Circular No. 11/TT-NH5 guiding the implementation of the Compulsory Reserve Regulation

CIRCULAR

OF THE STATE BANK OF VIETNAM

Guidelines for Implementing the Compulsory Reserve Regulation

The Governor of the State Bank has issued Decision No. 108/QĐ-NH5 dated June 9, 1992, promulgating the "Compulsory Reserve Regulation for Credit Institutions," and Decision No. 117/QĐ-NH1 dated June 26, 1992, concerning the "Compulsory Reserve Ratio for Banks and Credit Institutions." The Central State Bank provides additional specific guidelines for implementation as follows:

1. The compulsory reserve regulation applies to all state-owned commercial banks, joint-stock banks, and investment and development banks that have been granted new operating licenses or are undergoing organizational and operational adjustments to obtain new licenses (including foreign bank branches and joint venture banks operating in Vietnam) which mobilize deposits in Vietnamese dong.

- Credit cooperatives in rural areas and financial companies are temporarily exempt from implementing the compulsory reserve requirement for the time being.

- In cases where credit institutions are placed under conservation or bankruptcy proceedings, during the period they continue operations, the State Bank may consider approving the withdrawal of part or all of the compulsory reserve funds based on specific circumstances.

2. For credit institutions that mobilize foreign currency deposits, until separate regulations are established, the compulsory reserve shall be implemented at a rate of 10% of the balance of foreign currency deposits mobilized. Compulsory reserve funds in foreign currency must be deposited with the State Bank's Trading Department or another bank authorized in writing by the State Bank's Trading Department in a separate sub-account within the compulsory reserve account, without mixing foreign currency reserves with domestic currency reserves and vice versa.

3. The State Bank's Trading Department or the Branch of the State Bank in the province or city where the main account of the credit institution is opened will now open an additional compulsory reserve account for that credit institution. This account will be used for both above and below 35% reserve requirements.

Branches directly subordinate to credit institutions are not required to open compulsory reserve accounts.

4. The basis for calculating the compulsory reserve in Vietnamese dong is deposits or deposit-like items reflected on the consolidated accounting balance sheet of the credit institution (i.e., including the activities of the headquarters, branches, and direct subordinate branches).

The following types of deposits and deposit-like items are the basis for calculating the compulsory reserve:

- Settlement deposits of organizations and individuals (including Treasury deposits, deposits of the Gold, Silver, and Precious Stones Corporation).

- Term and non-term deposits of organizations and individuals.

- Special-purpose deposits of economic organizations.

- Term and non-term savings deposits of residents.

- Managed and held deposits.

- Bonds and bills with a term of less than one year.

Specifically, this includes: Level I accounts from 30 to 35 and account 37; Level II accounts include 660 and 780 (accounting system for banks issued pursuant to Decision No. 104/NH-QĐ dated August 10, 1991, of the State Bank Governor).

5. Calculation of the amount of compulsory reserve:

5.1. According to the formula:

 

 

5.2. Calculation of the average deposit balance of the previous month.

In the immediate future, the balance of the accounts mentioned in point 4 of the accounting balance sheet of the previous month will be used to calculate according to the formula: beginning of the month plus end of the month, divided by two.

Example: Credit institution A has balances of the accounts mentioned in point 4.2 above, with the beginning of July 1992 balance being 12.4 billion and the end of July 1992 balance being 13.2 billion.

Therefore, the average deposit balance of credit institution A in July 1992 is:

 

 

With a compulsory reserve ratio of 10%, the balance of the compulsory reserve account of credit institution A in August 1992 should be:

 

 

5.3. The State Bank's Trading Department or the provincial branch of the State Bank will compare the actual balance on the compulsory reserve account of credit institution A to determine any surplus or deficit and handle the accounting entries accordingly.

6. In cases where the Governor of the State Bank announces a compulsory reserve ratio exceeding 35%, the calculation will still follow the formula stated above. However, the interest calculation for the portion of the compulsory reserve exceeding 35% will be done in two steps:

6.1 Step 1:

 

 

Example: In May 1993, the Governor of the State Bank announced a compulsory reserve ratio of 40%. Using the formula above and the example of an average deposit balance of 12.8 billion, we have:

 

 

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6.2 Step 2: Interest calculation

After handling according to point 7 below, the excess amount on the compulsory reserve account (640 million) will be paid interest by the State Bank at the rate of non-term deposits of credit institutions at the State Bank, starting from the date when the sufficient amount of the new compulsory reserve ratio is transferred.

7. Handling surplus or shortage of compulsory reserve

7.1 On the 15th of each month, credit institutions must reconcile the balance on their compulsory reserve deposit account at the State Bank with the amount of deposits required to be reserved and report the results to the State Bank where the main deposit account is opened.

7.2 After reviewing the reported data of the credit institution, no later than the 20th of each month, the State Bank will notify the credit institution of the compulsory reserve amount for that month and proceed to handle any surplus or shortage according to Articles 7 and 8 of the compulsory reserve regulation.

a) In case of shortage: if there is no money left in the main account of the credit institution at the State Bank to immediately cover the shortfall, the credit institution must be requested to pay the difference in cash or borrow within three days. If the credit institution fails to submit the full amount of the shortage within this period, it will be considered a violation of the compulsory reserve regulation and will be subject to penalties for the amount of the shortage according to the penalty regulations of the State Bank Governor.

In addition to imposing penalties for violations, if there is money on the main deposit account of the credit institution, the State Bank must still deduct until the required amount of the mandatory reserve is reached.

b) In case of excess: The State Bank shall proactively transfer the excess amount from the mandatory reserve account to the main deposit account of the credit institution. If within three days, the State Bank does not make the transfer, it will be subject to the penalty regulations of the Governor of the State Bank.

c) For cases where the mandatory reserve exceeds or falls short of the required level, the State Bank must also:

- Calculate and pay interest to the credit institution on the excess amount from the first day to the date of settlement;

- Calculate and collect interest from the credit institution on the shortfall amount from the first day to the date of settlement.

8. The basis for calculating the mandatory reserve in foreign currency is deposits or accounts with deposit-like characteristics reflected in the consolidated accounting balance sheet of the credit institution, specifically including the following primary accounting accounts numbered:

- 17: foreign currency deposits of organizations and individuals from abroad.

- 22: foreign currency deposits of domestic organizations, individuals, and joint ventures between Vietnam and foreign countries.

The calculation of the amount of the mandatory reserve in foreign currency and the handling of excesses or shortages in the mandatory reserve in foreign currency shall be carried out according to the calculation and handling methods for Vietnamese dong as stipulated in Points 5 and 7 of this Circular.

9. Complaints and authority to resolve:

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

9.2. Within the latest five working days from the receipt of a complaint about the mandatory reserve from a credit institution, the director of the provincial branch of the State Bank or the director of the State Bank's Trading Department must promptly examine and resolve the issue, or must refer it to the Head Office of the State Bank. During the period before resolution, the credit institution must comply with the decision of the State Bank.

10. On the 25th of each month, the provincial branches of the State Bank and the State Bank's Trading Departments shall compile and report on the implementation of the mandatory reserve requirements (attached to this circular).

10.1. Provincial branches of the State Bank from Quang Binh Province and beyond shall prepare two copies:

- One copy sent to the Banking and Credit Institutions Department of the State Bank Head Office (Hanoi)

- One copy retained.

10.2. Provincial branches of the State Bank from Quang Tri Province and inward shall prepare three copies:

- One copy sent to the Banking and Credit Institutions Department of the State Bank Head Office (Hanoi)

- One copy sent to the permanent office of the Banking and Credit Institutions Department at 17 Ben Chuong Duong Street, Ho Chi Minh City.

- One copy retained.

11. The Accounting Department Director shall guide the accounting treatment of the mandatory reserve in Vietnamese dong and foreign currency.

During the implementation process, if there are obstacles or difficulties, they should be reported to the State Bank Head Office (Banking and Credit Institutions Department) for guidance and resolution.

CHU VAN NGUYEN

(Signed)

REPORT
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