Decision No. 1081/2002/QD-NHNN on the foreign currency status of credit institutions permitted to conduct foreign exchange operations

Pursuant to …;

Regarding the foreign currency status of credit institutions permitted to conduct foreign exchange operations

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GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated December 12, 1997;

Pursuant to Decree 15/CP dated March 2, 1993 of the Government on the tasks, powers, and responsibilities for state management of ministries and ministerial-level agencies;

Pursuant to Decree 63/1998/NĐ-CP dated August 17, 1998 of the Government on foreign exchange management;

At the proposal of the Director of the Department of Foreign Exchange Management;

DECISION:

Article 1: Scope of regulation and applicable subjects

This Decision stipulates the foreign currency status of credit institutions permitted to conduct foreign exchange operations in Vietnam (hereinafter referred to as Credit Institutions), excluding joint venture banks and branches of foreign banks, with the aim of mitigating risks in foreign currency trading activities of Credit Institutions.

Article 2: Definitions

In this Decision, the following terms shall be understood as follows:

1- Foreign currency is the currency of another country or common currency.

2- The original status of a foreign currency is the difference between total assets on the asset side and total liabilities on the liability side denominated in that foreign currency, including corresponding foreign currency spot trading accounts.

A foreign currency has a positive status when total assets on the asset side exceed total liabilities on the liability side (the English term is "long position").

A foreign currency has a negative status when total assets on the asset side are less than total liabilities on the liability side (the English term is "short position").

A foreign currency has a balanced status when total assets on the asset side equal total liabilities on the liability side (the English term is "square position").

3- The conversion rate for the status of a foreign currency is the spot transfer selling rate of that foreign currency against the Vietnamese dong of the credit institution at the end of the working day.

4- Total positive foreign currency status is the sum of the statuses of all foreign currencies with positive status (after converting to Vietnamese dong using the status conversion rate).

5- Total negative foreign currency status is the sum of the statuses of all foreign currencies with negative status (after converting to Vietnamese dong using the status conversion rate).

6- The own capital of credit institutions shall be applied according to the current regulations of the Governor of the State Bank of Vietnam regarding safety ratios in the operation of credit institutions.

Article 3: Time point for determining the foreign currency status

1- The end-of-day foreign currency status is determined at the end of the working day.

2- The end-of-month foreign currency status is determined at the end of the last working day of the month.

Article 4: Principles for calculating the status of a foreign currency.

1- The end-of-day foreign currency status is calculated based on the previous day's foreign currency status and the difference between the purchase volume and sale volume generated on that day, including both spot and forward transactions.

2- The end-of-month foreign currency status is calculated based on the balance at the end of the last working day of the month of the trading foreign currency account, the foreign currency sold from other sources account, the spot foreign currency purchase commitment account, the spot foreign currency sale commitment account, the forward foreign currency purchase commitment account, and the forward foreign currency sale commitment account.

3- The end-of-month foreign currency status serves as a basis for verifying the accuracy of the end-of-day foreign currency status.

Article 5: Principles for calculating the total foreign currency status.

1- Convert the original status of each foreign currency into Vietnamese dong according to the status conversion rate.

2- Sum up the positive foreign currency statuses to calculate the total positive foreign currency status. Sum up the negative foreign currency statuses to calculate the total negative foreign currency status.

Article 6: Limitations on the total positive foreign currency status and total negative foreign currency status of Credit Institutions.

1- The total positive foreign currency status at the end of the day may not exceed 30% of the credit institution's own capital at that time.

2- The total negative foreign currency status at the end of the day may not exceed 30% of the credit institution's own capital at that time.

3- In special cases, the Governor of the State Bank of Vietnam may consider allowing credit institutions to maintain foreign currency status exceeding the limits specified in Clauses 1 and 2 of this Article.

Article 7: Reporting System

Reports on the foreign currency status of Credit Institutions must be submitted to the State Bank of Vietnam (Department of Foreign Exchange Management) within the following deadlines:

1- Before 13:00 on the next working day for the report on the previous day's end-of-day foreign currency status (Form No. 01).

2- Before the 10th day of the following month for the report on the previous month's end-of-month foreign currency status (Form No. 02).

Article 8: Handling Violations

1- Violations of the foreign currency status regulations include:

- Exceeding the total positive foreign currency status and total negative foreign currency status limits.

- Violating reporting requirements: failing to report daily foreign currency status, reporting late, or reporting incorrect data.

2- For violations under Clause 1 of this Article, depending on the nature and severity, they may be subject to administrative penalties under the regulations on administrative sanctions in the field of currency and banking operations and other relevant laws.

Article 9: This Decision takes effect 15 days after its signing date and replaces Decision No. 18/1998/QĐ-NHNN7 dated January 10, 1998 of the Governor of the State Bank of Vietnam promulgating regulations on foreign currency status for credit institutions permitted to conduct foreign exchange operations.

Article 10: The Head of the Office, the Director of the Department of Foreign Exchange Management, the Inspector General of the State Bank of Vietnam, the Heads of units related to the State Bank of Vietnam, the Governors of provincial and centrally-administered city branches of the State Bank of Vietnam, and the General Directors (Directors) of credit institutions permitted to conduct foreign exchange operations are responsible for implementing this Decision.

 

GUIDELINES FOR COMPLETING FOREIGN EXCHANGE STATUS REPORT FORMS

1. Form No. 01: FOREIGN EXCHANGE OPERATIONS AND DAILY FOREIGN EXCHANGE STATUS REPORT

Applicable subjects: Credit institutions permitted to conduct foreign exchange operations

Deadline for submission: No later than 13:00 on the next working day for the previous day's data report

Format: By fax to the Department of Foreign Exchange Management, fax number: 04-9343468 or 04-8268789.

Method of completing the form:

Part I. Foreign Currency Trading with Customers in Vietnamese Dong

Banks shall only report transactions with customers involving foreign currencies (USD, EURO, JPY) against Vietnamese Dong (VND).

Spot transactions: Report the total turnover of buying and selling foreign currency with customers (no need to report details of each transaction).

Forward transactions: For each type of foreign currency, report the total turnover of buying and selling for periods less than 31 days; from 31 to 120 days; from 121 to 180 days (no need to report details of each transaction).

Swap transactions: Fully report component transactions under spot and forward sections in corresponding buy/sell columns.

All transactions must be reported on the date of contract signing (not on the value date of the contract).

Part II. End-of-Day Foreign Currency Position (Accumulated Turnover Method)

(Note: Foreign banks and joint venture banks are not required to implement the contents specified in this part).

Buy (Sell) Column: Represents the total turnover of buying (selling) foreign currency with customers; buying (selling) foreign currency with banks; converting foreign currency within the country and in the international market (including spot, forward, and swap transactions).

Other foreign currencies: Only report foreign currencies whose positions account for 1% or more of the bank's own capital.

Exchange rate for position conversion: For each foreign currency, it is the spot selling exchange rate between that foreign currency and VND of the bank at the end of the working day.

The foreign currency position calculated using the accumulated turnover method:

FC Position (t%) = Initial Position + Generated Position

(formula 1)

Note: On the effective date of the Decision, banks shall determine their initial position (FC Position (t-1)) based on Form No. 2.

Total positive FC Position: Is the sum of all positive positions of foreign currencies.

Total negative FC Position: Is the sum of all negative positions of foreign currencies.

2. Form 02: Monthly Foreign Currency Position Report (Balance Sheet Method)

Applicable subjects: Banks permitted to operate foreign exchange (excluding joint venture banks and branches of foreign banks)

Deadline for submission: No later than the 10th of each month

Format: By fax to the Department of Foreign Exchange Management, fax number: 04-9343468 or 04-8268789.

Method of completing the form:

The original foreign currency position is the total balance of accounts 4911, 4921, 9231, 9232, 9233, and 9234. Accounts with credit balances are marked with (+), while those with debit balances are marked with (-).

Other foreign currencies: Only report foreign currencies whose positions account for 1% or more of the bank's own capital.

Currently, due to differences in accounting practices for domestic and international foreign currency conversions among banks (for example, most banks record these activities through account 491, but some banks only record them through accounts 499 and 561 or record them through accounts 499 and 561 and then transfer them to 491 when there is a balance on account 491), Form 02 now refers only to account 491. During implementation, if there are any issues, banks are advised to submit proposals to the State Bank regarding how to extract data according to their specific accounting methods to ensure that the foreign currency position calculated using the balance sheet method (Form 02) reflects all domestic and international foreign currency conversion transactions.

After reviewing the suggestions of the banks, the State Bank will issue a document to standardize the method of extracting data to calculate the monthly foreign currency position (Form 02) as a basis for inspection and supervision work.

3. Reconciliation and Adjustment of FC Positions in Forms 01 and 02 at the End of the Month.

The monthly foreign currency position according to Form 02 serves as the benchmark to ensure the accuracy of daily foreign currency positions according to Form 01.

In principle, the foreign currency position of each currency against own capital on the last day of the month calculated using the accumulated turnover method (Part II of Form 01) should approximately equal the position calculated using the balance sheet method in Form 02 (minor discrepancies may arise due to exchange rate differences).

If the discrepancy is within 3%, the bank shall adjust its daily foreign currency position on the date of the balance sheet method calculation (no later than the 10th of the month) and use this as the new initial position for the following day.

If the discrepancy exceeds 3%: The bank must issue a letter explaining the reasons for the discrepancy, the measures taken to correct it, and any recommendations; simultaneously adjusting the figures to ensure accuracy.

Method of Adjusting Figures:

Example: The table below summarizes the foreign currency position of US Dollar of Bank A from September 27, 2002, to October 3, 2002, calculated using the accumulated turnover method:

1) The generated position is calculated using the formula:

By October 3, 2002, Bank A had calculated its foreign currency position for September 30, 2002, using the balance sheet method (Form 02) as +15% (with a -2% error compared to the accumulated turnover method). At that point, Bank A adjusted its foreign currency position for October 3, 2002: ²Adjusted FC Position (10/3) = Original FC Position (10/3) + ErrorTherefore, the FC Position (10/3) = -5% will serve as the initial position for calculating the foreign currency position for October 4./ compared to the cumulative sales method). At that time, Bank A adjusts its NTTR on October 3, 2002:

NTTR(10/3) has been adjusted      = Old NTTR(10/3) + Error

                                                =- 3% + (- 2%)

                                                =- 5%

Therefore, NTTR(10/3) = -5% will be the original state for calculating the NTTR on October 4./.