Vietnam: Deductions from liquid capital of a securities company

Margin value: In case a securities company has secured assets in order for the bank to guarantee payment when issuing covered warrants, the deduction value equals the minimum value of payment guarantee value of the bank; secured assets value determined as prescribed in Clause 6, Article 10 of Circular No. 87/2017/TT-BTC of the Ministry of Finance of Vietnam.

The asset value used for securing other organizations and individuals’ obligations has the remaining term of over ninety (90) days. The asset value shall be determined as prescribed in Clause 6, Article 10 of Circular No. 87/2017/TT-BTC.

The entire decrease in value of financial assets according to their book value, excluding the securities specified in Clause 7 Article 5 of Circular No. 87/2017/TT-BTC, shall be calculated according to the difference between the book value and the market price determined according to Appendix II hereof.

Other deductions shall be determined according to Appendix VI hereof, including:

- Long-term assets, except for those specified in Clause 6 Article 5 of Circular No. 87/2017/TT-BTC;

- The following short-term assets:

+ Securities specified in Clause 7 Article 5 of Circular No. 87/2017/TT-BTC in the short-term financial assets;

+ Prepayments;

+ Receivables with the payback period or remaining maturity of over ninety (90) days;

+ Advances that may be returned after over ninety (90) days;

+ Other short-term assets, except for those specified in Clause 5 Article 5 of Circular No. 87/2017/TT-BTC.

- Amounts mentioned in the qualified opinions, adverse opinions or disclaimer of opinions (if any) in the audited and examined financial statements but yet to be deducted from the liquid capital as prescribed in Points a and b Clause 4 Article 5 of Circular No. 87/2017/TT-BTC. In case an audit organization certifies that exceptions no longer exist, the securities-trading organization is not required to deduct them.

The following indicators are not included in the deductions from liquid capital specified at Points a and b, Clause 4 Article 5 of Circular No. 87/2017/TT-BTC:

- Assets against which market risks shall be identified as prescribed in Clause 2, Article 9 of Circular No. 87/2017/TT-BTC, except for the securities specified in Clause 7 Article 5 of Circular No. 87/2017/TT-BTC;

- Provision for impairment of assets recorded at book value;

- Provision for impairment of other assets;

- Provision for non-performing receivables.

When determining assets to be deducted from liquid capital specified in Clause 1, Clause 2, Points a and b of Clause 4 Article 5 of Circular No. 87/2017/TT-BTC, the securities-trading organization may reduce the value of deductions as follows:

- For the asset used for securing the obligation of the securities-trading organization, upon calculation of deductions, the minimum value of the market value of these assets determined as prescribed in the Appendix II hereof (if any), book value and remaining value of the obligation may be deducted;

- For the asset secured by the client's property, upon calculation of deductions, the minimum value of the market value of such property determined as prescribed in Clause 6, Article 10 of Circular No. 87/2017/TT-BTC and book value may be deducted.

The following securities classified as short-term and long-term financial assets shall be considered deductions from liquid capital:

- Securities issued by organizations are related to securities-trading organizations in the following cases:

+ They are parent companies, subsidiaries, joint-venture companies or associate companies of securities-trading organizations.

+ They are subsidiaries, joint-venture companies or associate companies of parent companies of securities-trading organizations.

- Securities to be restricted from transfer for over ninety (90) days from the date of calculation.

More details can be found in Circular No. 87/2017/TT-BTC of the Ministry of Finance of Vietnam, which takes effect from October 10, 2017.

- Nguyen Trinh -

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