Thông tư 12/2006/TT-BTC

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE DECREE NO. 146/2005/ND-CP DATED 23/11/2005 OF THE GOVERNMENT ON THE FINANCE REGIME APPLICABLE TO CREDIT INSTITUTIONS

With a view to implementing the Decree No.146/2005/ND-CP dated 23/11/2005 of the Government on the finance regime applicable to credit institutions, the Ministry of Finance provides guidance on the implementation of several contents as follows:

Chapter I

GENERAL PROVISIONS

1. Subjects of application of this Circular shall be credit institutions, which are established, organized and operate under the provisions of the Law on Credit Institutions No.02/1997/QH10 dated 12 December 1997 and the Law on the amendment, supplement of several articles of the Law on Credit Institutions No.20/2004/QH11 dated 15 June 2004.

This Circular shall not be applicable to People’s Credit Fund and Bank for Social Policy.

2. Financial activities of credit institutions shall be implemented in accordance with provisions of the Law on Credit Institutions No.02/1997/QH10 dated 12/12/1997 and the Law on the amendment, supplement of several articles of the Law on Credit Institutions No.20/2004/QH11 dated 15/6/2004, the Decree No.146/2005/ND-CP dated 23/11/2005 of the Governor on the finance regime applicable to credit institutions, contents which are specifically provided for in this Circular and other related legal documents on finance management.

3. Chairperson of the Board of Directors, General Directors (Directors) of credit institutions shall be responsible to the law, to State management agencies for the implementation of the finance regime by the credit institutions.

Chapter II

SPECIFIC PROVISIONS

I. MANAGEMENT OF CAPITAL AND ASSETS

1. Charter capital shall be the amount of capital stated in the charter of a credit institution.

2. The real charter capital provided for in Article 6 of the Decree No.146/2005/ND-CP dated 23/11/2005 of the Government shall be construed as the charter capital reflected in accounting books of a credit institution.

3. Surplus of voting shares shall be the difference between the face value of share certificate and its actually issued price (if any).

4. Difference of exchange rates arising from the conversion of financial statements of a foreign institution which independently operates, the difference of exchange rates arising during the investment in capital construction, which has not been completed yet, in respect of a newly established unit, shall be reflected accumulatively in the owner’s funds source of a credit institution in accordance with provisions of accounting standards.

5. A credit institution shall be responsible for following up the entire current assets and funds, performing the accounting in compliance with the current accounting regime; reflecting fully, accurately, timely the use, development of the funds and assets during business process, clearly stipulating the responsibility of each unit, individual in the event of any damage, loss of assets.

6. Credit institutions shall be entitled to use the operating capital for their business activity in accordance with provisions of the Law on credit institutions No. 02/1997/QH10 dated 12 December 1997 and the Law on the amendment, supplement of several articles of the Law on Credit Institutions No. 20/2004/QH11 dated 15 June 2004 in the principle of the maintenance and development of capital. Credit institutions shall be entitled to acquire, invest in fixed assets in the principle that the residual value of the fixed assets is not in excess of 50% of the own capital of level 1 in accordance with the guidance of the State Bank and provisions of the State on investment and construction management must be fully complied with.

7. In case of suffering from any damage of assets, a credit institution must determine the reason, responsibility and deal with as follows:

- If the damage of assets is due to a subjective reason, person causing the damage shall be subject to the compensation. The Board of Directors or the General Director (Director) of the credit institution shall decide on the level of compensation in accordance with provisions of applicable laws and be responsible for their decision.

- For assets that are insured, the treatment shall be carried out in accordance with the insurance policy.

- Using provisions which are made from expenditures to cover the damages in accordance with provisions of applicable laws.

- Any deficiency which remains after the loss is compensated and covered by individuals, collectives, insurance institutions and provisions made from expenditures shall be covered by the finance provisions fund of the credit institution. In the event the finance provisions Fund is not sufficient to cover the deficiency, any shortfall shall be charged to other expense in the period.

8. Lease, pledge, mortgage, assignment and sale, liquidation of assets:

8.1. Lease, pledge, mortgage of assets

- A credit institution shall be entitled to lease, pledge, mortgage its assets in accordance with provisions of the Civil Code and others provisions of applicable laws, providing that the efficiency, prudence and development of funds are ensured.

- In respect of assets for finance leasing, credit institution shall implement in accordance with provisions of the Government on finance leasing activities in Vietnam.

8.2. Assignment, sale of assets:

- A credit institution shall be entitled to assign, sell its assets for capital recovery to use for a more efficient business purpose.

- Any assignment, sale of assets by state owned credit institutions shall be implemented in accordance with provisions of the laws for state owned enterprises.

- Differences between amount received from the assignment, sale of assets and the residual value of the assigned, sold assets and the assignment, sale costs shall be stated in the loss and profit statement of a credit institution.

8.3. Liquidation of assets

- A credit institution shall be entitled to liquidate low quality assets, damaged assets which can not be rehabilitated, technically obsolete assets that are no longer in use or can not be used effectively. Competence to make decision on the liquidation of assets of state owned credit institutions shall be in accordance with provisions of the laws for state owned enterprises.

- Upon the liquidation of assets, credit institutions must set up a Liquidation Committee. Credit institutions must organise an auction for sale of those assets which are required by applicable laws to be sold through an auction in accordance with provisions of applicable laws.

- The difference between amount received from the liquidation of assets and their residual value and the liquidation costs shall be charged to the loss and profit statement of credit institutions.

9. For assets that a credit institution has leased, accepted as pledge, mortgage, administered on behalf of its customers, it shall be responsible for the management, maintenance or use in accordance with the agreement with the customer in line with provisions of applicable laws.

10. Credit institutions shall perform methods of ensuring the capital adequacy in accordance with provisions in Article 9 of the Decree No.146/2005/ND-CP of the Government. The credit institutions shall carry out the setting up of provisions from expenditures in accordance with specific provisions as follows:

10.1. In respect of provisions for credit risk in banking activity, the credit institutions shall set up and use in accordance with regulations of the Governor of the State Bank.

10.2. In respect of provisions for the decline of inventory’s prices, provisions for loss of long-term investments (including the decline of securities’ prices), provisions for receivables which are difficult to collect (apart from provisions for credit risk in banking activity), credit institutions shall set up provisions in accordance with general regulations for enterprises.

10.3. In respect of provisions for severance allowance, credit institutions shall make provisions for severance allowance in accordance with regulations of the Labour Code and guidance of the Ministry of Finance on the provisioning, management, use and accounting of the Provisions Fund for severance allowance at enterprises.

II. MANAGEMENT OF TURNOVER, EXPENDITURE

1. Management of turnover:

1.1. Turnover of a Credit Institution shall consist of receipts provided for in Article 16 of the Decree No.146/2005/ND-CP dated 23 November 2005 of the Government, including:

a. Incomes from business activities:

- Income from credit activities

- Income from deposit interests

- Income from services

- Income from foreign exchange and gold trading activity

- Income from the interest of capital contribution, shares purchase

- Income from the trading of share certificates, bonds and other valuable papers.

- Income from the activity of debts trading

- Income from the exchange rate difference

- Income from other business activities.

b. Other incomes:

- Income from the assignment, sale, liquidation of fixed assets.

- Income from funds which have been treated by risk provisions.

- Income from the management expenses for independent member companies.

- Income from the penalty for the contract violation by the customers

- Other incomes

1.2. Conditions and time for the acknowledgement of turnover:

a. For credit activity: Credit Institutions shall account the receivable interests arising in the period to income in respect of debts which are determined as recoverable in both principal and interest in due course and shall not be required to make specific provisions for risks in accordance with applicable regulations.

In respect of the receivable interests which have been accounted as income, but at the maturity of debt repayment (principal, interest), the customer fails to make due repayment, the credit institutions shall charge them to the business expense and follow up off-balance sheet for speeding up the collection. Where the interest collection is completed, the credit institutions shall account them to the income from business activity.

In respect of the receivable interests arising in the period of the remaining debts which are not required to be accounted into the income, the credit institutions shall follow up off-balance sheet for speeding up the collection, where the interest collection is completed, the credit institutions shall account them to the income from business activity.

b. The incomes from deposit interest, interest of the investment in bonds, bills... shall be considered as interests receivable in the period.

c. Dividends, profits, which are distributed from the capital contribution, shares purchase, shall be accounted upon the resolution or decision on the distribution.

d. Credit institutions shall acknowledge incomes from the exchange rate difference in accordance with provisions of accounting standards.

e. For turnover from remaining activities: turnover shall be the entire amounts received from the sale of products, goods, the supply of services arising in the period, which have been accepted for payment by customers after being subtracted with (-) commercial discounts, the decline of prices of the goods sold, and the value of the goods returned after being sold (if valid documents are available) irrespective of whether the payment is made or not.

1.3. Receipts of credit institutions arising in the period must be supported by invoices or valid documents and must be fully accounted to turnover.

2. Management of expenditure: expenditures of a credit institution shall be payables arising in the period for the business activity and other activities in accordance with provisions in Article 17 of the Decree No.146/2005/ND-CP dated 23 November 2005 of the Government, some expenses of the credit institution shall be implemented in conformation with following guidance:

2.1. Expenditure on business activity:

a. Expenses payable for deposit interest, loan interest

b. Expenses on foreign exchange and gold trading activity

c. Expenses on banking services trading activity.

d. Expenses on the trading of share certificates, bonds and other valuable papers.

dd. Expenses on the activity of debt trading.

e. Expenses on capital contribution, share purchase.

g. Expenses on the exchange rate difference in accordance with provisions of accounting standards.

h. Expenses on assets leasing

i. Expenses on the amortization of fixed assets, which are used for business activity, shall be implemented in accordance with the current regime on the management, use and amortization of the fixed assets.

k. In case of purchasing fixed assets by late payment: credit institutions shall charge the difference between the total payables and the purchasing price of fixed assets by outright payment to the expenditures under payment period, except for the case where those differences are charged to the original price of fixed assets (capitalizing) in accordance with provisions of accounting standards.

l. Expenses on salary, wage and the like in accordance with applicable provisions.

m. Expenses on amounts which have been accounted as turnover but in fact have not yet been collected;

n. Expense on outsourced services:

- Expense relating to the repair of fixed assets, transportation, electricity, water, telephone, stationery, fire prevention and fighting, consultation service, auditing, assets insurance premium, human accident insurance premium, business fee, expenses on travelling allowance on leave under applicable provisions, commissions, brokerage service, trust service and other services.

- Above mentioned expenses must be fully supported by invoices or valid documents in accordance with provisions of the Ministry of Finance.

- Expense relating to the repair of fixed assets shall be charged to the annual expenditures under the real amount. Expense on the repair of specialized fixed assets on the periodical basis shall be pre-accounted to expenditures in line with the expected expenditures; the time of accounting shall fall on the end of the fiscal year. When carrying out the repair, if the actual repair expense is greater than the pre-accounted one, the difference shall be accounted directly to the expenditure, if the actual repair expense is smaller than the pre-accounted one, the difference shall be accounted as a reduction of expenditure.

- Expense on fixed assets lease shall be performed in line with the lease contract. In the event of a lease payment made for several years, the lease payment shall be distributed gradually to the business expenditure under the number of years where the assets are used. Expenses relating to the land lease which are not deducted from the lease payment in accordance with applicable provisions, credit institutions shall apportion them to the expenditures under the time of using the leased land.

- Expense on hiring authorized organizations to perform the debt collection service in accordance with provisions of applicable laws.

- Expenses on the agent, trust commission must be reflected in the agent or trust contract and shall only be accounted in accordance with the actual payment supported by valid documents.

- Expense on brokerage commission:

+ The payment of brokerage commission by credit institutions must go with economic efficiency brought about by the brokerage. Credit institutions shall base on the guiding documents by the Ministry of Finance on the brokerage commission, their specific conditions and characteristics to work out their own regulation on the brokerage commission payment to apply uniformly and publicly in their organization. The Board of Directors of a credit institution shall approve the above-mentioned regulation for the application in their organization.

+ Based on the approved regulation and depending on each arising brokerage operation, the General Director (or Director) of a credit institution shall decide on the payment of commission for each brokerage activity.

+ Beneficiary of the brokerage commission shall be organizations, which, individuals (local and foreign) who provide the brokerage service to credit institutions.

+ Brokerage commission shall not be paid to subjects which are agents of credit institutions, designated customers, persons who are in managerial positions or staff of credit institutions.

+ The payment of brokerage commission must be based on a contract or a written confirmation between a credit institution and the commission beneficiary which should include such basic contents as name of the commission beneficiary; content of the  payment; payment level; mode of payment; the time of service provision and its completion; responsibilities of the parties.

+ For the brokerage commission relating to the re-lease of assets (including also the foreclosed, seized assets): the payment of the brokerage commission shall not exceed 5% of the total annual proceeds, at the maximum, from the lease of assets which results from the brokerage activity.

+ For the brokerage commission relating to the sale of pledged, mortgaged assets: the payment of the brokerage commission shall not exceed 1% of the actual value from the proceeds of assets sale through the brokerage; the payment of the brokerage commission for the sale of an asset shall not exceed VND 100 million.

p. Expenses relating to the payment of tax, fee, land lease in relation to the business activity (excluding the enterprise income tax) in accordance with provisions of applicable laws.

q. Other expenses:

- Expenses relating to the mid-shift meals for the labourer stipulated by credit institutions in line with their business effectiveness, but the monthly payment for each person shall not exceed the minimum salary stipulated by the State for state officials.

- Expenses for the labour safety in the event of subjects who should be equipped with labour safety tools during their work and expenses relating to the uniforms for staff of credit institutions in accordance with stipulated regime.

- Expense for job quitting allowances for the labourers in accordance with applicable regime.

- Expense for female labourers in accordance with applicable regime.

- Payment of membership fees to domestic professional associations in which the credit institution participates at the fee level provided by the respective association and approved by the Ministry of Finance. For the participation in a foreign professional association, credit institutions shall be entitled to charge the fee payment provided for by the foreign professional association to their expenditure.

- Payment for Party, Union activities at the credit institution (the payment beyond the expenditures of the Party, Union organizations shall be covered by stipulated sources).

- Expense relating to the setting up of the provisions for the activities of credit institutions in accordance with point 10 Section 1 Chapter II of this Circular.

- Expenses relating to the participation in a Deposit Insurance organization in accordance with applicable laws.

- Expense relating to bonus for the innovation proposals, improvement of labour productivity, bonus for the expense economization in line with the actual effectiveness. The Board of Directors of credit institutions must work out and announce publicly regulations on bonus in credit institutions.

- Expense for scientific research: Credit institutions shall be entitled to charge to their expenditure the expenses relating to the scientific research which results in practical application efficiency for the business activity of the credit institutions, expense relating to technological renovation research for the improvement of the business efficiency of the credit institutions. The research thesis and the proposed expense for each research must be approved and accountable by the Board of Directors.

- Expense for training, expense for educational support in accordance with provisions of applicable laws.

- Expense for medical care, including expenses for the labourers in accordance with current provisions of the State under the real payment beyond the scope of payment of social insurance and of the labourers.

- Expense for the office security.

- Expense for treasury and vault operation.

- Expense relating to environment protection. If the expense in a year is large and the effect is lasting for several years, this expense shall be distributed over subsequent years.

- Expense for protocol and festivals, advertisement and propagation, marketing, sale promotion, public relation, meeting and other expenses must be in accordance with stipulated regime and supported by invoices or valid documents in compliance with provisions of the Ministry of Finance, must be in relation to the business result of the credit institution. The maximum payment level shall be in accordance with provisions of the law on enterprise income tax.

- Expense for other business activities.

2.2. Expenditures on other activities:

a. Expenses relating to the assignment, sale, liquidation of assets.

b. The residual value of fixed assets upon the liquidation, assignment and sale

c. Expenses relating to the recovery of written off debts, expenses relating to the recovery of overdue debts which are difficult to collect;

- Credit institutions shall be entitled to pay to legal entities that have made contribution to the recovery of written off debts, overdue debts difficult to collect on the basis of their contribution and results brought about by them for credit institutions.

- Credit institutions shall work out the regulation on expenditures for the recovery of written off debts, overdue debts difficult to collect to submit to the Board of Directors for approval and public announcement. The General Director (or Director) of a credit institution shall be responsible for these expenditures.

- The annual level of payment for the legal entities that have made contribution to the recovery of written off debts, overdue debts difficult to collect shall not exceed 5% of the recovered debts. The maximum payment for the recovery of a debt shall not exceed VND 150 million.

d. Expense relating to fines due to violation of economic contract;

e. Expense relating to the treatment of losses of remaining assets after being covered by sources as provided for in point 7 section I Chapter II of this Circular.

g. Other reasonable, valid expenses.

2.3. Credit institutions shall not be entitled to charge following expenses to their expenditures:

- Fines due to the violation of applicable laws, committed by individuals not under the name of credit institutions, such as violating the law on traffic, law on taxes, law on environment, law on labour, violating regime on the statistical reporting, finance and accounting and others.

- Expenses not in relation to the business activities of the credit institutions, expenses without valid documents.

- Expenses financed by other sources of expenditures.

- Other unreasonable expenses.

3. Credit institutions with economic activities arising in foreign currency must convert them into Vietnam Dong in accordance with the guidance of the Ministry of Finance.

III. PROFIT DISTRIBUTION, SETTING UP OF FUNDS

The profit distribution, setting up of funds and using purpose of the funds of credit institutions shall be implemented in accordance with provisions in Article 21, 22, 23, 24 of the Decree No.146/2005/ND-CP dated 23 November 2005 of the Government.

IV. The regime on the accounting, statistics, auditing, reporting and financial disclosure

1. Credit institutions shall perform the regime on accounting in accordance with provisions of applicable laws, record adequately the original documents, update the accounting books and reflect adequately, timely, truly, accurately, objectively economic, financial activities.

2. The fiscal year of credit institutions shall begin on the first day of January and end on the 31^th December of the calendar year.

3. Credit institutions shall perform the financial settlement and fully comply with the provisions on the financial statements, prepare and submit (financial statements) to the Ministry of Finance in accordance with provisions of this Circular

3.1 Contents of the financial statement.

a. A report on financial plan: Credit institutions shall make an annual financial plan, including:

- A plan on funds source and use of funds

- A plan on incomes, expenditures, business result and the target of State Budget contribution.

- A plan on labour and salary.

b. Financial statement: Credit institutions shall be responsible to prepare and fully submit the following financial statements (including the soft copy):

- The balance sheet of level III accounts of the credit institutions, including also off-balance sheet accounts.

- Balance sheet of the credit institution.

- Notes to the financial statements including following contents (under Pro-forma attached):

+ The increase/decrease of fixed assets.

+ A report on risk adjusted Assets in accordance with provisions of applicable laws.

+ Business results, the performance of State Budget contribution.

+ The performance of labour, salary regime of the credit institution.

+ The overdue debts, recoverable bad debts, irrecoverable debts; unrealizable pledged assets; the lending to the biggest customers; funds investment in member units; funds contribution, shares purchase.

+ The performance of fund sources, use of funds

- An independent financial audit report

3.2. Chairperson of the Board of Directors, General Director (Director) of credit institutions shall be responsible for the accuracy, truth of these statements

3.3. Reporting period

a. Time limit for the submission of financial plans:

Financial plans drawn up by the credit institutions must be considered for approval by the Board of Directors and submitted to the Ministry of Finance prior to 15 November of the year before the planned year. In addition, State owned credit institutions shall draw up a plan on unit salary, a plan on State Budget contribution in accordance with provisions of the Law on State Budget and other provisions of applicable laws.

b. Time limit for the submission of financial statements, audit report:

- The quarterly report shall be submitted after 45 days since the end of the quarter at the latest.

- The annual report shall be submitted after 90 days since the end of the fiscal year at the latest.

- The audit result of the financial statements of credit institutions performed by an independent audit organization shall be submitted to the Ministry of Finance after 120 days since the end of the fiscal year at the latest.

3.4. Receiver of the reports:

Credit institutions shall submit their financial plans, financial statements to the Ministry of Finance.

4. The financial disclosure for credit institutions: credit institutions shall perform the regime on the financial disclosure in accordance with provisions of the laws on accounting.

5. Audit work:

Credit institutions must organize the internal audit in respect of their financial statements in line with provisions of the Law on Credit Institutions.

Within the period of 30 days prior to the end of the fiscal year, credit institutions must select an independent audit organization in accordance with provisions of the State Bank and laws on auditing to perform the audit of their activities. The audit result of financial statements of credit institutions shall be submitted to the Ministry of Finance.

V. FINANCIAL CONTROL, INSPECTION AND DEALING WITH VIOLATIONS FOR CREDIT INSTITUTIONS

1. The financial control, inspection shall be performed under following forms:

- Periodical financial inspection or irregular financial inspection

- Control by specific topic in line with requirements of the financial management.

2. Dealing with violations:

- Credit institutions violating the financial regime of the State shall be subject to the punishment in accordance with provisions of applicable laws.

- In the event where credit institutions fail to comply or inadequately comply with provisions on the regime on financial reporting stated in point 3, Section IV, Chapter II of this Circular shall be subject to the punishment in accordance with provisions of the law on accounting.

Chapter III

IMPLEMENTING ORGANIZATION

1. This Circular shall be effective after 15 days since its publication on the Official Gazette. This Circular shall replace the Circular No.92/2000/TT-BTC dated 14/9/2000 of the Ministry of Finance.

2. In the implementation, any query that may arise should be reflected to the Ministry of Finance for the consideration and settlement.

NOTES TO THE FINANCIAL STATEMENTS

Quarter----------Year--------

(issued in conjunction with Circular No. --------------dated------of the Ministry of Finance)

I. OPERATION CHARACTERISTICS OF CREDIT INSTITUTION

1. Licence on establishment and operation, term of validity;

2. Type of capital ownership;

3. Members of the Board of Directors (Name, position of each member)

4. Members of the Management Board (Name, position of each member)

5. Head office at………; number of branches:............., number of subsidiaries:………

6. Total of officers, workers.

II. OPERATION STATUS OF CREDIT INSTITUTION (UNIT: VND MILLION)

1. Increase, decrease of fixed assets

2. Report on income, expenditure of credit institution

3. Income of staff

Credit institutions shall draw up a reporting form on income of the staff on the annual basis.

4. Performance of obligations to the State Budget

Credit institutions shall draw up this form in accordance with current guidelines of the Ministry of Finance and the Tax authority.

5. Debts classification of credit institution

5.1. Classification of debts under group

5.2. Classification of debts under sectors, economic types and lending type in respect of medium and small enterprises

6. Performance of lending to 20 biggest customers

7. Performance of capital investment in member units

8. Change of the funds source and the use of funds

9. General norms

10. Performance of capital contribution, shares purchase