Government’s Decree on financial regimes of credit institutions, foreign bank branches

Government’s Decree on financial regimes of credit institutions, foreign bank branches

On 7 August, 2017, the Government issued Decree No.93/2017/ND-CP on financial regimes of credit institutions (CIs), foreign bank branches and financial supervisory agencies, appraisal of state-investment efficiency in 100% state-owned CIs and CIs of which the State has stakes.

Accordingly, the Decree stipulates that the financial management principles of CIs, foreign bank branches to be financially self-reliant, self-responsible for their business operations, and to fulfill their obligations and commitments in line with the laws.

CIs, foreign bank branches are required to comply with financial disclosure regulation in accordance with the Law on Credit Institutions and other applicable laws.

Working capital of CIs, foreign bank branches includes the owner’s equity, mobilized capital and other capital sources in accordance with the laws. Specifically, the owner’s equity is comprised of: charter capital or allocated capital; variances from asset revaluation, exchange rate variances; equity surplus; funds (reserve fund for supplementing charter capital, investment and development fund, financial contingency fund); Unallocated accumulated profits, unresolved accumulated losses; other capital in the possession of CIs, foreign bank branches.

Mobilized capital consists of: capital mobilized from deposits of organizations and individuals; capital mobilized through the issuance of valuable papers; entrusted investment capital; loans from credit institutions, domestic and overseas financial institutions; loans from the State Bank of Vietnam.

The Decree stipulates that CIs, foreign bank branches are allowed to utilize their working capital for business purposes in accordance with the Law on Credit Institutions and other applicable laws, provided that the principle of safety and capital growth is ensured.

Credit institutions, foreign bank branches are allowed to change their capital structures, assets for business development in line with the laws.

Credit institutions are allowed to purchase or invest in fixed assets for the purpose of direct service to their business operations under the principle that the residual value of fixed assets does not exceed 50% of the charter capital and reserve fund for recapitalization written in accounting books.

The Decree stipulates that revenues of CIs and foreign bank branches must be verified to be compliant to Vietnamese accounting standards and applicable laws, with valid invoices or bills and must be fully accounted in their revenues.

In terms of business turnover of CIs, foreign bank branches, the Decree points out 7 sources, particularly:

First, interest and similar incomes: revenues from deposit interest, lending, business, investment in debt securities, income from guarantee operations, financial leasing, debt trading and other credit activities;

Second, income from service activities: revenues from payment services; treasury service; trust and agent operations; and other services;

Third, income from forex and gold trading: revenue from foreign currency trading; income from exchange rate differences; gold trading; derivatives;

Fourth, revenue from security trading activities (except stocks);

Fifth, revenue from capital contribution, capital contribution and share transfers;

Sixth, revenue from other activities: revenue from debts that have been resolved through risk provision fund (including collection of written off debts); other derivatives; revenues from debt trading; asset transfer and liquidation; reverting provision of long-term investments; and income from other activities in accordance with the laws;

Seventh, other revenues in accordance with the laws.

Decree No.93/2017/ND-CP takes effect from September 25th, 2017. Concurrently, it shall replace Decree No.57/2012/ND-CP dated July 20th, 2012 of the Government on financial regimes of credit institutions and foreign bank branches.

Thoa Le