Circular No. 13/2011/TT-NHNN on the purchase and sale of foreign currency by State Economic Groups and State Corporations

CIRCULAR

Regulations on the purchase and sale of foreign currencies by State Economic Groups and State Corporations

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Pursuant to the Law on the State Bank of Vietnam No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Foreign Exchange Ordinance No. 28/2005/PL-UBTVQH11 dated December 13, 2005;

Pursuant to Decree No. 160/2006/NĐ-CP dated December 28, 2006 of the Government detailing the implementation of the Foreign Exchange Ordinance;

Pursuant to Decree No. 96/2008/NĐ-CP dated August 26, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Pursuant to Resolution No. 11/NQ-CP dated February 24, 2011 of the Government on focused measures to control inflation, stabilize macroeconomic conditions, and ensure social welfare,

The State Bank of Vietnam (hereinafter referred to as the State Bank) guides the implementation of the purchase and sale of foreign currencies by State Economic Groups and State Corporations as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the obligation of State Economic Groups and State Corporations to sell foreign currencies to Licensed Credit Institutions and their right to repurchase foreign currencies within the scope of the sold foreign currencies from Licensed Credit Institutions for the purpose of serving legitimate foreign currency usage needs.

Article 2. Applicability

The purchase and sale of foreign currencies as prescribed in this Circular shall apply to State Economic Groups and State Corporations including state-owned member enterprises that are not credit institutions (hereinafter referred to as the Organization).

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. Licensed Credit Institution means credit institutions and foreign bank branches operating in Vietnam permitted to conduct foreign exchange activities in accordance with the provisions of the law.

2. Obligation to sell foreign currency is the act of the Organization selling to Licensed Credit Institutions the amount of foreign currency received from legitimate foreign currency sources and balances on foreign currency deposit accounts at Licensed Credit Institutions.

3. Right to buy foreign currency is the act of the Organization purchasing back foreign currency within the scope of the sold foreign currency from Licensed Credit Institutions to meet current account payment and other lawful transaction requirements upon presenting valid supporting documents.

4. Legitimate foreign currency source is the Organization's income from current account transactions and other lawful transactions (excluding capital transactions) as stipulated in Decree No. 160/2006/NĐ-CP dated December 28, 2006 of the Government detailing the implementation of the Foreign Exchange Ordinance.

5. Balance on the Organization's foreign currency deposit account includes the balance of demand deposits and time deposits held by the Organization at Licensed Credit Institutions.

6. Foreign currency refers to freely convertible foreign currencies.

Legitimate foreign currency usage need includes foreign currency payment needs, collateral, and deposits for lawful foreign currency obligations according to current laws.

Article 4. Sources of foreign currency that the Organization must sell to Licensed Credit Institutions

1. Balances of demand deposits and time deposits on the Organization's foreign currency deposit account at Licensed Credit Institutions as of July 1, 2011.

2. Foreign currency in the form of bills, deposit certificates, treasury bills, bonds, or other securities (referred to as securities) as currently provided by law which the Organization purchases from Licensed Credit Institutions or other organizations. Upon maturity of the securities, the Organization transfers the amount of foreign currency (principal and interest) into its foreign currency deposit account at the Licensed Credit Institution.

3. Foreign currency entrusted for lending or investment by the Organization, the Organization may not extend the Entrustment Contract. Upon expiration of the entrustment period, the Organization transfers the amount of foreign currency received (principal, interest, and other lawful income) back to its foreign currency deposit account at the Licensed Credit Institution.

4. Foreign currency deposited on July 1, 2011 under guarantee, deposit, or suretyship accounts for future debt payments, Organizations are not required to sell to Licensed Credit Institutions. Upon expiration of the guarantee, deposit, or suretyship period; if the period is not extended or not utilized or fully utilized for debt repayment, the Organization transfers the amount of foreign currency back to its foreign currency deposit account at the Licensed Credit Institution.

5. Other legitimate foreign currency sources.

Article 5. Principles for Buying and Selling Foreign Currency

1. Monthly, the Organization shall be responsible for balancing its foreign currency revenue sources and legitimate foreign currency usage needs, and any remaining foreign currency shall be sold to authorized credit institutions.

2. The Organization shall not use a single foreign currency requirement to deposit with multiple authorized credit institutions as a basis for balancing foreign currency income and expenditure within the month.

3. When the legitimate foreign currency usage need within the month exceeds the balance on the Organization's foreign currency deposit account and the foreign currency revenue within the month, the Organization may purchase back the shortfall from the total amount of foreign currency previously sold to authorized credit institutions to meet its legitimate usage needs.

4. The Organization must buy back foreign currency from the same authorized credit institution to which it sold foreign currency. Authorized credit institutions shall monitor and ensure that the Organization can only buy back up to the amount of foreign currency it has sold according to this Circular.

5. The Organization has the right to buy back the foreign currency sold to authorized credit institutions within one year from the month of sale.

6. If the Organization exhausts its ability to buy back the foreign currency sold to authorized credit institutions as stipulated herein and still has a need to purchase foreign currency, the Organization and authorized credit institutions shall conduct such transactions based on mutual agreement and in compliance with current regulations governing foreign exchange management.

7. Authorized credit institutions shall be responsible for balancing foreign currency to execute buying and selling transactions with Organizations as stipulated in this Circular. They must ensure compliance with State Bank regulations regarding maintaining foreign exchange status at the time of executing foreign currency transactions.

8. The exchange rate for buying and selling foreign currency between authorized credit institutions and Organizations shall be carried out in accordance with current State Bank regulations.

Article 6. Transfer of Foreign Currency on the Organization’s Foreign Currency Deposit Account

The Organization may transfer foreign currency from its deposit account at one authorized credit institution to another when its monthly foreign currency revenue and existing balance at the authorized credit institution are insufficient to meet its registered legitimate foreign currency usage needs.

In this case, the receiving authorized credit institution must confirm in writing the Organization's legitimate foreign currency usage needs and the shortfall in foreign currency required, allowing the authorized credit institution to transfer the necessary amount.

Chapter II

OBLIGATION TO SELL FOREIGN CURRENCY OF THE ORGANIZATION

PART 1

OBLIGATION TO SELL FOREIGN CURRENCY OF THE ORGANIZATION IN JULY 2011

Article 7. Amount of Foreign Currency Required to Be Sold

1. Balances of demand deposits and time deposits on the Organization's foreign currency deposit account at Licensed Credit Institutions as of July 1, 2011.

2. Foreign currency sources of the Organization as specified in Clause 2, 3, 4, and 5 of Article 4 of this Circular arising in July 2011.

Article 8. Process for Selling Foreign Currency

1. For deposit balances:

a) From July 1, 2011 to July 7, 2011, the Organization shall report its total legitimate foreign currency usage needs in July 2011 to retain sufficient foreign currency from term deposits and non-term deposits held at authorized credit institutions on July 1, 2011, to meet its usage needs. The remainder shall be sold to the authorized credit institution where the Organization holds its foreign currency deposit account.

b) Authorized credit institutions shall accurately determine the foreign currency balance on term and non-term deposit accounts of Organizations at the authorized credit institution as of July 1, 2011.

c) Authorized credit institutions shall require the Organization to report (with supporting documentation) its legitimate foreign currency usage needs as stipulated in Article 7, Clause 1 of this Circular to retain sufficient foreign currency on its deposit account to meet its legitimate usage needs. The remaining foreign currency shall be purchased by the authorized credit institution from the Organization.

d) For foreign currency purchased from term deposit balances, at the time of purchase, the authorized credit institution shall pay interest on the foreign currency deposited by the Organization at the agreed rate for the deposit period and calculated based on the actual number of days the Organization has held the foreign currency at the authorized credit institution. This interest amount shall be paid to the Organization in foreign currency, considered as part of the Organization's foreign currency revenue in July 2011 and included in the balance of legitimate usage needs for the month.

đ) For foreign currency purchased from non-term deposit balances, the authorized credit institution shall pay interest in foreign currency to the Organization at the non-term deposit rate based on the actual number of days the Organization has held the foreign currency at the authorized credit institution. This interest amount shall be calculated as part of the Organization's foreign currency revenue in July 2011 and included in the balance of legitimate usage needs for the month.

2. For other legitimate foreign currency revenues arising in July 2011, authorized credit institutions shall follow the provisions of Clauses 2, 3, 4, 5, and 6 of Article 10 of this Circular.

PART 2

FOREIGN CURRENCY SALE OBLIGATIONS ARISING AFTER JULY 2011

Article 9. Amount of foreign currency to be sold

The sources of foreign currency of the Organization as prescribed in Clauses 2, 3, 4, and 5 of Article 4 of this Circular arising after July 2011.

Article 10. Process for selling foreign currency

1. Within the first five working days of each month, the Organization must submit a plan on its legitimate foreign currency usage needs arising in that month to the authorized credit institution along with relevant documents and materials proving the legitimacy of such foreign currency usage needs.

2. Based on the documents and materials presented by the Organization, the authorized credit institution shall accurately determine the amount of foreign currency the Organization needs to retain from legitimate foreign currency receipts arising in that month to meet its legitimate foreign currency usage needs.

3. Upon receiving the Organization's foreign currency receipts, the authorized credit institution shall credit the Organization’s foreign currency deposit account and reconcile the received foreign currency with the Organization's legitimate foreign currency usage needs for that month. In cases where newly generated receipts and the existing balance on the Organization's current deposit account exceed the amount of foreign currency the Organization still needs to use according to the previously determined plan, the authorized credit institution shall notify the Organization to sell the excess foreign currency within three working days from the date of notification.

4. If the Organization fails to sell the excess foreign currency to the authorized credit institution within the three working days stipulated in Clause 3 of this Article, the authorized credit institution shall immediately purchase such foreign currency and credit it to the Organization’s Vietnamese dong deposit account opened at the authorized credit institution. Should the Organization not have a Vietnamese dong deposit account at the authorized credit institution, the authorized credit institution shall open a Vietnamese dong deposit account for the Organization to immediately purchase the foreign currency and request the Organization to complete the procedures for opening a Vietnamese dong deposit account in accordance with the authorized credit institution's regulations.

5. Where the end of the three-working-day period specified in Clause 3 of this Article coincides with the start of the next month, the Organization may retain the excess foreign currency on its foreign currency deposit account based on presenting legitimate documentation for the usage of such foreign currency within the first five working days of that month.

6. After determining the Organization's legitimate foreign currency usage needs for the month, if additional legitimate foreign currency usage needs arise during that month, the Organization must inform and submit to the authorized credit institution documents and materials proving the legitimacy of the changed foreign currency usage needs so that the authorized credit institution can be informed and proceed with purchasing and selling foreign currency with the Organization in accordance with this Circular.

Chapter III

RIGHTS TO PURCHASE FOREIGN CURRENCY OF THE ORGANIZATION

Article 11. Right to retain foreign currency on deposit accounts

The Organization has the right to retain on its foreign currency deposit account the amount of foreign currency from legitimate foreign currency receipts in the month to fulfill its legitimate foreign currency usage needs based on proving the legitimacy of such foreign currency usage needs in the month.

Article 12. Right to Purchase Foreign Currency

1. In cases where the amount of foreign currency required for legitimate use in a month by an Organization exceeds the amount of foreign currency obtained and the balance in the foreign currency deposit account currently held, within the scope of the foreign currency sold to the permitted Credit Institution, the Organization has the right to purchase the remaining foreign currency from the permitted Credit Institution based on presenting valid documentation and certificates to the permitted Credit Institution to serve legitimate usage needs.

2. In cases where there is a need to purchase a large quantity of foreign currency (as defined by the permitted Credit Institution) to serve legitimate foreign currency usage needs, the Organization must notify the permitted Credit Institution at least five working days before the actual purchase date.

Chapter IV

RESPONSIBILITIES OF THE PERMITTED CREDIT INSTITUTION AND THE ORGANIZATION

Article 13. Responsibilities of the Permitted Credit Institution

1. Verify and cross-check the documents and materials presented by the Organization to accurately determine the amount of foreign currency that the Organization needs to retain to meet its legitimate usage requirements for the balance of term and non-term deposits as of July 1, 2011, to purchase the remaining foreign currency according to this Circular.

2. Guide, urge, and inform the Organization to comply with the regulations on purchasing and selling foreign currency stipulated in this Circular.

3. Monitor and control to ensure compliance with the quantity and time limits for purchasing and selling foreign currency as stipulated in this Circular.

4. Utilize the foreign currency deposit account of the Organization at the permitted Credit Institution to execute foreign currency purchases and sales transactions with Organizations according to this Circular.

5. Conduct checks and controls over certificates, particularly applications for purchasing foreign currency to serve the Organization's legitimate usage needs, to implement foreign currency purchase and sale transactions with the Organization in accordance with this Circular and relevant laws.

6. Timely report to the State Bank any violations by the Organization against the provisions of this Circular for appropriate measures.

7. Retain all relevant certificates related to foreign currency purchases and sales as stipulated in this Circular to facilitate inspection and audit work.

8. Fulfill reporting requirements to the State Bank as stipulated in this Circular.

Article 14. Responsibilities of the Organization

1. Strictly comply with the regulations on purchasing and selling foreign currency as stipulated in this Circular.

2. Accurately declare the legitimate foreign currency usage needs in a month to request the permitted Credit Institution to retain the obtained foreign currency to self-balance the Organization's foreign currency income and expenditure needs in the month. The Chairman of the Board of Management, General Director (Director) of the Organization shall be responsible for the accuracy, honesty, and validity of the documents and certificates proving the legitimate foreign currency usage needs in the month, self-balancing the ability to receive and spend foreign currency in the month to implement the foreign currency purchase and sale regulations with the permitted Credit Institution as stipulated in this Circular.

3. Present complete certificates and documents as required by the permitted Credit Institution when conducting foreign currency purchase and sale transactions. In cases where transaction certificates and documents contain confidential information, the Organization must provide a commitment confirmed by the Chairman of the Board of Management, General Director (Director) of the Organization regarding the honesty and accuracy of the legitimate foreign currency usage needs for the Credit Institution to have a basis for executing foreign currency purchases and sales.

4. Retain all relevant certificates related to foreign currency purchases and sales as stipulated in this Circular to facilitate inspection and audit work.

5. State Economic Groups and State-owned Corporations are responsible for reviewing and compiling a list of member enterprises subject to this Circular and submitting it to the permitted Credit Institution where the foreign currency deposit account transactions take place to execute foreign currency purchases and sales. In cases of changes to the list of member enterprises subject to this Circular, State Economic Groups and State-owned Corporations must immediately inform the permitted Credit Institution, update the list, and execute foreign currency purchases and sales according to this Circular.

6. State Economic Groups and State-owned Corporations are responsible for guiding and requiring member enterprises to strictly implement foreign currency purchases and sales according to this Circular.

Chapter V

REQUIREMENTS FOR REPORTING AND INSPECTION AND VIOLATION HANDLING WORK

Article 15. Reporting Requirements

1. By no later than August 15, 2011, authorized credit institutions shall report on the volume of foreign currency bought and sold with organizations in July 2011 according to Form No. 1 attached to this Circular to the State Bank of Vietnam (Department of Foreign Exchange Management).

2. Monthly, by no later than the 10th day of the following month, authorized credit institutions shall submit reports on the volume of foreign currency bought and sold in that month for organizations according to Form No. 2 attached to this Circular to the State Bank of Vietnam (Department of Foreign Exchange Management).

3. In cases where necessary, authorized credit institutions shall report on foreign currency buying and selling with organizations at the request of the State Bank of Vietnam.

4. In case other issues arise related to foreign currency buying and selling as stipulated in this Circular, organizations and authorized credit institutions shall have the responsibility to report to the State Bank of Vietnam for consideration and resolution.

Article 16. Inspection Work

When necessary, the State Bank of Vietnam will conduct inspections of the implementation of foreign currency buying and selling by authorized credit institutions with organizations as stipulated in this Circular. Authorized credit institutions and organizations are responsible for providing necessary files, documents, and certificates to ensure timely and effective inspections.

Article 17. Handling Violations

In case violations of the provisions of this Circular occur, depending on the severity of the violation, organizations and authorized credit institutions will be subject to legal sanctions.

Chapter VI

IMPLEMENTATION

Article 18. Effective Date

This Circular takes effect from July 1, 2011, and replaces Circular No. 26/2009/TT-NHNN dated December 30, 2009, of the State Bank of Vietnam on foreign currency buying and selling by certain state-owned corporations and companies.

Article 19. Implementation

1. The Director of the Office, the Head of the Inspectorate, the Head of Banking Supervision, the Heads of units under the State Bank of Vietnam, the Governors of provincial branches of the State Bank of Vietnam directly under the central government, the Chairmen of the Boards of Directors, and the General Managers (Directors) of authorized credit institutions; the Chairmen of the Boards of Directors, and the General Managers (Directors) of organizations are responsible for implementing this Circular.

2. Ministries, sectors, and management agencies of organizations shall coordinate in guiding the implementation of this Circular according to their functions and responsibilities./.