Circular No. 93/2013/TT-BTC dated July 08, 2013 of the Ministry of Finance guiding the financial regulations for the cooperative bank

THE MINISTRY OF FINANCE

Circular No. 93/2013/TT-BTC dated July 08, 2013 of the Ministry of Finance guiding the financial regulations for the cooperative bank

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

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

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

Pursuant to the Decree No. 57/2012/ND-CP, dated July 20, 2012 of the Government on the financial regulations applicable to credit institutions, branches of foreign banks;

At the proposal of the Director of Department of Finance of Banks and Financial Institutions;

The Minister of Finance promulgates the Circular guiding the financial regulations for the cooperative bank,

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

1. This Circular guides the financial regulation applicable to the cooperative bank.

2. Financial operations of the cooperative bank shall comply with the Decree No. 57/2012/ND-CP, dated July 20, 2012 of the Government on the financial regulations applicable to credit institutions, branches of foreign banks (hereinafter called the Decree No. 57/2012/ND-CP); content guided in this Circular and other relevant legal documents on financial management.

Article 2. Subjects of application

The cooperative bank (hereinafter called the bank) is established, organizes and operates in accordance with Law No. 47/2010/QH12 dated June 16, 2010 on Credit Institutions.

Chapter II

SPECIFIC PROVISIONS

Article 3. Equity

1. Charter capital, including:

a) Capital contributed from the member people’s credit funds.

b) Capital from support of state.

c) Capital contributed from other legal entities.

2. Differences due to the foreign exchange rate (if any) arising in the course of investment in unfinished fundamental construction accounted in the equity capital as prescribed by law.

3. Differences from re-evaluation of assets are differences between the book value of assets with the re-evaluated value of assets after having decision of State or when putting assets into contribution in share capital.

4. The reserve funds for charter capital addition, fund for investment in development of professional operations, the financial reserve fund.

5. Undistributed profit.

6. Other capital under ownership of bank.

Article 4. Use of capital and assets

1. Bank shall manage, use, monitor all assets and existing capital, perform the accounting in accordance with the current accounting regulation; reflect fully, exactly, timely the status of use and changes of capital  and assets in trading; clearly defining responsibility and form of handling applicable to each division, individual in case of causing fault, loss of assets, capital of bank.

2. Bank may use the operational capital in serve of trading as prescribed in Law on Credit Institutions, Decree No. 57/2012/ND-CP and specific guides in this Circular under the principles of ensuring the capital safety and development.

a) During the course of business operation, bank must ensure to maintain limitation of investment in construction, procurement of fixed assets in direct serve of business operation in the principle: The remaining value of the fixed assets does not exceed 50% of the charter capital and preserve fund for charter fund addition.

b) For the holding real estate due to handling of debts, complying with Clause 3 Article 132 of the Law on Credit Institutions: 

- For real estate which bank holds temporarily for sale, transfer aiming to recovery of capital, banks shall not make accounting to increase assets, not performing depreciation.

- For real estate which is purchased by bank in direct serve of business operation, bank makes accounting to increase assets, perform depreciation as prescribed by law and ensure limitation of investment in construction, procurement of fixed assets as prescribed in point a Clause 2 of this Article.

c) Bank performs measures to ensure the capital safety as prescribed in Article 8 of the Decree No. 57/2012/ND-CP. The setting up of reserve amounts in expenditure, bank shall comply with the following specific provisions:

- For provision amounts against risk in banking operations: Bank shall perform the setting up and use of provision against risks in accordance with general regulation applicable to credit institutions.

- For provision for reduction of inventory price, provision for loss from long-term investment amounts (including reduction of stock price), provision for doubtful receivable amounts (other than provision for credit risks in banking operations): Bank shall perform the setting up of provision in accordance with general regulation applicable to enterprises.

d) Lease, mortgage and pledge of assets.

Bank is entitled to lease, mortgage and pledge assets of bank as prescribed by the Civil Code, Law on Credit Institutions and other provisions of law with the aim to ensure the effective and safe use and development of capital.

dd) For assets which bank hires, accepts pledge, mortgage, preservation or holding for clients, bank shall manage or use as agreed with clients in accordance with law.

e) Sale, liquidation of assets

- Sale, liquidation of bank’s assets shall comply with law and provisions in the Charter of banks.

- Bank may sell assets to recover capital which is used for purpose of trading more effectively.

- Bank may make liquidation with assets of which quality is bad or decreased; assets which are faulted, not able to recover; assets with obsolete technique, without demand for use or ineffective use and cannot sell intact; assets used with a period longer the expired date as prescribed and cannot continue use. When perform liquidation of assets, bank must establish a liquidation council.

- For assets in case where law prescribes that they must be sold through auction, when sell or liquidate, bank must organize auction as prescribed by law.

Article 5. Revenue’s management

1. Bank’s revenue includes revenue s specified in Article 15 of the Decree No. 57/2012/ND-CP, specifying:

a) Revenue from business operation including:

- Revenue from credit operation: Revenue from interest of deposit, revenue from operation of credit extension, other revenues from credit operations;

- Revenue from service operation: Revenue from payment service; revenue from treasury services; revenue from commission or agent operation; revenue from providing for service of preserving assets, leasing safe cabinet, monetary advisory and brokerage; revenue from providing for new services for operations of the member people’s credit funds and for development of community’s benefits in localities; revenue from other service charges;

- Revenue from trading in foreign currency and gold: Revenue from trading in foreign currency of immediate handover; revenue from trading in gold; revenue from monetary derivative financial instruments;

- Revenue from interest of contributing capital;

- Revenue from difference of foreign exchange rate;

- Revenue from other business operations.

b) Other revenues include:

- Revenue from sale, liquidation of fixed assets;

- Revenue from lending which have been handled by the provision for risks (including debts which have been deleted but now recovered);

- Revenue from payable debts of which the owners have been lost or not identifiable and banks allowed to credit increase for revenue;

- Revenue from fines paid by clients, compensations paid by clients due to breaching contracts;

- Revenue from the insurance amounts paid for compensation;

- Revenue from paid taxes which are now allowed to be reduced, repaid;

- Revenue from reversal of provision for the provision already set up with redundant number (the amounts which must set up are lower than the amounts which have been set up), but not credit the decrease of cost, as prescribed by law on setting up provision for risks;

- Other revenues.

2. Principle of recording revenues

For revenue from business operation, bank only records for revenues arising from operations which the State Bank of Vietnam allows performance.

Principle of recording revenue is specified as follows:

a) For credit operation.

- Revenue from interest of credit extension operation:

Bank shall make accounting the collectible interest arising in term into the income for debts classified as debts eligible to not set up provision for risks specifically in accordance with regulation.

For the collectible interest amounts arising in term of the remaining debts, it is not required to make accounting into income, bank shall monitor at off- balance sheet in order to urge collection, when collecting, make accounting into income from business operation.

- Income from interest of deposit: is the collectible interest amount in the period.

b) Income from trading in securities of all kinds (except for stocks):

Bank shall make accounting as estimated revenues for the interest amounts estimated to collect from trading in securities of all kinds (except for stocks). In case where the term of collecting principals but banks fail to recover, bank shall not make accounting as estimated income from interest amounts for the next period.

c) For income from interest of contributing capital: dividends, profits which are divided from capital contribution are interest amounts divided when have resolutions or decisions on division.

d) For income from differences of foreign exchange rate due to re-assessment of foreign currency and gold, record accounting- book as prescribed in accounting standards and current laws.

dd) For revenues from remaining operations: Revenues are all amounts from sale of products, goods, service provision arising in the term and being accepted payment by clients after minus (-) commercial discounts, reduction of sale prices and value of the returned sale goods (if having valid documents) regardless having collected or not yet collected amounts.

e) For collectible revenues which have been accounted into income but banks fail to recover when the collection time have been overdue, bank shall make accounting to reduce revenues if it is in the same accounting period or accounting into the expenditure if it is not in the same accounting period and follow up at off-balance sheet  to urge recovery. When recovery is performed, bank shall make accounting into income from business operation.

3. Incomes of bank arising in the period must have invoices or valid documents and must be made accounting fully into revenues.

Article 6. Expenditure management

1. Expenditures of bank include expenditures specified in Article 16 of the Decree No. 57/2012/ND-CP.  Several expenditures of bank shall comply with the following guide:

a) Expenditure for business operation

- Expenditure for credit operation: Paying interest of deposits, interest of loans, interest of issuing valuable papers and other expenditures for operation of credit extension;

- Expenditure for the banking service business operation: Expenditure for payment service; expenditure for treasury service; expenditure for commission or agent services; expenditure for telecommunication service serving payment and other expenditures;

- Expenditure for trading in foreign currency and gold: Expenditure for trading in foreign currency of immediate handover; expenditure for trading in gold; expenditure for monetary derivative financial instruments;

- Expenditure for capital contribution:

- Expenditure for differences of foreign exchange rate as prescribed in accounting standards and current laws;

- Expenditure for other business operations, including: Losses due to trading in securities of all kinds (except for stocks); expenditure for debt purchase and sale and expenditure for other business operations.

b) Expenditure for paying tax, charges, fees including tax, charges and fees involving land rents (except for the EIT) as prescribed by law.

c) Expenditure for assets

- Expenditure for Depreciation of fixed assets used for business operation shall comply with regulation on management, use and Depreciation of fixed assets applicable to enterprises; 

In case of purchasing fixed assets under the form of deferred payment: Bank shall make accounting the differences between total payable amounts  and purchase price of fixed assets under form of immediate payment into the expenditure according to duration of payment unless those differences are counted into primary price of fixed assets (capitalization) in accordance with the accounting standards.

- Expenditure for hiring fixed assets:  Expenditure for hiring fixed assets shall comply with contracts of hiring.  In case of paying lump-sum rents for many years, the rents shall be allocated gradually into the business expenditure according to number of years of using assets.   For expenditures involving land rents not being deducted into the rents as prescribed, bank shall allocate into the expenditure according to time of using the rented land;

- Expenditure for maintaining fixed assets;

- Expenditure for repairing fixed assets;

- Expenditure for procurement, repair of tools and instruments;

- Expenditure for asset insurance;

- Other expenditure involving assets.

d) Expenditure for staff as prescribed by law

- Salaries, wages and amounts with salary nature;

- Expenditures for based- salary contributions: Paying social insurance, medical insurance, unemployment insurance, and funding of the Trade Union;

- Paying job-loss allowance to employees as prescribed by law applicable to enterprises;

- Expenditure for buying human-accident insurance;

- Expenditure for shift meals;

- Expenditure for labor protection in respect to subjects who need to be equipped labor protection during working;

- Expenditure for trading costume of staff;

- Expenditure for entitlements provided for female employees as prescribed by law;

- Health expenditures include expenditure for periodical medical examination of employees, expenditure for buying standby medicines and other health expenditures within responsibilities of enterprises as prescribed by current law;

- Expenditure for annual vacation money as prescribed by law;

- Other expenditures for employees as prescribed by law.

dd) Expenditures for management operation, activities on duty include the following expenditures:

- Working-trip allowances;

- Charges of electricity, water, telephone, paper, stationery, and other materials;

- Expenditure for vault professional operations;

- Expenditure for money transport;

- Expenditure for hiring advisory services, hiring foreign and domestic experts;

- Expenditure for audit;

- Commission of agent, charges of commission must be presented in contracts of agent, commission with full reasonable and valid documents;

- Expenditure for setting up fund of science and technology development as prescribed by law. Use of fund shall comply with current provisions;

- Expenditure for science and technology research: the part of expenditure in arrears after having used all fund of science and technology development;

- Expenditure for training, coaching professional operations;

- Expenditure for implementing duties and powers applicable to People’s credit funds as prescribed by the State Bank of Vietnam;

- Rewards for initiatives which improve, increase labor capacity, rewards for saving cost:  In principle of being suitable with the brought actual efficiency; bank must formulate and announce publicly regulations of rewarding and establish council for acceptance of initiatives;

- Expenditure for fire fighting and prevention;

- Expenditure for environmental protection;

- Expenditures for propagation, advertisement, marketing, promotion, conferences, protocol operations and festivities and other expenditure under the prescribed regulations and these expenditures must have invoices or documents as prescribed by the Ministry of Finance, in association with the business results of bank; 

- Expenditures for broker commission:  Expenditures for brokerage commission of bank must associate with the economy efficiency which the brokerage operation brings.  Bank shall, base on their conditions and specific characteristic, formulate regulation on expenditures for brokerage commission in conformity with law to apply uniformly and publicly in banks. The administrative Council of bank shall approve regulation of expenditure for brokerage commission to apply in its units.

Subjects which are enjoyed the brokerage commission are organizations and individuals (foreign and domestic) doing service of brokerage for bank. The brokerage commission is not applied to objects which are agents of bank, the appointed clients, managers and staffs of bank.

Payment of brokerage commission must base on contracts or certificates between bank and the party receiving brokerage commission, in which, it is required to have the basic contents: name of the party receiving commission; content of expenditure, level of expenditure; method of payment; time of performance and ending; responsibilities of parties.

For expenditure for brokerage to lease assets (including even assets from foreclosure, debt bondage): The level of expenditure for brokerage to lease assets of bank maximally does not exceed 5% of total amounts collected from lease of assets which the brokerage use brought in year.

For expenditure for brokers to sell mortgaged or pledged assets:  Level of expenditure for brokerage commission to sell the mortgaged or pledged assets of bank does not exceed 1% of the actual value collected from sale of assets through brokerage.

- Expenditure for guard; expenditure for militia, defense, security.

e) Expenditure for the provisions against risks, preservation and insurance of deposit

- Expenditure for setting up the provision in activities of bank as prescribed in point c, Clause 2, Article 4 of this Circular; 

- Expenditure for participating in organization of secure and insured deposit, fund for ensuring safety of system as prescribed by law.

g) Other expenditure

- Paying charges involving the domestic and foreign trade associations which bank have participated at levels of charge prescribed by these associations;

- Expenditures for operations of the Party, mass associations at bank (expenditures not in the funding of organizations of the Party and mass associations shall be paid by the defined sources);

- Expenditure for amounts which have been accounted in revenue but practically fail to collect them and not accounted to reduce revenue;

- Expenditure for payable debts, which have been defined as ownerless and accounted into revenue but later that the debt owners are definable;

- Expenditure for sale, liquidation of assets (if any) including the remaining value of fixed assets which are liquidated, sold;

- Paying charges of debt recovery services for organizations which are permitted to perform the debt recovery services as prescribed by law; expenditure for recovery of written-off debts, expenditure for recovery of bad debts;

- Paying fines due to administrative violations; fines and compensation due to breaching economic contracts belonging to responsibilities of bank;

- Expenditures to handle losses of assets which remain after being offset by sources as prescribed in Article 11 of the Decree No. 57/2012/ND-CP.

- Expenditures for social operation, including finance provision for health, education, finance provision for remedying consequences of natural disasters, cost for building charity houses for the poor and other costs as prescribed by law;

- Court charges and fees for judgment execution;

- Other expenditure.

2. Principles of recording expenditures

a) Expenditures of bank are expenditures which must be paid and practically arise in the period involving the business operation.

b) Expenditures of bank must ensure to not exceed level prescribed by law on EIT.

c) Expenditures which are recorded in business expenditure of bank must comply with the principles of conformity between revenues and expenditures and having full and valid invoices or documents as prescribed by law.

3. Bank is not allowed to count into cost for the following amounts:

a) Fines involving administrative violations, which must be paid by individuals as prescribed by law;

b) Expenditures which do not relate to the business operation of bank;

c) Expenditures which have no valid documents;

d) Costs which have been accounted for payment but not be paid practically;

dd) Expenditures which are financed by other funding sources;

e) Other unreasonable or/and invalid costs.

Article 7. Accounting currency

1. Defining of the accounting currency shall comply with Article 18 of the Decree No. 57/2012/ND-CP.

2.  If bank has economic operations in foreign currency, it must convert them to Vietnam dong as prescribed by law.

Article 8. Regulations on financial accounting, audit, report and publicity

1. Bank performs the accounting regime as prescribed by law, record fully the initial documents, update accounting book and reflect fully, timely, honestly, exactly, objectively its economic and financial activities.

2. Financial year of bank begins on January 1st and ends on December 31st of calendar year.

3. Bank performs financial settlements, make and send financial statements to the Ministry of Finance, the State Bank of Vietnam as prescribed in this Circular.

Chairperson of the Board of Directors of bank is responsible for the accuracy, honesty of these statements.

4. Content of a financial statement

a) Report on financial plan includes:

- Plan on capital sources and capital use;

- Plan on income, cost, business result and remittance to state budget;

- Plan on labor and salary.

b) A financial statement includes:

- System of annual financial statements, financial statements at the middle time of year and accounting report of bank as prescribed by the State Bank of Vietnam involving regulation on financial statements applicable to credit institutions.

- Other reports, including:  Report on changes of capital sources and capital use; report on investment capital at member units; report on capital contribution, share purchase; report on performing obligations with state budget; report on income of the Board of Directors, members of Supervising Board, employees; report on general norms (according to enclosed Annex). 

c) Report on the audit result of annual financial statements.

d) Irregular report: At the request of management agencies.

5. Time limit for sending reports

a) Annual report on financial plan is sent not later than November 15 of the year prior to the planned year.

b) Financial statement:

- Time limit for submitting financial statements and other annual reports is not later than 90th day after ending the financial year.

- Time limit for submitting financial statements and other reports (except for report on incomes of the Board of Directors, members of Supervising Board, employees) at the middle time of year is not later than 30th day of first month of the next quarter.

c) Report on the audit result of financial statements:

The audited annual financial statement enclosed conclusion of an organization of independent audit (audit report) is sent as soon as ending audit.

6. Place receiving reports

Bank shall send reports specified in clause 4 of this Article to the Ministry of Finance, and the State Bank of Vietnam.

Article 9. Financial examination and violation handling

1. Financial examination’s forms

The financial examination is carried out under forms:

a) Periodical or irregular financial examinations.

b) Examination based on each special subject at the request of financial management.

2. Agencies performing financial examination

a) The State Bank of Vietnam:

- To perform comprehensive inspection, examination and supervision over activities of bank including financial activities.

- To notify the Ministry of Finance about violations, problems relating to performance of financial management regulation of bank which are detected in the course of inspection, examination and supervision in order to coordinate with the Ministry of Finance in handling and completing policies.

b) The Ministry of Finance

- To perform financial inspection as prescribed by current law on financial inspection.

- To examine problems related to financial management, compliance with the financial regulations of bank serving for completing the financial management regulations applicable to bank. 

- To notify the State Bank of Vietnam about result of inspection, examination to coordinate together in handling.

3. Violation handling

 If bank breaches the financial regulations, financial reporting regimes of State it shall be handled as prescribed by law.

Article 10. Managing agency’s responsibilities

1. The Ministry of Finance, the State Bank of Vietnam shall perform their duties as prescribed in Article 34, Article 35 of the Decree No. 57/2012/ND-CP.

2. Quarterly, annually, the State Bank of Vietnam shall notify the Ministry of Finance about financial status of bank as prescribed in Clause 1, Article 35 of the Decree No. 57/2012/ND-CP, specified according to the following norms:

a) Total charter capital, equity capital, assets, total of debt outstanding, total of mobilized capital, rate of bad debts and safe ratios in operation of bank.

b) Total of profit (loss) of bank.

c) Amount remitted to state budget by bank (divided into kinds of tax, charge).

d) Violations involving the financial regulation of bank detected in the course of inspection and supervision.

e) Relevant norms and other content.

Chapter III

IMPLEMENTATION ORGANIZATION

Article 11. Transitional provisions

1. Cooperative bank which is converted from the Central People’s credit fund shall inherit legal rights, obligations and benefits regarding finance and handle problems which are existed or arisen relating to finance of the Central People’s credit fund before converting.

2. Cooperative bank and clients continue performing financial contracts and transactions which have been signed between the Central People’s credit fund and clients and still valid until the expired date of contracts as agreed. The amendment, supplementation or termination of contracts and transactions are performed on the basis of the uniformity of parties, in conformity with Law on Credit Institutions and relevant laws.

Article 12. Implementation effect

1. This Circular takes effect on September 01, 2013 and applies to the financial year 2013.

2. This Circular replaces the Circular No. 63/2006/TT-BTC, dated June 22, 2006 of the Ministry of Finance, guiding implementation of the financial regulation applicable to the Central People s credit fund.

3. In the course of implementation, any arising problems should be reported to the Ministry of Finance for consideration and settlement.

For the Minister of Finance

Deputy Minister

Tran Xuan Ha