Decision No. 04/2007/QD-NHNN on Overdraft and Overnight Loans Applied in Interbank Electronic Payment Systems

Pursuant to …;

Decision No. 04/2007/QĐ-NHNN of the State Bank of Vietnam on overdraft and overnight lending applied in electronic inter-bank payment transactions

Pursuant to the Law on the State Bank of Vietnam 1997; the Law amending and supplementing certain articles of the Law on the State Bank of Vietnam 2003;

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GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to Decree No. 64/2001/NĐ-CP dated September 20, 2001 of the Government on payment activities through service providers;

Pursuant to Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds;

Pursuant to Decree No. 151/2006/NĐ-CP dated December 20, 2006 of the Government on state investment credit and export credit;

Pursuant to Decree No. 52/2003/NĐ-CP dated May 19, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Monetary Policy Department,

This Decision regulates the overdraft and overnight lending of the State Bank of Vietnam to banks established and operating under the Law on Credit Institutions, which are direct participants in the electronic inter-bank payment system (referred to as banks), aimed at meeting the shortfall in settlement accounts in electronic inter-bank payments.

Pursuant to …;

Article 1. Scope of Regulation and Applicability

Article 1. Overdraft in electronic inter-bank payments is when banks draw more than their available balance on their settlement account with the Trading Center - State Bank of Vietnam on the day of payment.

Article 2. Interpretation of Terms

Article 2. Overnight lending in electronic inter-bank payments is when the State Bank of Vietnam lends to banks secured by collateralized securities within the period from the end of the working day before to 8:30 AM on the following working day.

Article 3. Purpose of overdraft and overnight lending

Clause 1. Banks may use overdraft to cover temporary shortfalls in payment capital during the day in electronic inter-bank payments.

Clause 2. The State Bank of Vietnam provides overnight loans to banks to settle overdrafts at the end of the working day.

Article 4. Conditions for overdraft and overnight lending

To be eligible for overdraft and overnight lending, banks must meet the following conditions:

Clause 1. Have an overdraft and overnight loan request accepted by the State Bank of Vietnam;

Clause 2. Accept and comply with the provisions of this Decision;

Clause 3. Provide collateral assets to secure the loan.

Article 5. Collateral assets for overdraft and overnight lending

Clause 1. Collateral assets for overdraft and overnight lending of banks include:

Point a) Treasury bills;

Point b) State Bank bills;

Point c) Treasury bonds;

Point d) Central construction bonds;

Point đ) National construction bonds;

Point e) Government bonds issued by the Development Fund prior to its reorganization into the Vietnam Development Bank, government bonds issued by the Vietnam Development Bank designated by the Prime Minister, and bonds issued by the Vietnam Development Bank guaranteed by the Government for principal and interest repayment upon maturity;

Point g) Local government bonds issued by the People's Committee of Hanoi City and the People's Committee of Ho Chi Minh City;

Point h) Other securities recognized by the Governor of the State Bank of Vietnam for each period applicable to the refinancing transactions of the State Bank of Vietnam.

Clause 2. Conditions for acceptance of collateral assets:

Securities are accepted by the State Bank of Vietnam as collateral assets when they meet the following conditions:

Point a) Banks are the beneficiaries (for registered securities) or lawful holders (for bearer securities);

Point b) The remaining maturity of the collateral securities is at least 10 days for securities specified in points a, b, c, d, đ Clause 1 of this Article; and 30 days for securities specified in points e, g Clause 1 of this Article;

Point c) They can be traded and settled with the State Bank of Vietnam according to current laws;

Point d) In cases where the collateral securities are issued in book-entry form, there must be a written commitment from the responsible organization to pay the State Bank of Vietnam if the banks cannot repay the debt.

Clause 3. The value of the collateral securities at the time of valuation is determined by discounting. The Trading Center - State Bank of Vietnam will provide specific guidance on determining the value of collateral securities using appropriate formulas based on the issuance methods of the collateral securities and the actual conditions of the money market.

Clause 4. If the value of the collateral securities at the Trading Center - State Bank of Vietnam is lower than the actual overdraft amount, then the banks must supplement short-term collateral securities to ensure that the minimum value of the collateral securities is at least 105% of the actual overdraft amount.

3. The value of securities pledged at the time of valuation shall be determined through discounting. The Securities Trading Department of the State Bank of Vietnam shall provide specific guidance on determining the value of pledged securities according to appropriate formulas that match the issuance methods of various types of pledged securities and are consistent with the actual conditions of the money market.

4. In cases where the value of pledged securities at the Securities Trading Department of the State Bank of Vietnam is lower than the actual overdraft level, banks must supplement short-term pledged securities to ensure that the total value of pledged securities is at least 105% of the actual overdraft level.

Article 6. Overdraft Limit and Overnight Loan Amount

1. The overdraft amount shall be equal to the actual shortfall in settlement funds in inter-bank electronic transactions, but the total overdraft amount shall not exceed 95% of the value of the securities pledged at the time of valuation.

2. The overnight loan amount shall be equal to the actual overdraft balance at the end of the business day, but shall not exceed 95% of the value of the securities pledged at the time of valuation.

3. The determination of the transaction value of the securities pledged, which are the types of bonds specified in point e, g Clause 1 Article 5 of this Decision, when calculating the overdraft limit and overnight loan amount, shall be carried out in accordance with the provisions of Articles 3 and 4 of Decision No. 1909/QĐ-NHNN dated December 30, 2005 of the Governor of the State Bank of Vietnam on the use of certain types of bonds in rediscounting transactions of the State Bank of Vietnam, other relevant legal regulations, and guidance from the Trading Center - State Bank of Vietnam.

Article 7. Overnight Loan Interest Rate

The interest rate for overnight loans shall be stipulated by the Governor of the State Bank of Vietnam in accordance with monetary policy objectives during each period. The timing and collection of interest on overnight loans shall be guided by the Trading Center - State Bank of Vietnam in accordance with the State Bank of Vietnam's regulations on calculation methods and accounting for interest income and expenditure for credit institutions.

Article 8. Procedures for Overdraft and Overnight Loans

1. Overdraft Procedure:

When a bank lacks funds in its settlement account and cannot replenish funds from its own sources or through money market transactions, the inter-bank electronic payment system will automatically increase the maximum amount by the limit prescribed in Article 6 of this Decision in the bank's settlement account to execute payment orders. When funds in the bank's settlement account are replenished, the payment system will automatically deduct the overdraft amount (including both principal and interest).

2. Overnight Loan Procedure:

a) At the end of the business day, if the balance in the settlement account is insufficient to settle the overdraft, the inter-bank electronic payment system will automatically transfer the unsettled overdraft to the overnight loan account, and the bank must bear the overnight interest.

b) On the following business day, the bank shall repay the principal and interest of the overnight loan to the Trading Center - State Bank of Vietnam. If the bank has not fully repaid the overnight loan, the remaining loan amount shall be converted into an overdraft for that business day.

3. The Trading Center - State Bank of Vietnam shall provide specific guidance on the procedures and formalities for overdrafts and overnight loans in inter-bank electronic payments.

Article 9. Handling Cases Where Banks Cannot Repay Overnight Loans

In cases where a bank fails to fully repay an overnight loan within two consecutive business days from the date the overnight loan occurs, the State Bank of Vietnam will notify the bank to repay the debt. If the bank still fails to fully repay the overnight loan within two additional business days from the notification date, the State Bank of Vietnam will process the collateral to recover the overnight loan and consider removing the bank from the inter-bank electronic payment system.

Article 10. Responsibilities of the parties

1. Responsibilities of the bank:

a) Repaying the principal and interest of overnight loans on time.

b) Supplementing negotiable instruments pledged to ensure their value is at least 105% of the actual overdraft amount.

2. Responsibilities of the State Bank of Vietnam

a) Refusing to grant overdrafts and overnight loans to banks that do not meet the conditions stipulated in Article 4 of this Decision.

b) Safeguarding and managing negotiable instruments pledged by banks.

c) Processing pledged negotiable instruments to recover debts if the bank fails to repay overnight loans and considering and deciding to remove the bank from the inter-bank electronic payment system.

Article 11. Implementation Organization

1. This Decision takes effect fifteen (15) days from the date of publication in the Official Gazette, replacing Decision No. 1085/2002/QĐ-NHNN dated October 7, 2002 of the Governor of the State Bank of Vietnam on the issuance of the Overdraft and Overnight Loan Regulations applicable in inter-bank electronic payments and Decision No. 185/2004/QĐ-NHNN dated February 24, 2004 of the Governor of the State Bank of Vietnam on amending and supplementing Clause 1, 2, and 3 of Article 5 of the Overdraft and Overnight Loan Regulations applicable in inter-bank electronic payments issued together with Decision No. 1085/2002/QĐ-NHNN dated October 7, 2002.

2. The Director of the Office, Heads of the Monetary Policy Department, and Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam branches in provinces and centrally governed cities; Chairmen of the Management Boards and General Directors (Directors) of banks are responsible for implementing this Decision./.