Circular Joint No. 02/NHNN-TC amends and supplements Circular Joint of the State Bank of Vietnam - Ministry of Finance No. 01/NHNN-TC dated February 10, 1995 on the issuance of Treasury bills through the State Bank of Vietnam.

MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
NUMBER: 39/2000/TT-BTC	Hanoi, May 11, 2000

 

CIRCULAR

||| DIRECTIVE NO. 39/2000/TT-BTC OF THE MINISTRY OF FINANCE ON MAY 11, 2000 GUIDING THE ISSUANCE OF TREASURY BILLS THROUGH THE STATE BANK

Pursuant to Decree No. 01/2000/NĐ-CP dated January 13, 2000 of the Government on the issuance of government bonds, after reaching consensus with the State Bank of Vietnam, the Ministry of Finance guides the issuance of treasury bills through the State Bank as follows:

I. GENERAL PROVISIONS

1. The issuance of treasury bills through the State Bank shall be conducted via public auction in accordance with the specific provisions set forth in this Circular.

2. The auction for treasury bills shall be based on interest rates. The bid interest rate and winning bid interest rate shall be calculated annually (365 days).

3. The Ministry of Finance, based on the annual budget estimates and revenue and expenditure situation of the state budget, will forecast the volume of treasury bills to be issued, time, form of sale, term, and interest rate, and instruct and notify the State Bank before organizing the auction for treasury bills.

4. The State Bank acts as an agent for the Ministry of Finance in issuing and settling treasury bills, conducting the auction business for treasury bills, organizing and supervising the secondary market for treasury bills after the auction.

II. SPECIFIC PROVISIONS

1. Auction principles:

- Maintain confidentiality regarding all bidding information from participating entities and the directed interest rate from the Ministry of Finance (if applicable).

- Organize a fair and equal auction in terms of rights and obligations among all participating members.

- The successful bidder must purchase treasury bills according to the quantity and interest rate announced upon winning the bid.

2. Entities participating in the auction as stipulated in Article 14 of the Government Bond Issuance Regulation promulgated together with Decree No. 01/2000/NĐ-CP must meet the following conditions:

- Possess legal entity status, established in accordance with current Vietnamese laws;

- Have a minimum statutory capital of 20 billion Vietnamese dong;

- Have a Vietnamese dong account opened at a bank;

- Submit an application to participate in the treasury bill auction market to the State Bank.

Annually, the State Bank reviews the conditions and standards of entities applying to participate in the auction to issue or revoke membership certificates.

3. Term of Treasury bills:

Treasury bills have various terms: 91 days, 182 days, 273 days, 364 days.

4. Interest rate on Treasury bills: Formed based on the results of each auction session.

5. Forms of selling Treasury bills:

The auction of treasury bills through the State Bank shall be carried out in one of the following two forms:

- Par value form: Treasury bills are sold at par value; principal and interest are paid once at maturity.

- Discount form: Treasury bills are sold below par value and redeemed at par value at maturity.

6. Forms of Treasury bills:

Treasury bills can be issued in the form of certificates or book-entry records.

- Treasury bill certificates are standardized by the Ministry of Finance, printed, and distributed by the State Bank for each issuance period.

- Book-entry records: recorded and managed by the State Bank.

7. Organization of Treasury bill auctions:

The auction of treasury bills is organized regularly every week, bi-weekly, or monthly depending on the state budget's funding needs and the money market situation.

7.1. Auction announcement:

Two days prior to the auction date, based on the Ministry of Finance's request to issue treasury bills, the State Bank sends the issuance announcement to participating members in the treasury bill auction market and publishes it on mass media.

7.2. Registration for auction:

7.2.1. Before 13:00 on the day of the opening of bids, participating members must submit their bid sheets to the State Bank.

7.2.2. The minimum bid amount is 100,000,000 VND (One hundred million VND). In cases where treasury bills are issued in certificate form, the face value of the treasury bills is determined and announced by the Ministry of Finance in the issuance announcement.

7.2.3. Participating members must complete a 5% deposit on the amount of treasury bills bid at the State Bank's trading department or designated branch, without earning interest during the deposit period.

7.3. Bid Opening:

The opening bid time is set at 13:30 on the auction day. The auction may be conducted via computer network, with the State Bank guiding the procedures and formalities for online auctions to ensure accuracy, security, and high confidentiality.

Procedures for registering for the auction, the process of opening bid sheets, verifying the legality and validity of bid sheets, as well as the procedures and formalities for the auction are regulated by the State Bank.

7.4. Determination of the volume and interest rate of winning Treasury bills:

7.4.1. Determining the quantity and interest rate of winning treasury bills is based on:

- The quantity and interest rate of bids from participants.

- The anticipated issuance volume of treasury bills and the directed interest rate (if applicable).

7.4.2. If the directed interest rate is used, the quantity of winning treasury bills is calculated in ascending order of bid interest rates within the directed range.

At the highest bid interest rate within the directed range, if the total bid quantity exceeds the anticipated issuance volume, the winning quantity will be allocated proportionally to each bid sheet based on the bid quantity at that interest rate.

7.4.3. If the directed interest rate is not used, the quantity of winning treasury bills is calculated in ascending order of bid interest rates until the anticipated issuance volume is reached.

If multiple bid sheets have the same interest rate and the total bid quantity exceeds the anticipated issuance volume, the winning quantity will be allocated proportionally to each bid sheet based on the bid quantity at that interest rate.

7.4.4. The issuance interest rate for treasury bills is the highest winning bid interest rate applied uniformly to all successful bidders.

7.5. Method of calculating the selling price and interest on Treasury bills:

7.5.1. For treasury bills issued under the par value form:

- The selling price of the treasury bill is 100% of its face value.

- The total payment amount when the treasury bill matures is calculated using the following formula:

n

T = G + (G * Ls * n / 365) x Ls x ------ )

365

Where:

T: Total amount (principal plus interest) of the treasury bill to be settled at maturity

G: Selling price of the treasury bill.

Ls: Winning bid interest rate of the treasury bill (as a percentage per 365 days)

n: Number of days in the term of the treasury bill

7.5.2. For treasury bills issued under the discount form:

- The selling price of the treasury bill is calculated using the following formula:

MG

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

Ls x n

1 + --------

365 x 100

Where:

G: Issue price of Treasury bills

MG: Face value of Treasury bills

Ls: Auction-winning interest rate for Treasury bills (calculated as a percentage per 365 days)

n: Number of days in the term of the treasury bill

The State Bank of Vietnam shall specify in detail the method for rounding the issue price of Treasury bills.

7.6. Announcing the auction results

After the auction has ended, the volume and auction-winning interest rate have been determined, the Tender Board shall sign to confirm the Summary of Auction Results at the location where the tender is held and send the auction results to the Ministry of Finance. Based on the Summary of Auction Results, the State Bank of Vietnam shall notify the successful bidders, announce the auction results through mass media, and post them at the headquarters of the State Bank of Vietnam.

8. Payment of treasury bills

8.1. Payment of auction-winning treasury bills

- Within two working days following the auction date, successful bidders must pay the full amount for purchasing Treasury bills according to the issue price of Treasury bills specified in the winning bid notification, and simultaneously be issued a certificate or credited to their Treasury bill account (for book-entry type).

- In case a successful bidder delays in completing the payment procedures, the State Bank of Vietnam shall deduct the bid bond and deposit from the successful bidder (for successful bidders that are commercial banks) or request the bank where the successful bidder maintains an account to deduct funds from the successful bidder's deposit (for successful bidders as defined in Point 2, Article 14 of the Government Bond Issuance Regulation issued together with Decree No. 01/2000/NĐ-CP dated January 13, 2000) and transfer it to the State Bank of Vietnam.

- If the balance in the deposit account of the successful bidder is insufficient to make the payment, then the successful bidder's winning result will be canceled, and the entire bid bond deposited at the State Bank of Vietnam will be deducted and transferred to the state budget.

- On the day when successful bidders pay for purchasing Treasury bills, the State Bank of Vietnam shall credit the Central Treasury's account opened at the State Bank of Vietnam branch with the total actual proceeds (issue price of Treasury bills).

8.2. Payment of treasury bills upon maturity

One day before the maturity date of the Treasury bills, the Ministry of Finance (Central Treasury) shall transfer the payment to the Central State Bank. On the maturity date of the Treasury bills, if the Central State Bank has not received the transfer document from the Central Treasury, it will automatically deduct funds from the Central Treasury's deposit account at the State Bank of Vietnam branch to settle the bill holder.

In case the maturity date of the principal and interest of Treasury bills falls on a holiday, the principal and interest will be paid on the next working day.

The State Bank of Vietnam and the Central Treasury must ensure their payment responsibilities in accordance with the above regulations. Any violation of payment deadlines or delayed payment volumes will be penalized according to current regulations of the State Bank of Vietnam.

9. Costs for organizing issuance and payment of treasury bills

9.1. Costs for auction and payment of treasury bills

All costs associated with organizing the auction and paying for Treasury bills shall be covered by the state budget, up to a maximum of 0.1% of the total issuance volume of Treasury bills, and transferred to the State Bank quarterly based on the auction results. These funds shall be used for the following purposes:

- Purchasing equipment for serving the Treasury bill auction;

- Regular maintenance and emergency repairs of machinery and equipment;

- Designing and constructing software programs for the Treasury bill auction;

- Advertising information about the Treasury bill auction on mass media;

- Direct costs for each auction session;

- Seminar, survey, and experience-sharing on Treasury bill auctions;

- Annual customer conference summarizing the organization of auctions;

- Immediate and periodic rewards for members of the Tender Board, staff supporting the auction work, and related agencies, not exceeding 10% of the total auction and payment costs;

- Meeting expenses for regular reviews of the auction situation and discussions on future work plans;

- Office supplies;

- Other expenses serving the Treasury bill auction.

These expenditures shall be implemented in accordance with the Ministry of Finance's financial management regulations for the State Bank and settled within the annual expenses of the State Bank.

9.2. Costs for printing treasury bill certificates

The Ministry of Finance shall pay printing costs for certificates according to contracts with printing agencies.

10. Responsibilities of relevant sectors in organizing Treasury bill auctions

10.1. Coordination between the Ministry of Finance and the State Bank of Vietnam in Treasury bill auctions shall be carried out through the Treasury Bill Tender Board. The inter-ministerial Tender Board consists of ten members: five from the State Bank of Vietnam, including one Deputy Governor of the State Bank of Vietnam as the Chairman; five from the Ministry of Finance (Central Treasury), including one or two leaders of the Central Treasury. The duties of the Treasury Bill Tender Board include:

10.1.1. Preparing contents related to each auction period for decision by the Ministry of Finance leadership:

- The expected issuance volume of Treasury bills for each auction period;

- The term of Treasury bills;

- The directed interest rate for each Treasury bill issuance period (if applicable);

- The form of sale and type of Treasury bills;

- The issuance time of Treasury bills.

10.1.2. Checking the conditions of participating entities;

10.1.3. Supervising the opening of bids, determining the winning volume, issue price, and interest on Treasury bills;

10.1.4. Approving the auction results and confirming the announcement of the auction results;

10.1.5. Monitoring the auction market dynamics of Treasury bills, and recommending measures to the Ministry of Finance and the State Bank of Vietnam for managing the market.

10.2. The Ministry of Finance and the State Bank of Vietnam shall be responsible for resolving any disputes or complaints arising during the auction and payment process of Treasury bills.

III. IMPLEMENTATION

1. This Circular takes effect from the date of signature and replaces Circular No. 01/NHNN-TC dated February 10, 1995, jointly issued by the State Bank of Vietnam and the Ministry of Finance, guiding the issuance of Treasury bills through the State Bank of Vietnam, and Circular No. 02/NHNN-TC dated June 4, 1997, amending and supplementing the joint Circular No. 01/NHNN-TC.

2. The State Bank shall cooperate with the Ministry of Finance to issue regulations providing specific guidance on the auction of Treasury bills through the State Bank and to implement the provisions of this Circular.

Vu Van Ninh (Signed)