JOINT CIRCULAR No. 01/NHNN-TC guiding the issuance of Treasury bills through the State Bank

CIRCULAR

JOINT STATE BANK OF VIETNAM - MINISTRY OF FINANCE

Guidelines for the issuance of Treasury bills through the State Bank of Vietnam

Implementing Decree No. 72/CP dated July 26, 1994 of the Government on the issuance of regulations for the issuance of government bonds;

The Joint State Bank of Vietnam - Ministry of Finance provides guidelines for the issuance of Treasury bills through the State Bank of Vietnam as follows:

I. GENERAL PROVISIONS:

1\. Treasury bills are a type of government bond with a term of less than one year issued by the Ministry of Finance to cover temporary budget deficits of the state and serve as an important tool for the State Bank of Vietnam to implement monetary policy.

2\. The Ministry of Finance bases its plans and the annual revenue and expenditure situation of the state budget to forecast the volume of Treasury bills to be issued, the issuance time, the term of the bills, the maximum interest rate directive of the bills, and exchanges and reaches consensus with the State Bank of Vietnam before organizing the issuance of Treasury bills through the State Bank of Vietnam.

3\. The issuance of Treasury bills through the State Bank of Vietnam shall be conducted through public bidding in accordance with the principles and specific provisions set forth in this Circular.

The State Bank of Vietnam acts as an agent for the Ministry of Finance in issuing, paying off Treasury bills upon maturity, organizing and managing Treasury bill auctions.

4\. The organization and supervision of the secondary market (resale of Treasury bills after auction) shall be carried out by the State Bank of Vietnam.

II\. SPECIFIC PROVISIONS:

5\. The issuance of Treasury bills through the State Bank of Vietnam via public bidding shall have the following form and characteristics:

5.1\. Payment and settlement in Vietnamese dong.

5.2\. Minimum face value of VND 1,000,000 (one million dong); specific higher denominations are determined and announced by the Joint State Bank of Vietnam - Ministry of Finance in the issuance announcement.

5.3\. Terms include: one month, three months, six months, and nine months; specific terms for each issuance round are announced by the Joint State Bank of Vietnam - Ministry of Finance in the issuance announcement.

5.4\. Treasury bills are discount bills: They are sold at a price lower than their face value and paid according to their face value upon maturity.

5.5\. Treasury bills are issued in the form of book-entry and Treasury bill certificates.

- For book-entry form: Managed and recorded by the State Bank of Vietnam.

- For Treasury bill certificate form: Printed by the State Bank of Vietnam based on a model prescribed by the Ministry of Finance.

5.6\. The bidding for Treasury bills is interest rate bidding.

6\. The issuance of Treasury bills through the State Bank of Vietnam via public bidding shall be carried out according to the following principles:

6.1\. Confidentiality of all bidding information until the results are announced.

6.2\. Organizing open bidding where all bidders enjoy equal rights and obligations.

6.3\. Successful bidders have the right and responsibility to purchase Treasury bills according to the quantity and interest rate announced.

7\. Participants in the bidding for Treasury bills include:

7.1\. Credit institutions operating in Vietnam: State-owned commercial banks, joint-stock commercial banks, investment and development banks, joint venture banks, branches of foreign banks, and finance companies.

7.2\. Insurance companies, insurance funds, and investment funds.

Participants wishing to participate in the bidding for Treasury bills must meet the following criteria and conditions:

+ Having legal person status, established in accordance with current Vietnamese laws.

+ Having a Vietnamese dong account opened at a bank.

+ Meeting the minimum capital requirement as stipulated by the State Bank of Vietnam.

+ Adhering fully to procedures and regulations regarding Treasury bill bidding.

+ Submitting an application to join the market to the State Bank of Vietnam.

The State Bank of Vietnam examines the conditions and criteria of participants in the bidding to issue membership certificates as well as revoke such certificates for participation in Treasury bill bidding.

8\. The bidding for Treasury bills shall be organized regularly once a week, every two weeks, or monthly depending on the needs of the state budget and the money market situation.

9\. Two days prior to the bidding date, based on the Ministry of Finance's proposal to issue Treasury bills, the State Bank of Vietnam sends the issuance announcement of Treasury bills to participating members and publishes it on mass media channels. The method of sending the announcement is regulated by the State Bank of Vietnam.

10\. Registration for bidding:

10.1\. Before noon on the day of opening bids, participating members must submit bid registration forms to the State Bank of Vietnam. The format, recording method, and submission process of the bid registration form are regulated by the State Bank of Vietnam.

10.2\. Participating members must ensure a minimum bid volume and complete a 5% deposit on the bid volume of Treasury bills according to the regulations of the State Bank of Vietnam.

11\. Procedures for opening bid registration forms, verifying the validity and legality of bid registration forms, as well as the bidding procedures are regulated and implemented by the State Bank of Vietnam.

12\. Determination of the volume and interest rate of successful Treasury bills:

12.1\. The determination of the volume and interest rate of successful Treasury bills is based on:

- The quantity and interest rate of bids from participants.

- The expected volume of Treasury bills to be raised and the directed interest rate.

12.2\. The volume of successful Treasury bills is calculated in ascending order of the bid interest rates within the directed interest rate range.

If the total bid volume at the highest bid interest rate within the directed interest rate range exceeds the expected volume of Treasury bills to be raised, the successful bid volume will be allocated proportionally to each bid based on the bid volume at that interest rate.

12.3\. The issuance interest rate of Treasury bills is the highest successful bid interest rate applied uniformly to all successful bidders.

13\. The common selling price of successful Treasury bills for all successful bidders is calculated using the following formula:

MG

G = ----------------------

Ls x T

1 + ------------

365 x 100

Where: G: Selling price of Treasury bills

MG: Face value of Treasury bills

Ls: Successful bid interest rate of Treasury bills (annual percentage rate).

T: Number of days in the term of the Treasury bill.

365: Number of days in a year.

The State Bank of Vietnam has specific regulations on rounding the price of Treasury bills.

14- After the tender opening concludes, the State Bank determines the volume and interest rate of the successful bid and sends the tender results to the Ministry of Finance. The authorized representative of the Ministry of Finance (National Treasury Department) reviews and signs off on the consolidated tender result at the tender evaluation site. Based on the consolidated tender result, the State Bank notifies the successful bidders and publishes the tender results through public media and posts them at the State Bank headquarters.

15- Payment for Treasury Bills:

15.1- Within two working days following the tender date, the bidding units must pay the full amount for purchasing Treasury Bills at the sale price determined in Clause 13 above, simultaneously receiving a Treasury Bill certificate from the State Bank or having their Treasury Bill account credited. In case the successful bidder does not pay the full amount or pays late, the State Bank will deduct the bid bond and deposits of the successful bidder to settle with the National Treasury.

15.2 - On the third day after the tender organization, the State Bank credits the National Treasury Department's account opened at the State Bank branch with the total volume of successfully bid Treasury Bills at the sale prices of the successful bidders.

15.3 - One day before the maturity date of the Treasury Bills, the Ministry of Finance (National Treasury Department) transfers the payment capital for the Treasury Bills (equal to the total value of issued Treasury Bills) to the Central State Bank. On the maturity date, if the State Bank has not received the documentation from the National Treasury Department, it will automatically deduct from the National Treasury Department’s deposit account at the State Bank branch to settle with the Treasury Bill holder.

The State Bank and the National Treasury must ensure their payment responsibilities according to the provisions above. Any violations of payment deadlines or volumes will be penalized for delayed payment according to current regulations of the State Bank.

16- All costs associated with organizing the tender and processing payments for Treasury Bills through the State Bank shall not exceed 0.25% of the total issuance amount based on the tender results. The cost of printing Treasury Bill certificates is paid by the Ministry of Finance under a contract with the printing agency.

17- Coordination between the Ministry of Finance and the State Bank in the tendering of Treasury Bills is carried out through the Treasury Bill Tender Committee. The Tender Committee consists of five members, headed by a Director General of the State Bank, two authorized members of the National Treasury Department, and two authorized members of the State Bank. The main duties of the Tender Committee include:

17.1 - Preparing relevant content related to each tender round for leadership approval of both Ministries:

+ The expected volume of Treasury Bills to be issued in each tender round.

+ The term of Treasury Bills.

+ The directed interest rate for each Treasury Bill issuance round.

+ The issuance date of Treasury Bills.

17.2 - Checking the conditions of participating bidding units.

17.3 - Supervising the tender opening, determining the volume of successful bids, and the issuance price of Treasury Bills.

17.4 - Approving the tender results and confirming the tender result notification.

17.5 - Verifying the eligibility of registered bidding units and tender application forms.

18- The State Bank and the Ministry of Finance are responsible for resolving any disputes or complaints arising from the organization of the tender and the payment of Treasury Bills.

III. IMPLEMENTATION:

19- Initially, in addition to the volume of Treasury Bills issued through the State Bank, the Ministry of Finance may continue to issue a certain volume of Treasury Bills directly to sell to the public.

Treasury Bills directly issued by the Treasury system must have a different certificate format from those issued through the State Bank via tender.

The interest rate for retail Treasury Bills sold through the National Treasury system is set by the Ministry of Finance after consultation with the State Bank and in accordance with market interest rates.

This Circular takes effect from the date of signature. The State Bank is responsible for providing detailed guidance on tendering Treasury Bills through the State Bank and issuing the operating rules of the Treasury Bill Tender Committee after obtaining the agreement of the Ministry of Finance.