Circular No. 04/TT-NH1 guiding the implementation of the mandatory reserve regulation

CIRCULAR

CIRCULAR NO. 04/TT-NH1 OF SEPTEMBER 19, 1995 ISSUED BY THE STATE BANK OF VIETNAM

GUIDELINES FOR IMPLEMENTING THE COMPULSORY RESERVE REGIME

The Governor of the State Bank of Vietnam has signed Decision No. 260/QĐ-NH1 dated September 19, 1995 promulgating the "Regime for Compulsory Reserves for Credit Institutions" and Decision No. 261/QĐ-NH1 dated September 19, 1995 on "the ratio and structure of compulsory reserves for credit institutions." The State Bank of Vietnam hereby provides additional guidance on the implementation of the following specific points:

1. OBJECTS SUBJECT TO THE COMPULSORY RESERVE REGIME INCLUDE:

- State-owned commercial banks.

- Urban joint-stock commercial banks.

- Branches of foreign banks operating in Vietnam and joint venture banks.

- Financial companies.

Rural joint-stock commercial banks, credit cooperatives, and people's credit funds are temporarily exempted from implementing the compulsory reserve regime at this stage.

In cases where credit institutions are placed under conservation or bankruptcy, during the period before their operations cease, the State Bank may consider approving the withdrawal of a portion or all of the compulsory reserve funds based on specific circumstances.

2. THE STATE BANK'S BRANCHES OR PROVINCE/CITY SUB-BRANCHES WHERE THE CREDIT INSTITUTIONS HAVE THEIR HEADQUARTERS AND MAIN ACCOUNTS SHALL RECORD THE AMOUNTS DEPOSITED AS COMPULSORY RESERVES INTO THE NON-MATURITY ACCOUNTS (THE PORTION OF COMPULSORY RESERVES REQUIRED TO BE DEPOSITED WITH THE STATE BANK ACCORDING TO THE REGULATION).

3. FOR CREDIT INSTITUTIONS THAT ACCEPT FOREIGN CURRENCY DEPOSITS, THE COMPULSORY RESERVES SHALL ALSO BE CALCULATED AT A RATE OF 10% ON THE AVERAGE BALANCE OF FOREIGN CURRENCY DEPOSITS. FOREIGN CURRENCY COMPULSORY RESERVES SHALL BE CONCENTRATED IN NON-MATURITY ACCOUNTS IN FOREIGN CURRENCY AT THE STATE BANK OF VIETNAM'S BRANCHES (MINIMUM LEVEL OF 70% OF THE TOTAL AMOUNT OF COMPULSORY RESERVES).

4. THE BASIS FOR CALCULATING DOMESTIC CURRENCY COMPULSORY RESERVES IS DEPOSITS OR DEPOSITS-LIKE FUNDS REFLECTED IN THE BALANCE SHEET OF THE CREDIT INSTITUTION (INCLUDING OPERATIONS OF THE HEAD OFFICE, BRANCHES, AND SUBSIDIARIES).

THE FOLLOWING TYPES OF DEPOSITS AND DEPOSITS-LIKE FUNDS ARE USED AS THE BASIS FOR CALCULATING COMPULSORY RESERVES:

- NATIONAL TREASURY DEPOSITS.

- DEMAND DEPOSITS AND TIME DEPOSITS UP TO 12 MONTHS.

(INCLUDING DEPOSITS FROM GOLD, SILVER, AND PRECIOUS STONE COMPANIES).

- SPECIAL PURPOSE FUNDS.

- FOREIGN DEPOSITS.

- DEMAND SAVINGS DEPOSITS AND SAVINGS DEPOSITS UP TO 12 MONTHS.

- OTHER SAVINGS DEPOSITS.

- ISSUANCE OF CERTIFICATES OF DEPOSITS, BILLS OF EXCHANGE, AND BONDS WITH MATURITIES UP TO 12 MONTHS.

- FUNDS UNDER MANAGEMENT AND SAFEKEEPING.

SPECIFICALLY, THESE INCLUDE ACCOUNTS: 2121, 3611, 3612, 3613, 3614, 3711, 3712, 3719, 441, 442, 449, 381.

TEMPORARILY, COMPULSORY RESERVES WILL NOT BE CALCULATED FOR DEPOSITS WITH MATURITIES OVER 12 MONTHS.

5. METHOD OF CALCULATING THE AMOUNT OF COMPULSORY RESERVES:

5.1. THE PERIOD FOR CALCULATING COMPULSORY RESERVES IS SET AT 15 DAYS (WITH TWO PERIODS IN FEBRUARY).

5.2. THE FORMULA FOR CALCULATING THE AMOUNT OF COMPULSORY RESERVES DURING THE PERIOD:

Amount of compulsory reserves to be deposited = Average deposit balance of the previous period x Reserve ratio

must be DTBB = average x DTBB ratio

The amount of compulsory reserves to be deposited during the period serves as the basis for the State Bank to notify the limit for the next period and is also the basis for checking and handling compliance with the limit of the previous period as stipulated in point 7 below.

5.3. METHOD OF CALCULATING THE AVERAGE DEPOSIT BALANCE OF THE PREVIOUS PERIOD:

BASED ON THE BALANCES OF THE ACCOUNTS MENTIONED IN POINT 4 OF THE PREVIOUS PERIOD'S BALANCE SHEET, CALCULATE USING THE FOLLOWING FORMULA:

Average deposit balance of the previous period = Total deposit balance of the 15-day period prior to the current period / 15

Balance of deposits Total balance of deposits 15 days prior to the period

For example, calculating the compulsory reserves for period 1 of August-September 1995 for Credit Institution A:

Assuming the total deposit balance across the accounts mentioned in point 4 above for the 15-day period prior to the current period is 18,000 billion VND. Therefore, the average deposit balance of Credit Institution A for the previous period is:

18,000 / 15 = 1,200 (billion VND)

With a reserve ratio of 10%, the amount of compulsory reserves that Credit Institution A must deposit during the period is:

18.000

1,200 x 10 / 100 = 120 (billion VND)

15

5.4. THE STRUCTURE OF COMPULSORY RESERVES FOR CREDIT INSTITUTIONS IS DETERMINED AS FOLLOWS:

5.4.1. THE AMOUNT OF COMPULSORY RESERVES THAT CREDIT INSTITUTIONS MUST DEPOSIT INTO NON-MATURITY ACCOUNTS AT THE STATE BANK IS MINIMALLY 70% OF THE TOTAL AMOUNT OF COMPULSORY RESERVES OF THE CREDIT INSTITUTION.

As calculated above, this would be:

100

120 x 70 / 100 = 84 (billion VND)

5.4.2. CASH ON HAND AND VALID BANK NOTES AT THE CREDIT INSTITUTION MAY NOT EXCEED 30% OF THE TOTAL AMOUNT OF COMPULSORY RESERVES OF THE CREDIT INSTITUTION.

120 x 30 / 100 = 36 (billion VND)

5.4.3. THE AMOUNT OF COMPULSORY RESERVES TO BE DEPOSITED DURING THE PERIOD IS: 84 + 36 = 120 (billion VND)

Of which, 84 billion VND is the minimum limit that the credit institution must maintain continuously in its non-maturity account at the State Bank.

100

5.4.4. IF THE CREDIT INSTITUTION IMPLEMENTS LESS THAN THE AMOUNT STIPULATED IN POINT 5.4.2 ABOVE, IT MUST INCREASE THE AMOUNT IN ITS NON-MATURITY ACCOUNT AT THE STATE BANK CORRESPONDINGLY (INCREASE CORRESPONDINGLY THE AMOUNT IN POINT 5.4.1).

120 x 30 / 100 = 36 (billion VND)

6. DETERMINATION OF SURPLUS OR SHORTFALL IN COMPULSORY RESERVES.

BASED ON REPORTS FROM CREDIT INSTITUTIONS, THE STATE BANK'S BRANCHES OR PROVINCE/CITY SUB-BRANCHES WHERE THE CREDIT INSTITUTIONS HAVE THEIR MAIN ACCOUNTS SHALL COMPARE THE TWO QUANTITIES a AND b BELOW TO HANDLE ACCORDING TO ARTICLE 7 OF THIS CIRCULAR.

100

a. THE AVERAGE BALANCE OF THE FOLLOWING ACCOUNTS: NON-MATURITY DEPOSITS AT THE STATE BANK; CASH AND VALID BANK NOTES AT THE CREDIT INSTITUTION (ONLY COUNTING UP TO 30% OF THE TOTAL AMOUNT OF COMPULSORY RESERVES).

b. THE AMOUNT OF COMPULSORY RESERVES TO BE DEPOSITED DURING THE PERIOD.

THE METHOD OF CALCULATING THE AVERAGE BALANCE OF THE ACCOUNTS MENTIONED IN POINT a IS CALCULATED ACCORDING TO THE FORMULA IN POINT 5.3.

7. HANDLING SURPLUS OR SHORTFALL IN COMPULSORY RESERVES.

7.1. IN CASE OF SHORTFALL (a

7.2. IN CASE OF SURPLUS (a>b), THE STATE BANK WILL CALCULATE INTEREST ON THE EXCESS AMOUNT IN THE CREDIT INSTITUTION'S NON-MATURITY ACCOUNT FROM THE BEGINNING OF THE PERIOD TO THE DATE OF CALCULATING THE COMPULSORY RESERVES.

8. THE BASIS FOR CALCULATING FOREIGN CURRENCY COMPULSORY RESERVES IS FOREIGN CURRENCY DEPOSITS OR DEPOSITS-LIKE FUNDS, REFLECTED IN THE BALANCE SHEET OF THE CREDIT INSTITUTION, SPECIFICALLY INCLUDING THE FOLLOWING ACCOUNTS: 207, 2122, 3621, 3622, 3623, 3624, 3721, 3722, 441, 442, 449.

- FOREIGN CURRENCY DEPOSITS WITH THE STATE BANK.

- FOREIGN CURRENCY DEPOSITS WITH THE NATIONAL TREASURY.

- FOREIGN CURRENCY DEMAND DEPOSITS AND FOREIGN CURRENCY TIME DEPOSITS UP TO 12 MONTHS.

- FOREIGN CURRENCY SPECIAL PURPOSE FUNDS.

- FOREIGN CURRENCY DEPOSITS FROM FOREIGN ORGANIZATIONS AND INDIVIDUALS.

- FOREIGN CURRENCY DEMAND SAVINGS DEPOSITS AND FOREIGN CURRENCY SAVINGS DEPOSITS UP TO 12 MONTHS.

- ISSUANCE OF FOREIGN CURRENCY CERTIFICATES OF DEPOSITS, FOREIGN CURRENCY BILLS OF EXCHANGE, AND FOREIGN CURRENCY BONDS OF OTHER TYPES WITH MATURITIES UP TO 12 MONTHS.

- Unfixed-term foreign currency deposits, fixed-term foreign currency deposits up to 12 months.

- Special-purpose foreign currency deposits.

- Foreign currency deposits of foreign organizations and individuals.

- Unfixed-term foreign currency savings deposits, fixed-term foreign currency savings deposits up to 12 months.

- Issuance of deposit certificates, issuance of promissory notes, issuance of other types of foreign currency bonds with terms up to 12 months.

Foreign currency deposits serve as the basis for calculating the Required Reserve Ratio (RRR) for freely convertible foreign currencies, converted into USD, and the RRR is implemented in USD.

The method for calculating the amount of RRR in foreign currency and handling excess or insufficient RRR in foreign currency shall be conducted in accordance with the methods for calculation and handling in Vietnamese dong as stipulated in Points 5, 6, and 7 of this Circular.

9. Complaints and authority to resolve complaints.

9.1. Credit institutions have the right to file complaints, including complaints to the Governor of the State Bank of Vietnam regarding decisions on handling that are deemed unsatisfactory concerning compliance with the RRR regulations.

9.2. Within no more than five working days from the date of receipt of a complaint about the RRR from credit institutions, the Director of the provincial branch of the State Bank of Vietnam or the Director of the State Bank of Vietnam's trading department must promptly examine and resolve the complaint or escalate it to the Central State Bank. During the period when the complaint has not been resolved, credit institutions must comply with the decision on handling issued by the State Bank of Vietnam.

10. On the 5th and 20th of each month (five days after the RRR calculation period), the provincial branches of the State Bank of Vietnam and the trading departments of the State Bank of Vietnam shall submit reports on the implementation of the RRR to the Department of Financial Institutions of the State Bank of Vietnam. The Department of Financial Institutions shall compile these reports and submit them to the Governor regarding the compliance of credit institutions with the RRR (in accordance with the attached form of this Circular). At the same time, they shall send copies to the following units:

- Economic Research Department of the State Bank of Vietnam (one copy)

- Inspectorate of the State Bank of Vietnam (one copy).

11. Implementation organization:

11.1. Trading Departments and provincial branches of the State Bank of Vietnam shall periodically monitor, calculate, and notify credit institutions of the RRR levels, wherein at least 70% must be deposited at the State Bank of Vietnam as the minimum limit, and credit institutions must ensure sufficient and continuous balances in their demand deposit accounts at the State Bank of Vietnam.

In cases where necessary, credit institutions may be permitted to use part of the RRR limit to meet payment capabilities, but this maximum usage cannot exceed 5% of the limit, and they must immediately take measures to replenish the shortfall within the same day. If a credit institution fails to replenish the RRR limit within the same day, it will be subject to penalties with an interest rate twice the highest lending rate of the credit institution applied to the amount of the shortfall.

11.2. The Department of Financial Institutions shall continuously monitor the implementation, basing on the situation of monetary policy during each period to propose adjustments to the RRR ratio to the Governor for appropriate alignment.

11.3. The Accounting and Finance Department shall provide guidance on accounting methods and calculations related to the RRR to ensure appropriateness.

11.4. The Inspectorate of the State Bank of Vietnam is responsible for establishing penalty regulations and organizing regular inspections to promptly identify credit institutions that fail to fully comply with RRR regulations; strict and timely measures shall be taken to bring compliance with the RRR regulations in line with the established rules.

12. Effective date

These guidelines in this Circular shall be effective from October 1, 1995; previous circulars guiding the RRR are hereby repealed.

Any issues encountered during implementation should be reported to the Central State Bank (Department of Financial Institutions) for guidance and resolution.

The State Bank of the Socialist Republic of Vietnam

VIETNAM INDEPENDENT - FREEDOM - HAPPINESS

--------- Date... Month... Year 199...

(Credit institutions prepare and submit this report to the State Bank

before the 15th or 30th of each month)

TABLE 1

Calculation table for the Required Reserve Ratio period (*)... Month... Year 199

------------------------------------------------------------------------------------------------------

S Deposits ≥ Number ≥ Balance of all days in the period ≥ Total

T to be calculated effect --------------------------------------------------------------------------------- balance

T RRR ≥ account number 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 of 15 (16) (17) (18) (19) (20) (21) (22) (23) (24) 25) (26) (27) (28) (29) (30) day

1 I. In VND …Deposits Kho

Bạc NN

(without K/h) 2121 …2 Deposits of customers …

- Demand deposits 3611 …- Time deposits up to 12 months in

account 3612 …3 Special-purpose deposits

in account 3613 …4 Deposits of other organizations and individuals

N/ng 3614 …

5 Savings deposits …- Savings deposits

without K/h …3711 …- Time savings deposits

up to 12 months in

account 3712 …

- Other savings deposits …3719 …

6 Deposit certificates,

promissory notes …Bonds up to

12 months …(441, 442, 449) …

7 Managed and

held on behalf 381

II. Foreign currency

(converted to USD)…Deposits of the State Bank 207 …

2 Deposits of

Kho Bạc NN 1222 …

3 Deposits of

customers …

- Demand deposits …

- Time deposits up to

12 months in

account 3622 …

4 Special-purpose deposits 3623 …Deposits of foreign organizations and individuals ³ 3624 ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

6 Savings deposits ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

³Demand savings deposits ³ 3721 ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

³Time savings deposits ³account 3722³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

7 Certificates, bonds with

maturity up to 12 months

Total A

up to 12 months in

TABLE 1 (Continued)

1. Amount required to be RRR in the period:

1.1. In VND (------- x 10%) :…

(441, 442, 449) ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

-------------------------------------------------------------------------------------------------------

Of which: Amount of RRR to be deposited at the State Bank (70%) :…

-------------------------------------------------------------------------------------------------------

³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³ ³

Cash and circulating notes (30.0%) :…

1.2. In foreign currency (--------- x 10%) :…

A

Cash and circulating notes (30.0%) :…

15

2. Actual amount of RRR in the previous period:

2.1. In VND :…

B

Of which: - Actual RRR at the State Bank :…

15

2. Actual amount of RRR in the previous period:

- Actual cash and circulating notes :…

At credit institutions (Maximum 30%) :…

2.2. In foreign currency :…

- Actual cash... at credit institutions

(Maximum 30%)

3. Result of excess (+) or shortage (-)

3.1. - In VND (2.1 - 1.1) :…

- Actual cash... at credit institutions

3.2. - In foreign currency (2.2 - 1.2) :…

Prepared by General Manager

Provincial Branch, City Branch of the State Bank of Vietnam

Province, City, Trading Department

Sent to the Department of Financial Institutions of the State Bank of Vietnam

(on the 5th, 20th of each period)

The State Bank of the Socialist Republic of Vietnam

VIETNAM INDEPENDENT - FREEDOM - HAPPINESS

-------- ------------------------------------------------

No.: /BC

TABLE 2

REPORT ON THE COMPLIANCE WITH THE REQUIRED RESERVE RATIO

PERIOD MONTH YEAR 199..

No Name ³ Deposit balance ³Required RRR ³Actual RRR ³Excess or Shortage ³Notes ³

T ³ Credit Institution ³ For the period in the period ³ ³ ³ (Summary ³

T ³ before ³ ³ ³ ³ ³ results ³

³ ³ ³ ³ ³ ³ ³

RRR ³ ³ ³ ³ ³ ³ ³

1 Credit Institution A ³ ³ ³ ³ ³ ³ ³

³ - In VND …³…³…³…³…³…³

³ - In foreign currency ³…³…³…³…³…³…³

³ (converted to USD) ³ ³ ³ ³ ³ ³ ³

-------------------------------------------------------------------------------------------------------

1 2 3 4 5 6 7=6-4 8

-------------------------------------------------------------------------------------------------------

2 ³Credit Institution B ³ ³ ³ ³ ³ ³ ³

Prepared by Head of Department Director

Branch…Date month year 199...

No:…/TB-TH

REQUIRED RESERVE RATIO LEVEL FOR THE PERIOD …MONTH... YEAR 199

³ ³- ³ .............³...........³...............³...........³...............³........³

³ ³- ³ .............³...........³...............³...........³...............³........

-----------------------------------------------------------------------------------------------------³

Prepared by Accountant Director

For Credit Institution…

The State Bank of the Socialist Republic of Vietnam

VIETNAM INDEPENDENT - FREEDOM - HAPPINESS

-------- -----------------------------------------------

- Based on the "Regulation on the Required Reserve Ratio for Credit Institutions" issued together with Decision No…/QĐ-NH1 of the Governor of the State Bank of Vietnam;

- Based on the results of calculations from the reporting data of Credit Institution…

MODEL NO. 3

NOTICE

The Director of the Trading Department (branch) of the State Bank of Vietnam…announces the Required Reserve Ratio level for the period for Credit Institution…as follows:

1. The total amount required to be the Required Reserve Ratio in the period... month... year 199...

in VND is :…

The minimum amount of Required Reserve Ratio that must be maintained continuously

in the demand deposit account at the State Bank of Vietnam is :…

1. The total amount of money that must be DTBB for the period... month... year 199...

in VND is :…

Where:

The minimum DTBB amount that must be maintained continuously

in the non-fixed-term deposit account at SBV is :…

2. The total amount of foreign currency (USD) to be deposited with the State Bank (DTBB) during the period is:...

3. The amount of USD that must be maintained regularly in the demand deposit account at the State Bank branch is:...

Where:

- Issued by ... Joint Stock Commercial Bank (to implement)

- State Bank Accounting Department for monitoring and supervision

Credit organization branch in province/city and basic credit cooperative…

Place of filing:

- State Bank Inspectorate

- For record keeping by the Treasury.

- State Bank of Vietnam Inspectorate

- To be filed with the Department.