CIRCULAR

PRESCRIBING ISSUANCE OF BILLS OF STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on credit institutions dated June 16, 2010 and the Law on amendments to the Law on credit institutions dated November 20, 2017;

The Government’s Decree 16/2017/ND-CP dated February 17, 2017 defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the request of the Director of the Monetary Policy Department;

The Governor of the State bank of Vietnam promulgates a Circular prescribing the issuance of bills of the State Bank of Vietnam.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Circular introduces regulations on the issuance of bills by the State Bank of Vietnam (“SBV”) for implementation of the national monetary policy.

Article 2. Regulated entities

1. SBV.

2. Commercial banks, foreign bank branches, finance companies, cooperative banks and banks for social policies (hereinafter referred to as “credit institutions”).

3. Deposit Insurance of Vietnam.

Article 3. Definitions

1. “SBV bill” means a short-term financial instrument issued by the SBV for the purpose of implementing the national monetary policy.

2. “settlement date” means the date on which the credit institution must make payment for the purchased SBV bills to SBV.

3. “issuance date” means the settlement date and is the basis for determining the maturity date of a SBV bill.

4. “term of the SBV bill” means the amount of time between the date following the issuance date and the maturity date of a SBV bill.

Chapter II

SPECIFIC PROVISIONS

Article 4. Terms and conditions of SBV bills

1. Eligible buyers: SBV bills are issued to credit institutions that have VND checking accounts opened at SBV.

2. Currency: SBV bills are issued, recorded and paid in VND.

3. Term: The term of SBV bills shall be decided by SBV and not exceed 364 days.

4. Face value: The face value of a SBV bill is VND 100,000 (one hundred thousand) or a multiple of VND 100,000.

5. Form: SBV bills are issued in book entry form.

6. Interest rate: The interest rate of a SBV bill shall be subject to SBV’s decision which is made in conformity with the money market development and specific objectives of the monetary policy in each period.

7. SBV bills are issued at a discount from the face value of the bill and the holder will be paid the face value when the bill matures.

Article 5. Price of SBV bills

1. The price of a SBV bill shall be calculated by adopting the following formula:

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Where:

G: Price of a SBV bill

MG: Face value of the SBV bill;

L: Interest rate of the SBV bill (%/year);

t: Term of the SBV bill (number of days).

2. Total amount received from selling SBV bills shall be calculated by adopting the following formula:

GG = G x N

Where:

GG: Total amount received from selling SBV bills;

G: Price of a SBV bill;

N: The number of SBV bills issued.

Article 6. Methods of issuance of SBV bills

1. SBV bills may be purchased through bidding or through a compulsory purchase process.

2. Issuance of SBV bills through bidding:

The issuance of SBV bills through bidding shall comply with SBV’s regulations on bidding through open market operations.

3. Compulsory purchase of SBV bills:

a) Based on specific objectives of the monetary policy in each period and actual conditions, SBV shall decide to issue SBV bills to a credit institution through a compulsory purchase process. Credit institutions must purchase SBV bills through a compulsory purchase process according to the decision of SBV’s Governor;

b) SBV may consider repurchasing SBV bills offered through a compulsory purchase process before maturity. The repurchase of SBV bills offered through a compulsory purchase process shall be subject to the decision of SBV’s Governor.

Article 7. Settlement for SBV bills

1. Foreigners shall pay for SBV bills purchased through bidding in accordance with SBV’s regulations on open market operations.

2. Foreigners shall pay for SBV bills purchased through a compulsory purchase process as follows: The credit institution shall make payment for SBV bills to the account designated by SBV within the settlement date. The credit institution must provide sufficient information on the money transfer order at the request of SBV.

3. When SBV bills mature, credit institutions shall be paid the face value of SBV bills they hold. If the maturity date falls on a weekend or a public holiday, the payment for SBV bills shall be made on the following business day.

Article 8. Fees of issuance and interest payment

Fees of issuance and payment of interests of SBV bills shall be recorded as operating expenses of SBV.

Article 9. Use of SBV bills in transactions by SBV

SBV bills shall be used in SBV’s transactions according to the decision of SBV's Governor in each period.

Article 10. Sale, purchase and pledge of SBV bills

1. A credit institution is entitled to purchase, sell or pledge SBV bills with another one in accordance with regulations of law.

2. Deposit Insurance of Vietnam is entitled to purchase SBV bills from a credit institution under an agreement which it enters into with that credit institution.

Article 11. Depository of SBV bills

SBV bills are deposited at SBV in accordance with SBV’s regulations on depository and use of financial instruments at SBV.

Article 12. Actions against credit institutions failing to make payment or making part payment of SBV bills

1. Actions against a credit institution that fails to make payment or makes part payment of SBV bills that it purchased through bidding shall be taken in accordance with SBV’s regulations on open market operations.

2. Actions against a credit institution that fails to make payment or only makes part payment of SBV bills that it purchased through a compulsory purchase process shall be taken as follows:

a) At the end of the settlement date, SBV (the Operations Center or a SBV's provincial branch) shall automatically get money from the checking account of the credit institution opened at SBV to the extent the purchase amount of SBV bills is fully paid and inform the credit institution in writing of such action;

b) If the balance on the checking account of the credit institution opened at SBV is not enough for paying for the unpaid purchase amount of SBV bills, the credit institution must incur the penalty for late payment which is calculated according to the overnight rate in interbank electronic payment. The late payment penalty per day shall be calculated by adopting the following formula:

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Where:

P: The late payment penalty per day;

Gp: The unpaid purchase amount of SBV bills at the end of settlement date;

Lp: The overnight rate adopted in interbank electronic payment according to SBV’s decision in effect at the time of calculation of the late payment penalty (%/year);

c) Within 05 business days after the settlement date, SBV (the Operations Center or a SBV's provincial branch) shall daily get money from the checking account of the credit institution opened at SBV until the purchase amount of SBV bills and late payment penalty are fully paid. The purchase amount of SBV bills shall be paid before the late payment penalty is paid;

d) Upon the termination of the time limit specified in Point c of this Clause:

(i) If the credit institution does not make full payment of the purchase amount of SBV bills, it shall incur administrative penalties in accordance with regulations on penalties for administrative violations in money and banking sector;

(ii) SBV (the Operations Center or a SBV's provincial branch) shall cancel the number of unpaid SBV bills calculated according to the face value and rounded to the nearest multiple of the face value, suspend calculation of late payment penalty and continue collecting late payment penalty by getting money from the checking account or other fund sources (if any) of the credit institution;

dd) SBV (the Operations Center or a SBV's provincial branch) shall determine the unpaid purchase amount of SBV bills and the unpaid late payment penalty at the end of each business day, and automatically get money from the checking account of the credit institution for debt collection on the following business day, and at the same time give a written notification of such action to the credit institution.

Chapter III

IMPLEMENTATION

Article 13. Responsibility of units affiliated to SBV

1. The Financial Policy Department shall:

Take charge and cooperate with relevant units to request the SBV's Governor to make decisions on issues concerning the issuance of SBV bills such as volume, interest rate, term, settlement date, issuance method and other contents, and repurchase of SBV bills offered through a compulsory purchase process.

2. The Operations Center shall:

a) fulfill its duties according to applicable regulations on bidding for SBV bills through open market operations;

b) with regard to offering of SBV through a compulsory purchase process:

(i) inform credit institutions of purchase of SBV bills through a compulsory purchase process according to the decision of SBV's Governor;

(ii) organize issuance, collect proceeds from the issuance, calculate penalty for late payment for SBV bills incurred by credit institutions, and make accounting records as regulated;

(iii) take actions against credit institutions that fail to make payment or make part payment of SBV bills purchased through a compulsory purchase process as prescribed in Clause 2 Article 12 hereof; send the list of such credit institutions to the Bank Supervision and Inspection Agency immediately after debts are fully paid;

(iv) act as a contact point for dealing with any difficulties that arise in the course of issuance of SBV bills through compulsory purchase process;

c) fulfill depository duties and procedures for transfer of ownership of SBV bills to buyers; act as a contact point in providing advice for SBV's Governor in making decision to allow Deposit Insurance of Vietnam to open SBV bill depository account at SBV;

d) prepare and submit a consolidated report on each offering of SBV bills to SBV’s Governor and the Financial Policy Department.

3. Each SBV’s provincial branch shall:

a) inform credit institutions of purchase of SBV bills through a compulsory purchase process according to the decision of SBV's Governor;

bi) organize issuance, collect proceeds from the issuance, calculate penalty for late payment for SBV bills purchased by credit institutions through a compulsory purchase process, and make accounting records as regulated;

c) take actions against credit institutions that fail to make payment or make part payment of SBV bills purchased through a compulsory purchase process as prescribed in Clause 2 Article 12 hereof; send the list of such credit institutions to the Bank Supervision and Inspection Agency immediately after debts are fully paid by getting money from their checking accounts;

d) prepare and submit report on issuance and settlement for SBV bills issued through a compulsory purchase process to the Operations Center after completion of each issue;

dd) act as a contact point for dealing with any difficulties that arise in the course of issuance of SBV bills through compulsory purchase process.

4. The Department of Finance and Accounting shall:

Provide guidelines for accounting for SBV bill transactions.

Article 14. Effect

1. This Circular comes into force as from December 09, 2019.

2. This Circular supersedes the Decision No. 362/1999/QD-NHNN1 dated October 08, 1999 of the State Bank of Vietnam.

3. Clause 2 Article 13 of the Circular No. 24/2014/TT-NHNN dated September 06, 2014 is abrogated.

Article 15. Implementation organization

Chief of the Ministry’s Office, Director of the Monetary Policy Department, heads of units affiliated to SBV, Directors of SBV’s provincial branches, Chairpersons of the Boards of Directors, Chairpersons of the Boards of Members and General Directors (Directors) of credit institutions, Chairperson of Board of Directors and General Director of Deposit Insurance of Vietnam shall implement this Circular./.

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