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

THE GOVERNMENT

Decree No. 57/2012/ND-CP of July 20, 2012, on the financial regime applicable to credit institutions and foreign bank branches

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

Pursuant to the November 29, 2005 Law on Enterprises;

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

At the proposal of the Minister of Finance,

The Government promulgates the Decree on the financial regime applicable to credit institutions and foreign bank branches.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides the financial regime applicable to credit institutions and foreign bank branches established, organized and operating under June 16, 2010 Law No. 47/2010/QH12 on Credit Institutions.

Article 2. Financial management principles

1. Credit institutions and foreign bank branches enjoy financial autonomy, take responsibility for their business operations and fulfill their obligations and commitments in accordance with law.

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

Article 3. Responsibility regime

Chairpersons of Boards of Directors, chairpersons of Members’ Councils or directors general (directors) of credit institutions or foreign bank branches shall take responsibility before law and state management agencies for the observance of financial, accounting and audit regulations by their respective credit institutions or foreign bank branches.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Article 4. Operating capital of credit institutions

1. Equity capital:

a/ Charter capital;

b/ Differences due to asset revaluation or exchange rate differences under law;

c/ Equity surplus;

d/ Charter capital addition reserve fund, operational development investment fund and financial provision fund;

e/ Undistributed profits;

f/ Other capital lawfully owned by credit institutions or foreign bank branches.

2. Raised capital:

a/ Capital raised from deposits of organizations and individuals;

b/ Entrusted investment capital;

c/ Loans from domestic and foreign credit institutions and financial institutions;

d/ Loans from the State Bank of Vietnam;

e/ Capital from the issue of valuable papers.

3. Other types of capital as provided by law.

Article 5. Credit institutions and foreign bank branches shall maintain the real value of the charter capital or allocated capital at least equal to the legal capital level prescribed by the Government. Credit institutions and foreign bank branches shall disclose the new charter capital or allocated capital when their charter capital or allocated capital is changed.

The real value of the charter capital or allocated capital is calculated to be the actually contributed charter capital or allocated capital, plus (minus) undistributed profit (unhandled loss), funds deducted from post-tax profit (excluding the reward fund, welfare fund and bonus fund for the executive board).

Article 6. Use of capital and assets

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

2. Credit institutions and foreign bank branches may restructure their capital and assets for business development.

3. A credit institution may use not more than 50% of its charter capital and charter capital addition reserve fund for building and procuring fixed assets that directly serve its activities and shall fully observe the law on investment and construction management.

Transfer of capital and assets among branches or among independent member companies of a credit institution complies with the charter of the credit institution.

4. A foreign bank branch may use not more than 50% of its allocated capital and allocated capital addition reserve fund for building and procuring fixed assets that directly serve its activities and shall fully observe Vietnamese law on investment and construction management.

Article 7. Capital contribution and share purchase by credit institutions

1. A credit institution may only use its charter capital and reserve fund for contributing capital to and purchasing shares from businesses and other credit institutions in accordance with the Law on Credit Institutions.

2. The General Meeting of Shareholders or Board of Directors of a joint-stock credit institution shall approve plans on contribution of capital to and purchase of shares from businesses and other credit institutions in accordance with law and the charter of its credit institution.

3. The Members’ Council of a credit institution being a limited liability company shall decide on plans on contribution of capital to and purchase of shares from businesses and other credit institutions in accordance with law and the charter of its credit institution.

4. A credit institution may not contribute capital to or purchase shares from businesses and other credit institutions being its shareholders or capital contributors.

Article 8. Capital adequacy assurance

Credit institutions and foreign bank branches shall comply with regulations on assurance of operating capital adequacy as follows:

1. To manage and use capital and assets under law.

2. To implement regulations on operation safety assurance under the Law on Credit Institutions and other relevant laws.

3. To buy asset insurance under law.

4. To participate in deposit preservation and insurance institutions under law and disclose such participation at their head offices and branches.

5. To account and deduct operation risk provi-sions as expenses for business activities under the guidance of the State Bank after obtaining the agreement of the Ministry of Finance.

6. To take other capital preservation measures under law.

Article 9. Asset inventory and revaluation

1. Asset inventory:

a/ Credit institutions and foreign bank branches shall inventory their assets in the following cases:

- At the end of each fiscal year;

- Separation, split-up, merger, consolidation or transformation;

- After the occurrence of a natural disaster, enemy sabotage or another event resulting in change in their assets;

- As required by a competent state agency.

b/ For surplus or deficient assets, it is necessary to identify causes and responsibilities of concerned persons for handling on a case-by-case basis.

2. Asset revaluation:

a/ Credit institutions and foreign bank branches shall revaluate their assets in the following cases:

- Under decision of a competent state agency;

- Upon transformation or diversification of ownership forms;

- Use of assets for outward investment;

- Recovery of assets upon termination of outward investment activities;

- Other cases as provided for by law.

b/ Revaluation of assets and accounting of the increased or decreased value as a result of asset revaluation under Point a, Clause 2 of this Article comply with applicable law on a case-by-case basis.

Article 10. Fixed asset depreciation

Credit institutions and foreign bank branches shall make fixed asset depreciation as provided by the law on enterprises. Credit institutions and foreign bank branches may use capital gained from fixed asset depreciation for reinvestment to replace or renovate fixed assets and for other business requirements in accordance with law.

Article 11. Asset loss handling

For lost assets, credit institutions or foreign bank branches shall identify their causes and responsibilities and handle the case as follows:

1. If the loss is due to a subjective cause, the person who causes the loss shall pay compen-sation. The Boards of Directors, Members’ Councils or directors general (directors) of credit institutions or foreign bank branches shall decide on compensation amounts in accordance with law and take responsibility for their decisions.

2. The loss of insured assets shall be handled under the insurance contract.

3. Using the provisions deducted from expenses to cover the loss in accordance with law.

4. Any remaining loss value after being covered by the compensation of individuals, collectives or insurers and the provisions deducted from expenses shall be covered by the financial provision funds of credit institutions or foreign bank branches. If the financial provision fund is insufficient, the deficient amount shall be accounted as other expenses in the period.

Article 12. Asset lease, mortgage and pledge

Credit institutions and foreign bank branches may lease, mortgage or pledge assets under their management and use in accordance with law, ensuring capital efficiency, safety and development.

Article 13. Asset sale

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

2. The asset sale of credit institutions and foreign bank branches complies with law and their charters.

3. The asset sale of a credit institution being a state-owned one-member limited liability company complies with the law on asset sale applicable to state-owned one-member limited liability companies.

Article 14. Asset liquidation

1. Credit institutions and foreign bank branches may liquidate poor-quality assets; damaged assets which are irreparable; technically backward assets which are no longer needed or which are ineffectively used and cannot be sold in their current conditions; and assets which cannot be further used after their use durations expire.

Competence to decide to liquidate assets of credit institutions being state-owned one-member limited liability companies complies with the law on liquidation of assets applicable to state-owned one-member limited liability companies.

Competence to decide to liquidate assets of other credit institutions and foreign bank branches complies with law and their charters.

2. Upon asset liquidation, credit institutions or foreign bank branches shall set up liquidation councils. For assets subject to auction upon liquidation as required by law, credit institutions or foreign bank branches shall auction such assets in accordance with law.

Chapter III

TURNOVER AND EXPENSES

Article 15. Turnover

1. Turnover from business activities of a credit institution or foreign bank branch includes:

a/ Revenues from business activities, including:

- Revenue from credit operations: deposit interest, loan interest, financial leasing interest, and other credit operations;

- Revenue from services;

- Revenue from foreign currency and gold trading;

- Revenue from capital contribution or share purchase;

- Revenue from exchange rate difference;

- Revenue from other business activities.

b/ Other revenues, including:

- Revenue from fixed asset sale and liquidation;

- Revenue from capital amounts handled by the risk provisions;

- Other revenues.

2. The Ministry of Finance shall stipulate conditions and time for turnover determination.

Article 16. Expenses

1. Expenses of a credit institution or foreign bank branch are those that actually arise in relation to its business activities, including:

- Expenses for credit operations: paying deposit interest, loan interest, and other expenses for credit operations;

- Expenses for services;

- Expenses for foreign currency and gold trading;

- Expenses for capital contribution and share purchase;

- Expenses for exchange rate difference;

- Expenses for other business activities;

- Expenses for payment of taxes, charges and fees;

- Asset-related expenses, including fixed asset depreciation; expenses for asset lease and maintenance and repair; procurement of tools and instruments; and asset insurance;

- Payments to employees: salaries and wages; salary-based contributions, including social insurance, health insurance and unemployment insurance, human accident insurance, trade union funds; shift meal expenses; labor protection expenses; expenses for employees’ outfits; and other expenses for employees as provided by law;

- Expenses for management work and public duties: Expenses for electricity, water, telephone, materials, printing paper and stationery; consultancy, audit, commissions, brokerage and entrustment agency; hiring of domestic and foreign experts; scientific research, technology research and renewal; training; rewards for innovations that improve and increase labor productivity and cost saving; environmental protection; communication, advertising, marketing and sale promotion; conferences, reception, transactions, external relations, and other expenses;

- Expenses for risk prevention and deposit preservation and insurance;

- Other expenses: contributions to professional associations of which the credit institution or foreign bank branch is a member; expenses for party cells’ and mass organizations’ activities at the credit institution or foreign bank branch (expenses outside the budgets of party and mass organizations according to regulations); expenses for the sale and liquidation of assets and residual value (if any) of liquidated or sold fixed assets; expenses for the recovery of written-off debts or collection of bad debts; expenses for dealing with the remaining asset loss after being covered by the sources specified in Clause 4, Article 11 of this Decree; expenses for amounts already accounted as turnover but actually not collected; expenses for social activities under law; and other expenses.

2. The Ministry of Finance and the State Bank of Vietnam shall guide in detail some expenses specific to credit institutions and foreign bank branches.

Article 17. Payments which may not be accounted as expenses

A credit institution or foreign bank branch may not account as expenses the following payments:

1. Fines for administrative violations, including violations of traffic law, business registration regulations, accounting and statistical regulations and tax laws, and other administrative violations under law.

2. Expenses irrelevant to its business activities.

3. Expenses without lawful documents;

4. Expenses paid from other funding sources.

Article 18. Currency used in accounting

1. Economic activities shall be recorded in Vietnam dong in accounting books, financial statements and finalization statements.

2. In case an accounting unit collects and pays money mainly in foreign currency, it may choose a foreign currency stipulated by the Ministry of Finance as a currency for use in accounting books and financial statements.

Article 19. Credit institutions and foreign bank branches shall account their turnover and expenses under regulations, take responsibility before law for the accuracy of revenues and expenses, and comply with regulations on accounting invoices and documents.

Chapter IV

PROFIT AND SETTING UP OF FUNDS

Article 20. Income liable to enterprise income tax

Incomes liable to enterprise income tax of credit institutions and foreign bank branches comply with the law on business income tax.

Article 21. Post-enterprise income tax profit

Post-enterprise income tax profit of a credit institution or foreign bank branch is the difference calculated by the total turnover arising in the period minus the total reasonable expenses arising in the period, including enterprise income tax.

Article 22. Distribution of post-enterprise income tax profits of credit institutions being state-owned one-member limited liability companies

1. Dividing profits to capital contributors under contracts (if any).

2. Covering previous years’ losses after the expiry of the period they are allowed to be deducted from pre-enterprise income tax profit.

3. Deducting 5% into the charter capital addition reserve fund. This fund must not exceed the charter capital of the credit institution.

4. Deducting 10% into the financial provision fund. This fund must not exceed 25% of the charter capital of the credit institution.

5. After the amounts specified in Clauses 1 thru 4 of this Article are subtracted, the remaining profit must be further distributed as follows:

a/ Deducting 50% into the operation development investment fund;

b/ Making deductions into the bonus fund for the executive board of the credit institution under regulations applicable to state-owned one-member limited liability companies;

c/ Making deductions not more than three months’ actually paid salaries of employees into the reward and welfare fund;

d/ After the amounts specified at Points a, b and c of this Clause are subtracted, the remaining profit shall be added to the operation development investment fund.

Article 23. Distribution of post-enterprise income tax profits of other credit institutions and foreign bank branches

1. Dividing profits to associated members under contracts (if any).

2. Covering previous years’ losses after the expiry of the period they are allowed to be deducted from pre-enterprise income tax profit.

3. Deducting 5% into the charter capital addition reserve fund of the credit institution or into the allocated capital addition reserve fund of the foreign bank branch. This fund must not exceed the charter capital of the credit institution or the allocated capital of the foreign bank branch.

4. Deducting 10% into the financial provision fund. The maximum balance of this fund must not exceed 25% of the charter capital of the credit institution or must not exceed 25% of the allocated capital of the foreign bank branch.

5. Credit institutions and foreign bank branches may decide by themselves on the division of the remaining profit. For a credit institution being a joint-stock commercial bank with over 50% of its charter capital owned by the State, the representative of state capital amount at this bank shall obtain approval of the State Bank of Vietnam and agreement of the Ministry of Finance on the division of the remaining profit before voting at the General Meeting of Shareholders.

Article 24. Fund use principles

1. The charter capital or allocated capital addition reserve fund must be used for adding charter capital or allocated capital.

2. The financial provision fund must be used for covering the remaining asset loss or damage arising in the business process after being covered by the compensations paid by the persons causing such loss or damage, the indemnities of insurers and the provisions deducted from expenses; and used for other purposes as provided for by law.

3. The operation development investment fund must be used for expanding the business scale, renewing technologies and equipment and improving working conditions of the credit institution.

Based on its investment needs and the fund’s capacity, a credit institution may decide on the forms and measure of investment in order to ensure capital efficiency, safety and development.

4. The bonus fund of the executive board of a credit institution must be used for giving bonuses to the Members’ Council and Board of Directors of the credit institution. The bonus levels must be decided by the owner based on the business efficiency of the credit institution and at the proposal of the chairperson of its Members’ Council.

5. The reward fund must be used for:

a/ Giving year-end or regular rewards to employees of the credit institution. The reward levels must be decided by the Members’ Council of the credit institution at the proposal of the director general (director) and the trade union of the credit institution based on the labor productivity and performance of each employee in the credit institution;

b/ Giving extraordinary rewards to individuals and collectives in the credit institution that have innovations to improve techniques and operation processes, bringing about business efficiency. The bonus levels must be decided by the Members’ Councils of the credit institution;

c/ Giving rewards to individuals and units outside the credit institution that have economic relationships with the credit institution and have fulfilled the contractual conditions and effectively contributed to the business of the credit institution. The reward levels must be decided by the Members’ Council of the credit institution.

6. The welfare fund must be used for:

b/ Building or repairing and supplementing capital for building welfare facilities of the credit institution, contributing capital to building common welfare facilities in the sector or joining other units in building welfare facilities under their agreed contracts;

b/ Sports, cultural and public welfare activities of employees of the credit institution;

c/ Paying regular or extraordinary difficulty allowances for employees of the credit institution, including the retired and sick;

d/ Other welfare activities.

The Members’ Council and director general (director) shall coordinate with the trade union’s executive board of the credit institution in managing and using this fund.

Chapter V

ACCOUNTING, STATISTICAL AND AUDIT REGIMES

Article 25. Accounting and statistics

1. Credit institutions and foreign bank branches shall implement the accounting and statistical regimes in accordance with law.

2. The fiscal year of a credit institution or foreign bank branch starts on January 1 and ends on December 31 of the calendar year.

Article 26. Reporting

At the end of an accounting period (quarter or year), a credit institution or foreign bank branch shall make and send financial statements and statistical reports in accordance with law. The chairperson of its Board of Directors, the chairperson of its Members’ Council or its director general (director) shall take responsibility for the accuracy and truthfulness of such statements and reports.

Article 27. Audit

1. Credit institutions shall organize internal audits under Article 41 of the Law on Credit Institutions.

2. Audit of financial statements of a credit institution or foreign bank branch complies with the current law on accounting and audit. Audit results of financial statements of a credit institution must be sent to the Ministry of Finance and the State Bank of Vietnam.

Article 28. Disclosure of financial statements

Within 120 days after the end of a fiscal year, credit institutions and foreign bank branches shall disclose their financial statements under law.

Article 29. Financial regulations

Pursuant to documents guiding the financial regime, credit institutions shall develop their financial regulations and submit them to their Boards of Directors or Members’ Councils for approval as a basis for implementation.

Article 30. Financial plans

1. Credit institutions being commercial banks with 100% charter capital owned by the State and joint-stock commercial banks with over 50% charter capital owned by the State shall make annual financial plans under the Finance Ministry’s guidance. Such a financial plan comprises:

a/ Plan on capital sources and capital use;

b/ Plan on income, expenses, business results and state budget remittance target;

c/ Labor and wage plan.

The above plans must be approved by the Boards of Directors or Members’ Councils of credit institutions and sent to the Ministry of Finance and the State Bank of Vietnam before November 15 of the year preceding the plan year.

2. Other credit institutions and foreign bank branches shall make financial plans under their charters.

Chapter VI

RESPONSIBILITIES OF BOARDS OF DIRECTORS, MEMBERS’ COUNCILS OR DIRECTORS GENERAL (DIRECTORS) OF CREDIT INSTITUTIONS AND FOREIGN BANK BRANCHES

Article 31. Responsibilities of Boards of Directors or Members’ Councils of credit institutions

1. To conduct, examine and supervise financial activities of their credit institutions within the ambit of their competence provided by law.

2. To receive capital, land, natural resources and other resources allocated by the State, owners and capital contributors to credit institutions for use.

3. To decide or approve within the ambit of their competence provided by law and the charters of credit institutions the following:

a/ Capital raising plans;

b/ Plans on capital use, preservation and development, projects to invest, purchase and sell assets of credit institutions; plans on capital contribution to and share purchase from businesses and other credit institutions;

c/ Annual financial statements and long-term and annual financial plans;

d/ Annual financial statements of their independent member companies;

e/ Appointment of representatives of their capital amounts invested in other businesses.

4. To disclose financial statements under regulations.

5. To examine and supervise their directors general (directors) and directors of their independent member companies in using, preserving and developing capital, conducting business under approved plans and fulfilling the obligation toward the state budget.

6. To take responsibility for the accuracy and truthfulness of financial statements of their credit institutions.

7. To perform other responsibilities provided by law.

Article 32. Responsibilities of directors general (directors) of credit institutions

1. To administer operation of their credit institutions and take responsibility before the Boards of Directors or Members’ Councils and law for such administration.

2. To regulate the use of capital in business activities under capital use, preservation and development plans approved by the Boards of Directors or Members’ Councils; divide profits after fulfilling the tax and other financial obligations in accordance with law.

3. To raise and use capital sources for business activities; to take material responsibility for damages caused due to subjective mistakes to their credit institutions.

4. To formulate expense norms suitable to business conditions of their credit institutions.

5. To formulate and submit financial statements to the Boards of Directors or Members’ Councils for approval; take responsibility for the accuracy and truthfulness of financial statements, statistical reports, finalization data and other financial information.

6. To formulate annual financial plans suitable to business plans and submit them to the Boards of Directors or Members’ Councils for approval;

7. To decide on investment projects in, capital contribution to and share purchase from businesses and other credit institutions as authorized by the Boards of Directors or Members’ Councils of their credit institutions.

8. To perform other responsibilities provided by law.

Article 33. Responsibilities of directors general (directors) of foreign bank branches

1. To represent their foreign bank branches before law and take responsibility for all activities of their foreign bank branches and administer daily activities within the ambit of their rights and obligations in accordance with current law.

2. A foreign bank that has two or more branches operating in Vietnam and applies consolidated financial, accounting and reporting regulations shall authorize a director general (director) of one of these branches to take responsibility before law for activities of all branches in Vietnam.

Chapter VII

RESPONSIBILITIES OF MANAGEMENT AGENCIES

Article 34. Responsibilities of the Ministry of Finance

1. To guide credit institutions and foreign bank branches in implementing the financial regime in accordance with this Decree.

2. To inspect and examine the observance of the financial regime by credit institutions under the inspection law.

3. To coordinate with the State Bank of Vietnam in handling financial matters of credit institutions being state-owned one-member limited liability companies and credit institutions being joint-stock commercial banks with over 50% charter capital owned by the State.

Article 35. Responsibilities of the State Bank of Vietnam

1. To comprehensively inspect, examine and supervise all activities of credit institutions and foreign bank branches; quarterly and annually notify the Ministry of Finance of the financial situation of credit institutions and foreign bank branches and their violations of the financial regime detected through inspection, examination or supervision, for timely coordinated handling.

2. To act as representatives of owners of state capital amounts at credit institutions with state-allocated capital.

a/ To decide and take responsibility for their decisions within the ambit of competence of representatives of owners of state capital amounts s provided by law;

b/ To assume the prime responsibility for, and coordinate with the Ministry of Finance in, submitting to the Prime Minister for consideration and decision financial matters falling beyond their competence.

Chapter VIII

IMPLEMENTATION PROVISIONS

Article 36. Effect

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

2. This Decree replaces the Government’s Decree No. 146/2005/ND-CP of November 23, 2005, on the financial regime applicable to credit institutions, and financial regulations applicable to foreign bank branches in the Government’s Decree No. 22/2006/ND-CP of February 28, 2006, on the organization and operation of foreign bank branches, joint-venture banks, wholly foreign-owned banks and representative offices of foreign credit institutions in Vietnam.

Article 37. The Ministry of Finance shall assume the prime responsibility for, and coordinate with the State Bank of Vietnam in, guiding the implementation of this Decree.

Ministers, heads of ministerial-level agencies, heads of government-attached agencies and chairpersons of provincial-level People’s Committees shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG