DECISION

ON FOREIGN CURRENCY POSITION OF CREDIT INSTITUTIONS PERMITTED TO ENGAGE IN FOREIGN EXCHANGE BUSINESS

THE GOVERNOR OF THE STATE BANK

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated 12 December, 1997;
Pursuant to the Decree No. 15/CP dated 02 March, 1993 of the Government providing for the assignment, authority, responsibility for the State management of Ministries and ministerial-level agencies;
Pursuant to the Decree No. 63/1998/ND-CP dated 17 August, 1998 of the Government on foreign exchange control;
Upon the proposal of the Director of the Foreign Exchange Control Department.

DECIDES

Article 1: Scope of adjustment and subjects of application

This Decision shall provide for foreign currency position of credit institutions permitted to engage in foreign exchange business in Vietnam (hereinafter referred to as credit institution), except for joint-venture banks and foreign bank branches, in order to restrain risks in foreign exchange business of credit institutions.

Article 2: Interpretation

...

...

...

1. Foreign currency is the currency of another country or common currency.

2. Original currency position of a foreign currency is the difference between the total assets and total liabilities denominated in this currency, including the respective off-balance sheet items.

A foreign currency is considered in a long position if the total assets is larger than the total liabilities (the English term is long position).

A foreign currency is considered as in a short position if the total assets is less than the total liabilities (the English term is short position).

A foreign currency is considered as in a square position if the total assets is equal to the total liabilities (the English term is square position).

3. The exchange rate used to calculate the position of a foreign currency shall be the spot rate applicable to transfer between that foreign currency with VND of credit institutions at the end of the working day.

4. The total long position of foreign currencies is the sum of long position of foreign currencies which are in a long position (after being converted into VND by the position exchange rate).

5. The total short position of foreign currency is the sum of short position of foreign currencies which are in a short position (after being converted into VND by the position exchange rate).

6. The own capital of a credit institution shall be applied in accordance with current provisions of the Governor of the State Bank of Vietnam on the prudential ratios in credit institutions activities.

...

...

...

1. The foreign currency position at the end of the day shall be determined at the end of a working day.

2. The foreign currency position at the end of the month shall be determined at the end of the last working day of that month.

Article 4. Principles to calculate the position of foreign currency

1. The foreign currency position at the end of the day shall be calculated on the basis of foreign currency position of the previous day and the difference between purchase turnover and sale turnover arising during the day of that foreign currency, including both spot and forward transactions.

2. The foreign currency position at the end of a month shall be calculated on the basis of the balance at the end of the last working day of the month of account: foreign currency dealing, account: foreign currency sale from other sources, account: commitment for spot purchase, account: commitment for spot sale, account: commitment for forward purchase, account: commitment for spot sale.

3. Foreign currency position at the end of the month shall be the basis for the reconciliation to ensure the accuracy of foreign currency position at the end of the day.

Article 5. Principles to calculate the total foreign currency position

1. To convert the position of each original foreign currency into VND at the position exchange rate.

2. To add all the foreign currency long positions to arrive at the total foreign currency long position.

...

...

...

Article 6. Limits of the total foreign currency long position and total foreign currency short position of credit institutions.

1. The total foreign currency long position at the end of a working day shall not exceed 30% of the own capital of a credit institution at that time.

2. The total foreign currency short position at the end of a working day shall not exceed 30% of the own capital of a credit institution at that time.

3. In special case, the Governor of the State Bank shall consider and permit credit institutions to maintain foreign currency position, which exceed the limits as provided for in paragraph 1 and paragraph 2 of this Article.

Article 7. Reporting regime

The report on foreign currency position of credit institutions shall be submitted to the State Bank (the Foreign Exchange Control Department) as follows:

1. Before 13 pm of the working day in respect of the report on foreign currency position at the end of previous day (Form No. 01).

2. Before the 10th of the current month in respect of the report on foreign currency position at the end of previous month (Form No. 02).

Article 8: Dealing with violations

...

...

...

- Violating the limits of the total foreign currency long position and the total foreign currency short position.

- Violating the reporting regime: failure to report daily foreign currency position, failure to report by the stipulated time, report wrong data.

2. Acts violating provisions in paragraph 1 of this Article shall, depending on the nature, seriousness, be treated in accordance with provisions on the punishment of administrative violations in the monetary area and banking activities and other related legal provisions.

Article 9. This Decision shall be effective after 15 days from the date of signing and replace the Decision No. 18/1998/QD-NHNN7 dated 10 January, 1998 of the Governor of the State Bank of Vietnam issuing the Regulation on foreign currency position for credit institutions permitted to engage in foreign exchange business.

Article 10. The Director of Administrative, the Director of Foreign Exchange Control Department, the Chief Inspector of the State Bank of Vietnam, Heads of related units of the State Bank of Vietnam, General Managers of State Bank branches in cities and provinces under the central Governments management, General Directors (Directors) of credit institutions permitted to engage in foreign exchange business shall be responsible for the implementation of this Decision.

FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR




Phung Khac Ke