifically:

a) Income from business operations includes:

- Income from lending activities: Interest income from deposits, income from credit provision activities, other income from lending activities;

- Income from service activities: Income from payment services; income from cash management services; agency and commission income; income from providing asset storage, safe deposit box rental, security consulting, and brokerage services; income from new product and service offerings serving member people's credit funds and community development interests in the area; other service fee income;

- Income from foreign exchange and gold trading activities: Income from spot foreign exchange trading; income from gold trading; income from derivative financial instruments;

- Income from interest on capital contributions;

- Income from exchange rate differences;

- Other business income.

b) Other income includes:

- Income from the sale and liquidation of fixed assets;

- Revenue from loans that have been processed through risk provisions (including debts that were written off but are now recoverable);

- Revenue from debts owed to unidentified creditors or those whose creditors cannot be determined, recorded as increased income;

- Penalties paid by customers and compensation for breach of contract;

- Insurance proceeds received as compensation;

- Taxes paid that are subsequently reduced or refunded;

- Reversal of excess risk provisions (where the amount to be set aside is lower than the amount already set aside), but not recorded as a reduction in expenses according to the legal regulations on setting aside risk provisions;

- Other income.

2. Principles for recognizing revenue

For revenue from business operations, the Bank may only recognize revenue generated from activities permitted by the State Bank of Vietnam.

The specific principles for recognizing revenue are as follows:

a) For lending activities.

- Interest revenue from lending activities:

The Bank records interest receivable arising during the period in income for loans classified as standard non-provisioned loans according to the regulations.

For interest receivable arising during the period for other loans, it shall not be recorded as income; the Bank will monitor such amounts off-balance sheet to urge collection, and record them in business operation revenue when collected.

- Deposit interest revenue: the interest receivable during the period.

b) Revenue from securities trading activities (excluding stocks):

The Bank records anticipated revenue from interest expected to be received from securities trading activities (excluding stocks). In cases where the principal is due but not recovered, the Bank does not record anticipated interest revenue for the subsequent period.

c) For dividend revenue from capital contributions: dividends and profits distributed from capital contribution activities are recorded as revenue when there is a resolution or decision to distribute.

d) For revenue from exchange rate differences resulting from revaluation of foreign currency and gold, recognition shall be made in accordance with accounting standards and current legal regulations.

đ) For revenue from remaining activities: revenue includes the total amount of product sales, goods sales, and service provision revenue generated during the period accepted for payment by customers after deducting trade discounts, price reductions, and returned goods value (if supported by valid documentation), regardless of whether the payment has been received or not.

e) For revenue receivables that have been recorded as income but remain uncollected at maturity, the Bank shall reduce revenue if in the same accounting period, or record it as an expense if in a different accounting period, and monitor off-balance sheet to urge collection. When collected, it shall be recorded in business operation revenue.

3. Revenue of the Bank generated during the period must be supported by invoices or valid documentation and fully recorded in revenue.

Article 6. Expense Management

1. Bank expenses include items specified in Article 16 of Decree No. 57/2012/NĐ-CP. Some expenses are implemented as follows:

a) Expenses for business operations

- Expenses for lending activities: interest paid on deposits, interest paid on loans, interest paid on issuance of negotiable instruments, and other expenses related to lending activities;

- Expenses for banking service operations: payment service fees; cash management service fees; agency and trustee service fees; telecommunications service fees supporting payment operations, and other expenses;

- Expenses for foreign exchange and gold trading activities: expenses for spot foreign exchange trading; expenses for gold trading; expenses for derivative financial instruments;

- Expenses for capital contribution activities;

- Exchange rate difference expenses as prescribed by accounting standards and current legal regulations;

- Expenses for other business activities, including losses from securities trading activities (excluding stocks); expenses for debt purchasing activities; and expenses for other business activities.

b) Tax payments and fees, including land lease-related taxes, fees, and levies (excluding corporate income tax) as prescribed by law.

c) Expenses for assets

- Depreciation expenses for fixed assets used in business operations are carried out according to the management, usage, and depreciation rules for fixed assets of enterprises;

In case of purchasing fixed assets on credit: the Bank records the difference between the total amount payable and the purchase price of the fixed asset paid immediately as an expense over the payment period, except when this difference is capitalized (included in the original cost of the fixed asset) according to accounting standards.

- Lease expenses for fixed assets: lease expenses are carried out according to the lease agreement. In cases where lease payments are made in one lump sum for multiple years, lease expenses are allocated gradually over the years of asset use. For lease-related expenses that cannot be deducted from lease payments according to regulations, the Bank allocates them over the period of land use;

- Maintenance expenses for fixed assets;

- Repair expenses for fixed assets;

- Purchase and repair expenses for tools and equipment;

- Insurance expenses for assets;

- Other expenses related to assets.

d) Employee expenses as prescribed by law

- Salary and wage expenses and other salary-like expenses;

- Social insurance, health insurance, unemployment insurance, and labor union fee expenses;

- Unemployment benefits paid to employees according to legal regulations for enterprises;

- Human accident insurance expenses;

- Meal expenses;

- Labor protection expenses for workers who need protective gear while working;

- Uniform expenses for staff;

- Expenses for female employees according to legal regulations;

- Medical expenses including regular medical examination expenses for employees, preventive drug purchase expenses, and other medical expenses under the responsibility of the enterprise according to current legal regulations;

- Pay annual leave allowance in accordance with the provisions of the law;

- Other employee expenses as prescribed by law.

đ) Management and public service expenses include the following expenses:

- Travel expenses;

- Electricity, water, telephone, paper, office supplies, and other material expenses;

- Cash management expenses;

- Money transportation expenses;

- Consulting and expert hiring expenses both domestically and internationally;

- Audit expenses;

- Commission and agency expenses must be reflected in valid and reasonable agency and trust agreements.

- To establish a fund for scientific and technological development in accordance with the provisions of the law. The use of the fund shall be carried out in accordance with current regulations;

- To cover scientific and technological research costs: the remaining expenses after using up the fund for scientific and technological development;

- Training and professional development costs;

- To cover responsibilities and authorities related to credit cooperatives in accordance with the regulations of the State Bank of Vietnam;

- To award bonuses for innovative improvements, increased labor productivity, cost savings: in accordance with the principle of being commensurate with the actual results achieved; Banks must establish and publicly announce bonus distribution rules and form a committee to verify innovations;

- To cover fire prevention and firefighting costs;

- To cover environmental protection activities;

- To cover promotional, advertising, marketing, sales promotion, conference, reception and other expenses as prescribed, which must be supported by invoices or receipts in accordance with the regulations of the Ministry of Finance, linked to the bank's business results;

- To cover brokerage commissions: The payment of brokerage commissions by the bank must be tied to the economic benefits generated by the brokerage activities. Based on its specific conditions and characteristics, the bank must establish a commission payment system that complies with the law and apply it uniformly and publicly within the bank. The bank's board of directors must approve the commission payment system applicable within the unit;

The beneficiaries of the brokerage commission are organizations and individuals (domestic and foreign) who provide brokerage services to the bank. Brokerage commissions cannot be applied to agents of the bank, designated customers, management positions, or employees of the bank;

The payment of brokerage commissions must be based on contracts or confirmation letters between the bank and the recipient of the brokerage commission, which must include basic contents such as the name of the recipient, the nature of the expense, the amount, the method of payment, the time of implementation and completion, and the responsibilities of both parties;

For brokerage expenses for leasing assets (including seized and mortgaged assets): the maximum brokerage fee for leasing assets by the bank shall not exceed 5% of the total revenue from leasing activities facilitated by the brokerage in the year;

For brokerage expenses for selling collateral and pledged assets: the brokerage fee for selling collateral and pledged assets by the bank shall not exceed 1% of the actual value received from the sale of these assets through brokerage;

- To cover security expenses; expenses for self-defense militia, national defense, and security work;.

e) To cover risk reserves, asset preservation, and deposit insurance;

- To cover the establishment of reserve funds in the bank's operations as stipulated in Point c, Clause 2, Article 4 of this Circular;

- To cover expenses for participating in organizations for asset preservation and deposit insurance, and systemic safety guarantee funds in accordance with the law;

g) Other expenses;

- To cover membership fees for domestic and international industry associations in which the bank participates at the rates set by these associations;

- To cover expenses for Party and mass organization activities at the bank (the portion of expenses outside the funding provided by the Party and mass organizations);

- To cover revenues that have been recorded but were actually not collected and not reduced from revenue;

- To cover debts that have been identified as lost and recorded as income but later identified as having creditors;

- To cover expenses for the sale or liquidation of assets (if any), including the residual value of fixed assets sold or transferred;

- To cover service fees for debt recovery paid to organizations authorized to perform debt recovery services in accordance with the law; expenses for recovering written-off debts and bad debt recovery costs;

- To cover administrative fines for violations; penalties and compensation for breach of economic contracts under the responsibility of the bank;

- To cover losses remaining after compensating with sources as stipulated in Article 11 of Decree No. 57/2012/NĐ-CP;

- To cover social work expenses, including financial support for healthcare, education, disaster relief, and other expenses for building homes for the poor in accordance with the law;

- To cover litigation fees and enforcement fees;

- Other expenses;

2. Principles for recognizing expenses

a) Bank expenses are actual expenses incurred during the period related to business activities;

b) Bank expenses must comply with the legal limits on corporate income tax;

c) Expenses recorded as business expenses of the bank must adhere to the principle of matching revenue and expenses and must be supported by valid invoices and receipts in accordance with the law;

3. The bank shall not include the following items in its expenses:

a) Administrative fines that individuals must pay according to the law;

b) Expenses unrelated to the bank's business activities;

d) Expenses covered by other sources;

d) Expenses that have been recorded but not actually paid;

đ) Expenses covered by other sources of funding;

e) Other unreasonable or invalid expenses;

Article 7. Accounting Currency

1. The determination of the accounting currency shall be implemented in accordance with Article 18 of Decree No. 57/2012/NĐ-CP;

2. If the bank engages in economic activities denominated in foreign currencies, they must be converted into Vietnamese Dong in accordance with the law.

Article 8. Accounting, Auditing, Reporting, and Financial Disclosure System

1. The Bank shall implement the accounting system in accordance with the provisions of the law, record all original vouchers fully, update the accounting books, and reflect all economic and financial activities in a timely, truthful, accurate, and objective manner.

2. The fiscal year of the Bank begins on January 1 and ends on December 31 of each calendar year.

3. The Bank shall settle its financial accounts, prepare and submit financial reports to the Ministry of Finance and the State Bank of Vietnam in accordance with this Circular.

The Chairman of the Board of Directors of the Bank shall be responsible for the accuracy and truthfulness of these reports.

4. Contents of Financial Reports

a) Financial Plan Report includes:

- Capital sources plan and capital utilization plan;

- Income, expense, business result, and state budget revenue plan;

- Labor force and salary plan.

b) Financial Report includes:

- Annual financial report system, mid-year financial report, and bank accounting report in accordance with the State Bank of Vietnam's regulations on financial reporting systems for credit organizations;

- Other reports, including: Capital source and utilization situation report; investment capital situation report at member units; capital contribution and share purchase report; state budget obligation implementation report; income situation report of the Board of Directors, members of the Supervisory Board, and staff; comprehensive index report (as attached);

c) Audit report on annual financial statements.

d) Special reports: As required by management agencies.

5. Deadline for Submission of Reports

a) The annual financial plan report must be submitted no later than November 15 of the preceding year.

b) Financial Report:

- The deadline for submitting annual financial reports and other regular reports is 90 days from the end of the fiscal year.

- The deadline for submitting mid-year financial reports and other reports (excluding income situation reports of the Board of Directors, members of the Supervisory Board, and staff) is the first day of the next quarter.

c) Audit report on financial statements:

The audited annual financial statement accompanied by the independent auditor's conclusion (audit report) must be submitted immediately upon completion of the audit.

6. Recipients of Reports

The Bank has the responsibility to send the reports stipulated in Clause 4 of this Article to the Ministry of Finance and the State Bank of Vietnam.

Article 9. Financial Inspection and Handling of Violations

1. Forms of Financial Inspection

Financial inspection is conducted in the following forms:

a) Regular or special financial inspections.

b) Financial inspections on specific topics as required by financial management work.

2. Agencies Conducting Financial Inspections

a) The State Bank of Vietnam:

- Conducts comprehensive supervision and inspection of the Bank's operations, including financial activities.

- Notifies the Ministry of Finance of any violations or issues related to the implementation of the Bank's financial management system discovered during supervision and inspection for the Ministry of Finance to coordinate in handling and improving policies.

b) The Ministry of Finance:

- Conducts financial inspections in accordance with current laws on financial inspections.

- Inspects issues related to financial management work and compliance with the Bank's financial system to serve the improvement of financial management mechanisms for the Bank.

- Notifies the State Bank of Vietnam of the results of inspections for coordination in handling.

3. Handling of violations

The Bank violating the financial system and the State's financial reporting system will be dealt with according to the law.

Article 10. Responsibilities of Regulatory Authorities

1. The Ministry of Finance and the State Bank of Vietnam shall perform their responsibilities as prescribed in Articles 34 and 35 of Decree No. 57/2012/NĐ-CP.

2. Quarterly and annually, the State Bank of Vietnam shall notify the Ministry of Finance of the Bank's financial situation in accordance with Clause 1, Article 35, Decree No. 57/2012/NĐ-CP, specifically as follows:

a) Total subscribed capital, owner's equity, assets, total loans, total capital mobilization, non-performing loan ratio, and safety ratios in the Bank's operations.

b) Total profit (loss) of the Bank.

c) Amount of state budget revenue of the Bank (divided by types of tax and fees).

d) Financial system violations of the Bank discovered during inspections and supervision.

đ) Other relevant indices and contents.

Chapter III
IMPLEMENTATION

Article 11. Transitional Provisions

1. Cooperative Banks converted from Central People's Credit Funds have the responsibility to inherit the financial rights, obligations, and legitimate interests of the Central People's Credit Funds before conversion and handle existing and emerging financial issues related to the Central People's Credit Funds.

2. Cooperative Banks and customers continue to fulfill financial contracts and transactions signed between the Central People's Credit Fund and customers that remain valid until the contract expires according to agreement. Amendments, supplements, termination of contracts, and transactions are carried out based on mutual agreement and in accordance with the Law on Credit Institutions and relevant laws.

Article 12. Effective Date

2. This Circular replaces Circular No. 63/2006/TT-BTC dated June 29, 2006, issued by the Ministry of Finance guiding the implementation of the financial system for Central People's Credit Funds.

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

Appendix 1. Capital Source and Utilization Situation
(Issued together with Circular No. 93/2013/TT-BTC dated July 8, 2013, of the Ministry of Finance)

Unit: million VND

Appendix 2. Capital contribution situation
(Issued together with Circular No. 93/2013/TT-BTC dated July 8, 2013, of the Ministry of Finance)

Appendix 3. Implementation of tax obligations to the state budget
(Issued together with Circular No. 93/2013/TT-BTC dated July 8, 2013, of the Ministry of Finance)

Unit: million VND

Appendix 4. Situation of income of the Board of Directors, supervisors, officers, workers
(Issued together with Circular No. 93/2013/TT-BTC dated July 8, 2013, of the Ministry of Finance)

Unit: million VND

1. Income of Board of Directors members

2. Income of Supervisory Board members

3. Income of officers and workers

The bank prepares a report form on the income situation of the Board of Directors, supervisors, officers, and workers according to the accounting period of the year.

Appendix 5. Summary indicators
(Issued together with Circular No. 93/2013/TT-BTC dated July 8, 2013, of the Ministry of Finance)

Unit: million dong/%