Circular No. 01/2015/TT-NHNN stipulates the operation of trading and supplying interest rate derivative products by commercial banks and foreign bank branches. The Circular applies to banks, credit institutions, and customers using these products in both domestic and international markets. Notable points include provisions on net loss limits, risk management, and responsibilities of related parties.
적용 범위
Commercial banks, foreign bank branches, credit institutions, and customers using interest rate derivative products in both domestic and international markets.
핵심 사항
- Commercial banks and foreign bank branches may only engage in trading and supplying interest rate derivative products upon approval from the State Bank of Vietnam and issuance of internal regulations in accordance with such approval.
- Trading and supplying interest rate derivative products in the domestic market involving legal entities, credit institutions, and foreign bank branches must comply with specific product types and conditions.
- Net loss limits for trading, supplying, and using interest rate derivative products shall not exceed 5% of the charter capital or authorized capital of credit institutions and foreign bank branches.
- Commercial banks and foreign bank branches must implement centralized risk management at their headquarters or in accordance with the mother bank's regulations.
- Customers using interest rate derivative products must provide information and documents proving their eligibility and bear responsibility for the accuracy and truthfulness of such information.
🌐 이 문서의 사회적 영향
- Creating opportunities for commercial banks and foreign bank branches to diversify services, helping customers effectively manage interest rate risks.
- Requiring banks to comply with risk management regulations may increase operational costs for banks.
- Reducing customer risk through the use of interest rate derivative products, helping them stabilize finances.
❓ 자주 묻는 질문
What approval must commercial banks obtain from the State Bank of Vietnam to trade interest rate derivative products?
Commercial banks and foreign bank branches may only engage in trading and supplying interest rate derivative products upon obtaining approval from the State Bank of Vietnam in their establishment and operation licenses or by separate written approval.
What is the net loss limit for trading, supplying, and using interest rate derivative products?
The net loss limit shall not exceed 5% of the charter capital or authorized capital of credit institutions and foreign bank branches.
How must banks implement risk management?
Commercial banks engaging in trading and supplying interest rate derivative products must implement centralized risk management and control at their headquarters. Foreign bank branches must implement risk management and control according to the mother bank’s regulations or be authorized by the mother bank.
What information must customers using interest rate derivative products provide?
Customers must provide original or certified copies of the underlying transaction contracts; other information and documents required by commercial banks and foreign bank branches to prove their eligibility to use interest rate derivative products.
Are there any reports that banks need to submit to the State Bank of Vietnam?
Monthly, no later than the 12th day of the following month, commercial banks and foreign bank branches must report on their trading, supplying, and using of interest rate derivative products according to Forms 01 and 02.
전문
CIRCULAR
Regulations on the operation of interest rate derivative products trading and supply
by commercial banks and foreign bank branchesANNEX I.A[31]
____________________
Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;
Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;
Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;
Article 1.
The Governor of the State Bank of Vietnam issues this Circular regulating the operation of interest rate derivative products trading and supply by commercial banks and foreign bank branches.
PART I
GENERAL PROVISIONS
Article 1. Scope of Regulation
This Circular regulates the operation of interest rate derivative products trading and supply by commercial banks and foreign bank branches.
Article 2. Applicability
1. Commercial banks and foreign bank branches operate in the trading and supply of interest rate derivative products.
a) Credit institutions and foreign bank branches established and operating under the Law on Credit Institutions;
b) Legal entities (excluding credit institutions and foreign bank branches) established and operating under Vietnamese law.
3. Organizations and individuals related to the operation of interest rate derivative products trading and supply by commercial banks and foreign bank branches as stipulated in this Circular.
In this Circular, the following terms are understood as follows:
1. Interest rate derivative product is a financial instrument valued based on anticipated interest rate fluctuations.
2. Operation of interest rate derivative products trading and supply is the act of commercial banks and foreign bank branches entering into and performing interest rate derivative contracts with foreign financial institutions in the international market for the purpose of mitigating interest rate risks of commercial banks and foreign bank branches, or the act of commercial banks and foreign bank branches entering into and performing interest rate derivative contracts with customers in the domestic market for the purpose of mitigating interest rate risks of customers.
3. Underlying transaction is a transaction subject to interest rate risk, including: Deposit, acceptance of deposits; issuance, purchase, investment in securities; lending, borrowing; leasing, finance lease; other lawful transactions subject to interest rate risk, except for interest rate derivative contracts.
4. Hedging transaction is the act of commercial banks and foreign bank branches entering into and performing interest rate derivative contracts with commercial banks and foreign bank branches supplying interest rate derivative products in the domestic market or with foreign financial institutions for the purpose of mitigating interest rate risks associated with interest rate derivative contracts already entered into and performed with customers.
6. Notional principal amount is the sum of money agreed upon by the parties to the interest rate derivative contract as the basis for calculating interest payable, interest receivable, net interest or fee (if any); the notional principal amount may be equal to or less than the principal amount.
7. Net interest or loss per settlement period of the interest rate derivative contract is the difference between the amount of interest received and the amount of interest paid during that settlement period.
8. Net interest or loss of the interest rate derivative contract of credit institutions and foreign bank branches is the net interest or loss of all settlement periods of that interest rate derivative contract.
9. Reference interest rate is the interest rate level agreed upon by the parties to the interest rate derivative contract as the basis for implementing the interest rate derivative contract.
10. Cap interest rate in the interest rate option contract is the highest interest rate level agreed upon by the parties to the interest rate option contract to mitigate interest rate risk when market interest rates increase.
11. Floor interest rate in the interest rate option contract is the lowest interest rate level agreed upon by the parties to the interest rate option contract to mitigate interest rate risk when market interest rates decrease.
12. Foreign financial institution includes commercial banks, investment banks, credit institutions, and other financial organizations established and operating under foreign laws.
1. The business operation and supply of derivative interest rate products by commercial banks and foreign bank branches shall be carried out according to agreements between the parties involved in concluding and performing derivative interest rate contracts, in compliance with this Circular and relevant laws.
2. Commercial banks and foreign bank branches may only engage in the business and supply of derivative interest rate products when:
a) They have been approved by the State Bank of Vietnam for the business and supply of derivative interest rate products in their establishment and operation licenses, or through separate written documents in accordance with the provisions of the law;
b) They have issued internal regulations on the business and supply of derivative interest rate products in compliance with this Circular and relevant laws, ensuring internal control mechanisms, internal audit, and risk management for the business and supply of derivative interest rate products.
3. Commercial banks and foreign bank branches engaging in the business and supply of derivative interest rate products related to foreign exchange must comply with the provisions of Vietnamese law on foreign exchange.
4. Commercial banks and foreign bank branches conducting derivative interest rate product business on international markets must comply with the provisions of Vietnamese law on activities and foreign exchange transactions on international markets.
Chapter II
BUSINESS AND SUPPLY OF DERIVATIVE INTEREST RATE PRODUCTS
Section 1
DOMESTIC MARKET BUSINESS AND SUPPLY OF DERIVATIVE INTEREST RATE PRODUCTS
Article 5. Purpose of Domestic Market Business and Supply of Derivative Interest Rate Products
Article 6. Scope of Domestic Market Business and Supply of Derivative Interest Rate Products
Commercial banks and foreign bank branches may conduct business and supply various types of derivative interest rate products, including:
1. Forward Rate Agreement (FRA): Commercial banks and foreign bank branches conclude derivative interest rate contracts with customers, whereby on the date of conclusion of the derivative interest rate contract, the parties agree to determine the fixed interest rate to be applied to the nominal value of the loan; on the maturity date of the derivative interest rate contract, the commercial bank or foreign bank branch or customer makes a single payment of the difference between the agreed fixed interest rate in the derivative interest rate contract and the reference interest rate on the nominal value of the loan.
a) Single Currency Interest Rate Swap: Commercial banks and foreign bank branches conclude derivative interest rate contracts with customers, wherein the parties agree to periodically pay each other interest amounts in the same currency (Vietnamese dong or foreign currency) calculated based on the agreed interest rates (fixed or floating) on the nominal value of the loan;
b) Accrual Interest Rate Swap: This is a single currency interest rate swap where commercial banks and foreign bank branches and customers agree that the interest amount received or paid will be calculated based on interest rates accompanied by conditions based on exchange rate fluctuations, market interest rates, and accumulated over the agreed payment periods on the nominal value of the loan.
3. Cross Currency Interest Rate Swap or Currency Swap:
a) Cross Currency Interest Rate Swap: Commercial banks and foreign bank branches conclude derivative interest rate contracts with customers, wherein the parties agree to periodically pay each other interest amounts in two different currencies based on the nominal value of the loan; the exchange or non-exchange of the initial nominal value of the loan or partial exchanges during the period or at the end is made according to a fixed exchange rate agreed upon in compliance with the State Bank of Vietnam's regulations on exchange rates at the time of signing the derivative interest rate contract;
a) Interest Rate Option - Cap: A commercial bank or a foreign bank branch enters into an interest rate derivative contract with a customer, wherein the commercial bank or foreign bank branch sells to the customer the right (not an obligation) to purchase a capped interest rate on the nominal value of the principal at a time before the maturity date or on the maturity date of the interest rate derivative contract for the purpose of mitigating and limiting the risk of rising interest rate fluctuations. During the term of the interest rate derivative contract, when the reference interest rate fluctuates upward and exceeds the cap, if the customer requests, the commercial bank or foreign bank branch must pay to the customer an amount of interest calculated based on the difference between the reference interest rate and the cap and the nominal value of the principal; if the reference interest rate is lower than the cap, there will be no payment transaction between the commercial bank or foreign bank branch and the customer regarding the difference between the reference interest rate and the cap. The customer must pay a fee to the commercial bank or foreign bank branch according to the terms of the interest rate derivative contract to purchase the cap option; this fee may be paid once on the transaction date or multiple times during the interest payment periods throughout the term of the interest rate derivative contract as agreed upon in the interest rate derivative contract.
b) Interest Rate Option - Floor: A commercial bank or a foreign bank branch enters into an interest rate derivative contract with a customer, wherein the commercial bank or foreign bank branch sells to the customer the right (not an obligation) to purchase a floored interest rate on the nominal value of the principal at a time before the maturity date or on the maturity date of the interest rate derivative contract for the purpose of mitigating and limiting the risk of falling interest rate fluctuations. During the term of the interest rate derivative contract, when the reference interest rate fluctuates downward and falls below the floor, if the customer requests, the commercial bank or foreign bank branch must pay to the customer an amount of interest calculated based on the difference between the reference interest rate and the floor and the nominal value of the principal; if the reference interest rate is higher than the floor, there will be no payment transaction between the commercial bank or foreign bank branch and the customer regarding the difference between the reference interest rate and the floor. The customer must pay a fee to the commercial bank or foreign bank branch according to the terms of the interest rate derivative contract to purchase the floor option; this fee may be paid once on the transaction date or multiple times during the interest payment periods throughout the term of the interest rate derivative contract as agreed upon in the interest rate derivative contract.
c) Interest Rate Option - Collar: A commercial bank or a foreign bank branch enters into an interest rate derivative contract with a customer, wherein the commercial bank or foreign bank branch sells to the customer the right (not an obligation) to purchase a capped interest rate, while simultaneously purchasing from the customer the right (not an obligation) to purchase a floored interest rate, on the same nominal value of the principal at a time before the maturity date or on the maturity date of the interest rate derivative contract. During the term of the interest rate derivative contract, when the reference interest rate fluctuates upward and exceeds the cap, if the customer requests, the commercial bank or foreign bank branch must pay to the customer an amount of interest calculated based on the difference between the reference interest rate and the cap and the nominal value of the principal; when the reference interest rate decreases and falls below the floor, if the commercial bank or foreign bank branch requests, the customer must pay to the commercial bank or foreign bank branch an amount of interest calculated based on the difference between the reference interest rate and the floor and the nominal value of the principal. If the reference interest rate fluctuates but remains within the range between the cap and the floor, there will be no payment transaction between the commercial bank or foreign bank branch and the customer regarding the difference between the reference interest rate and the cap or the floor. The customer and the commercial bank or foreign bank branch agree in the interest rate derivative contract on the payment of fees and the amount of fees to be paid.
Article 7. Conditions for customers using interest rate derivative products traded and supplied by commercial banks and foreign bank branches in the domestic market
b) Having valid underlying transactions that are consistent with their business activities and legal provisions;
c) Possessing financial capacity as assessed by the commercial bank or foreign bank branch trading and supplying interest rate derivative products to fulfill payment obligations arising from the execution of interest rate derivative contracts;
d) Implementing measures to secure obligations agreed upon with the commercial bank or foreign bank branch trading and supplying interest rate derivative products.
2. For credit institutions and foreign bank branches using interest rate derivative products:
c) Possessing financial capacity as assessed by the commercial bank or foreign bank branch trading and supplying interest rate derivative products to fulfill payment obligations arising from the execution of interest rate derivative contracts;
d) Implementing measures to secure obligations agreed upon with the commercial bank or foreign bank branch supplying interest rate derivative products.
Article 8. Matching Transactions
1. Commercial banks and foreign bank branches may conduct matching transactions with commercial banks and foreign bank branches supplying interest rate derivative products in the domestic market or with foreign financial organizations to hedge against and mitigate interest rate risks for interest rate derivative contracts already supplied to customers in the domestic market.
2. Types of interest rate derivative products that commercial banks and foreign bank branches may conduct matching transactions with are those specified in Article 6 of this Circular.
3. Duration and value of matching transactions:
b) For cases where matching transactions are conducted for two or more interest rate derivative contracts, the duration and value of the matching transaction shall not exceed the longest remaining duration of the interest rate derivative contract and the total nominal values of the interest rate derivative contracts.
4. When conducting matching transactions with foreign financial organizations, in addition to the provisions stipulated in Clause 2 and Clause 3 of this Article, commercial banks and foreign bank branches must comply with the following regulations:
a) Comply with relevant legal provisions concerning foreign exchange activities in the international market;
b) Conduct transactions with foreign financial organizations rated at least Baa/P-3 by Moody's Investors Service or BBB-/A-3 by Standard & Poor's or BBB-/F3 by Fitch Ratings at the time of entering into the interest rate derivative contract, except in cases where a foreign bank branch conducts a matching transaction with its parent bank or with a foreign branch of its parent bank.
Section 2
INTERNATIONAL MARKET ACTIVITIES FOR TRADING AND SUPPLYING INTEREST RATE DERIVATIVE PRODUCTS
Article 9. Purpose of Operating Derivative Interest Rate Products on the International Market
1. Commercial banks and foreign bank branches may operate derivative interest rate products on the international market based on the conclusion and implementation of derivative interest rate contracts with foreign financial institutions for the purpose of:
a) Mitigating and limiting interest rate risks associated with ongoing transactions that remain valid and enforceable. The underlying transactions must be consistent with the content and scope of operations of commercial banks and foreign bank branches as stipulated by the Law on Credit Institutions and relevant laws;
b) Mitigating and limiting interest rate risks arising from the balance sheet of commercial banks and foreign bank branches.
2. Commercial banks and foreign bank branches shall not engage in derivative interest rate product operations with foreign financial institutions on the international market beyond the provisions set forth in Clause 1 of this Article.
Article 10. Scope of Operating Derivative Interest Rate Products on the International Market
Commercial banks and foreign bank branches may operate various types of derivative interest rate products on the international market as prescribed in Article 6 of this Circular.
Article 11. Conditions for Selecting Financial Organizations for Commercial Banks and Foreign Bank Branches Engaging in Derivative Interest Rate Product Operations on the International Market
When operating derivative interest rate products on the international market, commercial banks and foreign bank branches must conduct such activities with foreign financial organizations rated at least Baa/P-3 according to Moody's Investors Service, or BBB-/A-3 according to Standard & Poor's, or BBB-/F3 according to Fitch Ratings at the time of concluding derivative interest rate contracts, except in cases where foreign bank branches operate derivative interest rate products on the international market with their parent bank or foreign branch of the parent bank.
Section 3
LIMITS ON OPERATIONS, SUPPLY AND USE OF DERIVATIVE INTEREST RATE PRODUCTS
1. Credit institutions and foreign bank branches may engage in operations, supply and use of derivative interest rate products when the net loss limit on such operations does not exceed 5% of the charter capital or authorized capital of credit institutions and foreign bank branches. In case the net loss limit exceeds 5% of the charter capital or authorized capital, credit institutions and foreign bank branches must cease entering into new derivative interest rate contracts, report to the State Bank of Vietnam (Supervisory Authority) on the reasons for the losses, measures taken, and the timeframe for rectification.
2. When there is a need to enter into new derivative interest rate contracts, credit institutions and foreign bank branches must determine the net loss limit on operations, supply and use of derivative interest rate products in accordance with the provisions of Clause 1 of this Article. The net loss limit on operations, supply and use of derivative interest rate products is determined by the sum of net profits and net losses of outstanding derivative interest rate contracts plus the sum of net profits and net losses of settled derivative interest rate contracts within the fiscal year.
Section 4
INTEREST RATES, DERIVATIVE INTEREST RATE CONTRACTS AND RECORDS OF OPERATIONS, SUPPLY OF DERIVATIVE INTEREST RATE PRODUCTS
Article 13. Interest Rate in Derivative Interest Rate Contracts
The parties shall agree and commit in derivative interest rate contracts on interest rates to implement derivative interest rate products, ensuring compliance with the State Bank of Vietnam's regulations on interest rates for underlying transactions at the time the parties sign the contract.
Article 14. Derivative Interest Rate Contract
a) Name and address of the legal representatives of the parties entering into the contract;
c) Interest rates for implementing derivative interest rate products;
d) Duration of validity of the contract;
e) Rights and obligations of the parties entering into the contract;
g) Circumstances for changing, adjusting the contract, and terminating the contract prematurely;
h) Dispute resolution and contract liquidation;
2. The parties may agree to apply the International Swaps and Derivatives Association's model contract provided that the contents of the derivative interest rate contract do not contravene the provisions of this Circular and relevant laws.
Article 15. Business Activity Records and Supply of Derivative Interest Rate Products
When conducting business activities and supplying derivative interest rate products, commercial banks and foreign bank branches must establish and retain business activity records and supply records of derivative interest rate products, including:
1. Derivative interest rate contract.
2. Other documents related to the establishment and implementation of the derivative interest rate contract according to internal regulations of commercial banks and foreign bank branches, in compliance with this Circular.
RESERVE ESTABLISHMENT, ACCOUNTING RECORDS, AND REPORTING
Article 16. Reserve Establishment
Credit organizations and foreign bank branches shall implement reserve establishment and utilization to handle risks associated with derivative interest rate product business activities, supply, and usage in accordance with the State Bank of Vietnam's regulations.
Article 17. Accounting Records
Credit organizations and foreign bank branches shall conduct accounting records for derivative interest rate products in accordance with Vietnamese Accounting Standards and the State Bank of Vietnam's regulations on the accounting system of credit organizations and foreign bank branches.
Article 18. Reporting
Monthly, no later than the twelfth day of the month immediately following the reporting month, credit organizations and foreign bank branches shall report to the State Bank of Vietnam (Department of Monetary Policy) on their business activities, supply, and usage of derivative interest rate products according to Tables 01 and 02 issued together with this Circular.
Chapter III
RESPONSIBILITIES OF COMMERCIAL BANKS, FOREIGN BANK BRANCHES IN BUSINESS ACTIVITIES AND SUPPLY OF DERIVATIVE INTEREST RATE PRODUCTS AND CUSTOMERS USING DERIVATIVE INTEREST RATE PRODUCTS
1. Conduct business activities and supply derivative interest rate products in accordance with the provisions of this Circular.
2. Issue internal regulations on business activities and supply of derivative interest rate products in compliance with this Circular, relevant laws, and the commercial bank's or foreign bank branch's policies on business activities and supply of derivative interest rate products. Internal regulations of commercial banks and foreign bank branches must include:
a) Conditions for customers using derivative interest rate products in the domestic market; necessary documents from customers to be submitted to commercial banks and foreign bank branches;
b) Conditions for foreign financial institutions with which commercial banks and foreign bank branches enter into and perform derivative interest rate contracts in the international market;
c) Delegation, authorization, functions, duties, and responsibilities of individuals and departments in assessing, approving, and deciding on business activities and supply of derivative interest rate products;
d) Identification, measurement of potential risks arising from business activities and supply of derivative interest rate products; establishment of procedures and assignment of responsibilities for monitoring, controlling, and evaluating emerging risks; preventive and handling measures for risks, including overall business limits for derivative interest rate products of commercial banks and foreign bank branches, business limits for individual customers, and limits for individuals and organizations authorized to approve and decide on business activities and supply of derivative interest rate products of commercial banks and foreign bank branches;
e) Documents and information related to business activities and supply of derivative interest rate products;
f) Other contents required by internal management of commercial banks and foreign bank branches to ensure safe and effective business activities and supply of derivative interest rate products.
3. Commercial banks engaged in business activities and supply of derivative interest rate products must manage and control risks centrally at the headquarters of the commercial bank. Foreign bank branches engaged in business activities, supply, and usage of derivative interest rate products must manage and control risks in accordance with the parent bank's regulations or be authorized by the parent bank to manage and control risks.
4. Request customers to provide information and documents proving they meet the conditions for using derivative interest rate products as stipulated in this Circular and the internal regulations of commercial banks and foreign bank branches regarding business activities and supply of derivative interest rate products.
5. Provide customers with full and accurate information about the content of interest rate derivative products and the risks that may arise when using such products so that customers understand, consider, and decide on the use of interest rate derivative products and take preventive and mitigating measures against risks.
6. Study foreign laws and international market developments related to the business of interest rate derivative products, and credit rating information of foreign financial organizations to consider and decide on the conclusion and performance of interest rate derivative contracts with foreign financial organizations in the international market to ensure safe and effective operation of interest rate derivative product business by commercial banks and foreign bank branches.
7. In cases where commercial banks and foreign bank branches engage in the business of interest rate derivative products on the international market for the purpose of preventing and mitigating interest rate risks arising from the balance sheet, such commercial banks and foreign bank branches must develop a plan to prevent and mitigate interest rate risks, including an analysis of interest rate risks arising from the balance sheet; the plan to prevent and mitigate interest rate risks must be approved by the legal representative of the commercial bank or foreign bank branch.
8. Maintain records of business activities and supply of interest rate derivative products in accordance with the provisions of the law.
Article 20. Responsibilities of Customers Using Interest Rate Derivative Products
1. Implement the use of interest rate derivative products in accordance with the provisions of this Circular.
a) Provide commercial banks and foreign bank branches with the original or certified copy of the contract of the underlying transaction; other information and documents required by commercial banks and foreign bank branches supplying interest rate derivative products to prove eligibility to use interest rate derivative products in accordance with this Circular. Bear legal responsibility for the accuracy and truthfulness of the information and documents provided to commercial banks and foreign bank branches;
b) Timely notify commercial banks and foreign bank branches of any changes related to the underlying transaction so that commercial banks and foreign bank branches can examine and handle issues related to the interest rate derivative contract;
c) Study legal regulations and market developments related to interest rate derivative products to consider and decide on the use of interest rate derivative products supplied by commercial banks and foreign bank branches for the purpose of preventing and mitigating interest rate risks.
3. For credit institutions and foreign bank branches using interest rate derivative products:
d) Establish and define internal control systems and internal regulations on risk management, which must include content on controlling and managing risks associated with the use of interest rate derivative products;
Chapter IV
IMPLEMENTATION
Article 21. Effective Date
1. This Circular takes effect from March 2, 2015.
2. Repeal Decision No. 62/2006/QĐ-NHNN dated December 29, 2006 promulgating the Regulation on Implementation of Swap Transactions.
3. For interest rate derivative contracts signed before the date this Circular takes effect, commercial banks and foreign bank branches shall continue to implement the contents recorded in the interest rate derivative contract in accordance with the applicable laws at the time of signing the interest rate derivative contract or amend and supplement the interest rate derivative contract in accordance with this Circular.
Article 22. Implementation organization
The Director of the Office, Heads of the Monetary Policy Department and other units under the State Bank of Vietnam, Governors of the State Bank of Vietnam Branches in provinces and centrally-run cities, Chairmen of the Board of Directors, Chairmen of the Board of Members and General Directors (Directors) of credit institutions and foreign bank branches are responsible for organizing the implementation of this Circular./.
DEPUTY DIRECTOR
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