Adjustment of the Annual Contribution Rate to the Guarantee Fund for the Safety of the People's Credit Fund System

According to current regulations, the Deposit Insurance Fund of the Credit Institutions System (hereinafter referred to as the Insurance Fund) is a financial fund of the system of credit institutions that are cooperatives (including cooperative banks and people's credit funds) established by the cooperative bank based on the contribution fees of the cooperative bank and its member people's credit funds, placed at the cooperative bank and managed and used by the cooperative bank in accordance with this Circular and the provisions of law.

Illustrative image (source: internet)

The cooperative banks and people's credit funds (except those under special control) are responsible for fully and punctually contributing the participation fee to the Insurance Fund once a year before January 31 of the following year. Article 5 Circular 21/2019/TT-NHNN amending Clause 2, Article 4 of Circular 03/2014/TT-NHNN dated January 23, 2014 of the Governor of the State Bank provides regulations on ensuring the safety of the people's credit fund system, stipulates the contribution to the Insurance Fund as follows:

- The annual contribution rate (starting from the fiscal year 2019) is 0.05% (instead of 0.08%) of the average outstanding loan balance of the previous year ending on December 31 of the cooperative bank and people's credit funds, in which the average outstanding loan balance of the year is calculated by the total outstanding loan balance (Group 1 and Group 2 according to the debt classification regulations of the State Bank of Vietnam) at the end of each month during the year divided by the actual number of months to be calculated. For the cooperative bank, the outstanding loan balance at the end of each month excludes the outstanding loan balance for capital harmonization with member people's credit funds;- The contribution to the Insurance Fund for the fiscal year shall only be made when the total operational capital of the Insurance Fund before contribution is less than 1.5% of the total assets of the people's credit fund system. In the event that the contribution to the Insurance Fund for the fiscal year causes the total operational capital of the Insurance Fund to exceed or equal 1.5% of the total assets of the people's credit fund system, the cooperative bank and people's credit funds must still make the contribution to the Insurance Fund for that fiscal year;

This Circular clearly states that the amount contributed to the Insurance Fund shall be accounted as operational expenses of the cooperative bank and people's credit funds.

See the full text of the regulations at Circular 21/2019/TT-NHNN effective from January 1, 2020.

Thu Ba

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