DECISION

ON THE INSURANCE OF REGULATION ON FOREIGN EXCHANGE TRANSACTION

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Ordinance on the State Bank and the Ordinance on Banks, Credit cooperatives and Finance companies promulgated by the Decree no. 37/LCT-HDNN8 and Decree No. 38/LCT-HDNN8 dated 24 May, 1990 of the Chairman of the State Council of the Socialist Republic of Vietnam;
Pursuant to the Decree No. 15 CP dated 2 March, 1993 of the Government on the assignment, authority and responsibility for State Management of Ministries and ministry-level agencies;

Upon proposal of the Director of the Foreign Exchange Control Department,

DECIDES

Article 1.

To issue in conjunction with this Decision "Regulation on foreign exchange transactions".

Article 2.

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Article 3.

The Head of Governor office, relevant Directors of Departments in the State Bank head-office and General Managers of State Bank branches in provinces and cities shall be responsible for the enforcement of this decision

FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR





Le Duc Thuy

 REGULATIONS

ON FOREIGN EXCHANGE TRANSACTIONS
(Issued in conjunction with Decision No. 17/1998/QD-NHNN7 dated 10 January 1998 of the Governor of the State Bank)

I. GENERAL PROVISIONS

Article 1. Purpose

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Article 2. Forms of transactions

Foreign exchange transactions are transactions for buying and selling foreign currencies. Forms of transactions provided for in this Regulation shall consist of:

1. Spot foreign exchange transactions (English abbreviation: SPOT)

The spot foreign exchange transaction is a transaction for buying and selling an amount of foreign currency between two parties at the spot exchange rate at the time of the transaction and the transaction settlement shall be completed within two working days from the date of commitment to buy and sell.

2. Forward foreign exchange transactions (English abbreviation: FORWARD)

The forward foreign exchange transaction is a transaction in which two parties commit to buy from or sell to each other an amount of foreign currency at a determined exchange rate and the transaction settlement shall be made in future.

3. Swap foreign exchange transactions (English abbreviation: SWAP)

The forward foreign exchange transaction is a foreign exchange transaction which consists of two transactions taking place at the same time: a buying and a selling transaction of the same amount of one currency for another currency (there are only two currencies involved in the transaction), the settlement dates of these transactions are different and the exchange rates of the two transactions are determined at the time the contract is signed.

Article 3. Entities participating in transactions

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1. Credit institutions;

2. Economic entities being a Vietnamese legal entity;

3. Organisations and individuals; and

4. The State Bank of Vietnam.

Article 4. Scope of transactions

Entities mentioned in Article 3 can only carry out transactions within the following scope:

1. Credit institutions:

a. Credit institutions which are not commercial banks:

Credit institutions which are not commercial banks which satisfy conditions provided for in point a, paragraph 1 of Article 5 shall be permitted to carry out spot transactions with entities mentioned in Article 3 of this Regulation.

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Commercial banks and investment and development banks which satisfy conditions provided for in point a, paragraph 1 of Article 5 shall be permitted to carry out spot transactions with entities mentioned in Article 3 of this Regulation.

Commercial banks and investment and development banks which satisfy conditions provided for in point b paragraph 1 of Article 5 shall be permitted to carry out the forward and swap transactions with each other and with entities mentioned in Article 3, except for those provided for in paragraph 3 Article 3.

2. Economic organisation being a Vietnamese legal entity;

Economic organisation being a Vietnamese legal entity which have foreign currency earnings or requirement to enter into foreign currency transactions in accordance with current foreign exchange currency control regulation shall only be permitted to carry out spot transactions with credit institutions and forward and swap transactions with commercial banks and investment and development banks.

3. Other entities

Other organisations and individuals are only be permitted to carry spot transactions in compliance with current foreign exchange control regulation and only with credit institutions.

4. The State Bank

The State Bank shall carry out foreign exchange transactions (spot, forward, and swap) with credit institutions in the foreign currency inter-bank market.

Article 5. Conditions for carrying out foreign transactions and procedures for consideration of issuance of spot, forward, and swap license.

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a. Credit institutions shall have to possess a foreign exchange license granted by the Governor of the State Bank in order to enter into spot foreign exchange transactions.

b. Only commercial banks and investment and development banks which satisfy the following conditions shall be considered for a forward and swap transactions licence by the State Bank:

- Provisions stipulated in point a paragraph 1 Article 5 are completely satisfied;

- Process well functioning information and reporting systems which are able to capture foreign exchange positions of branches and the total position of the entire bank during the business day;

- The submission of regular and complete report to the State Bank on the volume of transactions foreign currency position is complied with;

- There are well-trained group of people who are familiar with foreign exchange transactions.

2. Application procedures for license

Commercial banks and investment and development banks shall file application for a license (in the form attached) to the State Bank (Department of Foreign Exchange Control). Within 30 days from the date of receipt of the application, the State Bank shall consider and examine the real status of the bank concerned, the compliance with the reporting requirement in order to make decision on whether or not to grant the forward and swap license .

Article 6. Transaction currency

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2. Considering the practical situation, the General Directors (Directors) of credit institutions shall provide in detail foreign currencies for their transactions.

3. In the case of necessity, the State Bank might decide on the currencies prohibited for transactions.

Article 7. Transaction fee

The State Bank shall provide for the maximum transaction fee applied to fees which credit institutions are permitted to charge.

Article 8. Transaction maturity of forward and swap transactions

The maximum transaction maturity permitted for forward and swap transactions shall be 6 months from the date of signing of the contract.

Article 9. Principles of transactions rate quotation.

Credit institutions authorised to engage in foreign currency shall have to quote both buying and selling exchange rates.

II. DETAILED PROVISIONS ON TRANSACTION TECHNIQUES

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1. Spot rate

The Spot rate is the exchange rate quoted by credit institutions at the time of transaction or agreed mutually by both parties, a spot rate shall have to be within the limits provided for by the State Bank of Vietnam.

2. Settlement

The settlement between parties shall have to be completed within 2 working days at the latest from the date of commitment to buy and sell. Parties to a transaction shall be permitted to agree on the timing of settlement within the 2 working days as mentioned.

Article 11. Principles to carry out a forward transaction.

1. Forward rate is the exchange rate quoted by the commercial banks and investment and development banks or agreed mutually by two parties to a transaction; forward rate shall have to be within the current limits provided for by the State Bank for the forward rate at the time when the contract is signed.

2. Settlement:

a. Settlement date shall be the last working day of the transaction maturity and expressed clearly in the contract.

b. Parties shall only effect settlement when the settlement is due. The settlement between the two parties shall be effected and completed within two working days from the settlement date at the latest.

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1. Swap rate

Swap rate is the exchange rate applied to a swap transaction quoted by commercial banks and investment and development banks or mutually agreed by parties concerned at the time the contract is signed on the following principles:

In case a swap transaction includes a spot transaction, the spot rate shall be in compliance with provisions for forward rate mentioned in paragraph 1 Article 10 of this Regulation.

In case a swap transaction includes two forward transactions, the forward rate shall be in compliance with provisions for forward rate mentioned in paragraph 1 Article 11 of this Regulation.

2. Settlement:

In case a swap transaction includes a spot transaction and a forward transaction, the settlement shall be effected on the principle provided for spot and forward transactions.

In case a swap transaction includes two forward transactions, the settlement shall be effected on the principle provided for forward transactions.

Article 13. Down payment

1. For the security of a forward transaction contract or a swap transaction contract, General Directors (Directors) of commercial banks and investment and development banks shall have the right to request for a down-payment by their counterpart. The General Directors (Directors) of commercial banks and investment and development banks shall stipulate in detail the particular requirement for down-payment of different customers. Commercial banks investment and development banks shall pay interests for the down-payment at the rates for the deposits of similar term .

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Article 14. Modes of transaction

Parties to a foreign exchange transaction can carry out the transaction directly through the telephone, telex, fax and with the assistance of the computer network.

1. Transactions through telephones, telex and fax:

After the confirmation of the transaction, parties concerned can, in case of a spot transaction, reconfirm in writing the amount of foreign currency to buy and sell the exchange rate, mode of settlement or enter into a detailed contract as provided for in the Article 15 of this Regulation.

2. Transactions with the assistance of the computer network

In case of transaction through the computer network under code and other test keys of the computer network, participating parties only have to confirm in writing; they are not required to enter into a contract.

Article 15. Foreign exchange transaction contract

A foreign exchange transaction contract shall include following provisions:

- Types of transaction;

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- Account numbers of the parties;

- Date of the contract;

- Maturity of the contract (if any);

- Transaction currencies (foreign currencies against foreign currency or foreign currency against Vietnamese Dong);

- Number of transactions;

- Exchange rate of transactions;

- Modes of payment;

- Settlement date;

- Down-payment (if any);

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- Place of outgoing or 7 incoming transfer of funds

- Confirmation signatures by competent person from each party.

III. REPORTING REQUIREMENTS

Article 16.

Credit institutions permitted to engage in spot, forward and swap transactions shall submit daily before 10am each day, a return of transaction value of foreign currency bought and sold of the previous business day to the State Bank of Vietnam (Department of Foreign Exchange Control) in the pro-forma return of transaction value (attached to this Regulation).

IV. DEALING WITH VIOLATIONS

Article 17. Dealing with violations of contracts of transactions

In case of a violation of contracts of transactions, the suffering party shall have the right to file the case economic court.

If the party making the down - payment refuses to implement the contract, the amount of down-payment shall belong to the commercial banks and investment and development banks accepting the down-payment which refuse to implement the contract; they shall have to return the amount of the down-payment to the party making the down-payment and interest accrued on the down-payment and an additional sum equivalent to the amount of the down-payment. These banks may be subject to reprimand or have their license withdrawn in the event of repeated violations.

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For payment settlement effected later than the settlement date agreed upon in the contract to the following penalty measures shall be applied:

- In case the settlement currency is foreign currency, the maximum penalty to be applied shall be 150% of the current ceiling rate of the short-term lending provided for by the Governor of the State Bank, calculated for the days in default and the amount involved.

- In case the settlement currency is the Vietnamese Dong, the maximum penalty to be applied shall be 150% of the current ceiling rates of the short-term lending provided for by the Governor of the State Bank, calculated for the days in default and the payment amount involved.

Article 19. Dealing with violations of provisions of this Regulation

1. Credit institutions shall have to comply strictly with the reporting requirements, the pro-forma of the return as provided for by the State Bank, the timing of the report, and ensure the accuracy of the data reported.

Credit institutions upon engaging in transaction forms: spot, forward and swap shall ensure the compliance with provisions of this Regulation and maintain the foreign currency position between the current limits stipulated by the State Bank (position in forward transactions shall also be included in the calculation of foreign currency position of a credit institution).

2. Credit institutions violating the report requirement and provisions of the State Bank on the foreign exchange transaction bands, fees of transactions, maturity of transactions, and other provisions shall be subject to penalty provided by Laws or dealt with by one of the following measures:

a. Violation on the reporting: Warning in the case of late submission of returns. Termination of a part or of the entire buying & selling activities in case of repeated late submission or no submission of returns.

b. Violation of the foreign exchange bands, fees of transactions, and maturity: Termination of the entire foreign currency buying and selling activities or revocation of the foreign currency business license.

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Article 20.

The Director of the Department of Foreign Exchange Control shall be responsible for co-operating with the relevant departments to disseminate and implement this Regulation and to issue licenses to engage in forward and swap transactions to commercial banks, investment and development and banks which meet the required conditions.

Article 21.

The Director of the Department of Accounting and Finance shall be responsible for guiding the accounting of the forward and swap transactions.

Article 22.

General Managers of State Bank branches of provinces and cities shall be responsible to supervise the implementation of this Regulation by credit institutions in their localities.

Article 23.

General Directors (Directors) of credit institutions shall be responsible to the Governor of the State Bank for organising the implementation of this Regulation in their institutions.

Article 24.

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FOR THE GOVERNOR OF THE STATE BANK OF VIETNAM
DEPUTY GOVERNOR




Le Duc Thuy