Decision No. 1452/2003/QD-NHNN on the issuance of the Regulation on secured lending by pledge of negotiable instruments by the State Bank of Vietnam for banks.

DECISION OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Regarding the issuance of the Regulation on lending with collateral in the form of pledge of negotiable instruments by the State Bank of Vietnam for banks

secured by pledge of negotiable instruments of the Bank

State of Vietnam for the banks

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 and the Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997, and the Law Amending and Supplementing Certain Provisions of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated June 17, 2003;

Pursuant to the Government's Decree No. 86/2002/NĐ-CP dated November 5, 2002, stipulating the functions, tasks, powers, and organizational structure of Ministries and ministerial-level agencies;

At the proposal of the Director of the Credit Department,

DECISION:

Article 1. This Decision promulgates the Regulation on lending with collateral in the form of pledge of negotiable instruments by the State Bank of Vietnam for banks.

Article 2. This Decision shall take effect fifteen days from the date of publication in the Official Gazette and shall replace the Regulation on short-term rediscounting of negotiable instruments issued by the State Bank for banks pursuant to Decision No. 251/2001/QĐ-NHNN dated March 30, 2001 of the Governor of the State Bank.

Article 3. The outstanding balance of rediscounting of the State Bank of Vietnam for banks on the effective date of this Decision shall continue to be implemented according to the terms agreed upon in the debt acceptance agreement until the State Bank recovers all debts.

Article 4. The Heads of the Office, Directors of the Credit Department, Directors of the Accounting and Finance Department, Director of the Branch Transaction Department of the State Bank, Heads of the Inspectorate, Heads of units related to the State Bank of Vietnam, Directors of the State Bank Branches in provinces and centrally-administered cities, and Chairmen of the Board of Management, General Managers (Directors) of banks are responsible for implementing this Decision./.

Regulation

Lending with collateral in the form of pledge of negotiable instruments of
the State Bank of Vietnam for banks

(Annexed to Decision No. 1452/2003/QĐ-NHNN
dated November 3, 2003 of the Governor of the State Bank)

I. General Provisions

Article 1. Scope of application

This Regulation stipulates the rediscounting in Vietnamese dong of the State Bank of Vietnam for banks in the form of lending with collateral in the form of pledge of negotiable instruments aimed at providing short-term capital and payment means for banks.

Article 2. Borrowers

Banks eligible to borrow under this Regulation are those established and operating under the Law on Credit Institutions (referred to as banks), including:

1. Commercial banks;

2. Development banks;

3. Investment banks;

4. Policy banks;

5. Cooperative banks;

6. Joint venture banks;

7. Branches of foreign banks;

8. Other types of banks established and operating under the Law on Credit Institutions.

Article 3. Definitions

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

Short-term negotiable instruments are negotiable instruments with a term of less than one year.

Long-term negotiable instruments are negotiable instruments with a term of one year or more from the date of issuance to maturity.

Lending with collateral in the form of pledge of negotiable instruments (hereinafter referred to as pledge lending) is a form of lending by the State Bank of Vietnam to borrowing banks based on the pledge of negotiable instruments to secure the obligation to repay the debt.

Pledge lending limit is the total maximum amount that the State Bank of Vietnam can lend through pledge in a quarter or year.

Interest rate on pledge lending is the rediscount rate used to calculate and collect interest on the actual principal when the State Bank of Vietnam lends through pledge.

Article 4. Principles of pledge lending

Pledge lending by the State Bank of Vietnam must be carried out in accordance with the following principles:

1. Secured credit provision;

2. Supplying short-term capital needs and payment means for banks;

3. Repayment of principal and interest on loans within the due time.

Article 5. Conditions for Collateral Loans

The State Bank of Vietnam shall examine and decide to grant collateral loans when the bank meets the following conditions:

1. Being banks as prescribed in Article 2 of this Regulation;

2. Not being placed under special supervision;

3. Having a Loan Application Form;

4. Not having overdue debts with the State Bank of Vietnam;

5. Implementing provisions on collateral for loans as stipulated in this Regulation.

Article 6. Interest Rate for Collateral Loans

1. The interest rate for collateral loans shall be set and adjusted by the Governor of the State Bank of Vietnam in accordance with the monetary policy objectives during each period.

2. In case the loan becomes overdue due to the borrowing bank not having funds to repay at maturity, it will be transferred to overdue debt and must apply an overdue interest rate equal to 150% of the collateral loan interest rate during each period.

II. Specific Provisions

Article 7. Collateral

Collateral includes:

1. Treasury Bills;

2. State Bank bills;

3. Government Bonds;

4. Treasury Bonds;

5. Government Bonds issued by the Ministry of Finance;

6. Other negotiable instruments recognized as collateral assets by the Governor of the State Bank of Vietnam during each period.

Article 8. Conditions for Acceptance of Collateral Assets

Negotiable instruments shall be accepted by the State Bank of Vietnam as collateral assets when they meet the following conditions:

1. The borrowing bank is the beneficiary (for registered negotiable instruments), or the lawful holder (for bearer negotiable instruments);

2. Negotiable instruments as prescribed in Article 7 of this Regulation;

3. Being able to be pledged and settled to the State Bank of Vietnam as a third party according to the law and the commitment of the beneficiary;

4. In case the negotiable instrument is issued in book-entry form, there must be confirmation and guarantee from the organization responsible for payment of such negotiable instruments that they will settle to the State Bank of Vietnam when the borrowing bank (beneficiary) cannot repay the debt;

5. In case the negotiable instrument is a long-term instrument, the remaining repayment period of such negotiable instrument shall not exceed two years.

Article 9. Documents for Requesting Collateral Loans

When there is a need for capital, the borrowing bank shall submit to the State Bank of Vietnam a request for collateral loan documents including:

1. A loan application secured by pledging negotiable instruments at the State Bank of Vietnam containing the following basic contents: Name; address of the borrowing bank; amount requested; purpose of the loan; commitment regarding loan security; repayment; interest payment and other commitments.

2. A balance sheet accompanied by an explanation of the capital sources and usage at the time of requesting the loan, proving the shortage of capital to meet short-term capital needs and repayment ability;

3. An inventory of negotiable instruments proposed for pledge to obtain a loan at the State Bank according to form number 01/CC;

4. Relevant documents to prove that the collateral assets meet the conditions as prescribed in Article 8 of this Regulation.

Article 10. Acceptance of Collateral Assets and Approval for Collateral Loans

1. In case the borrowing bank meets the conditions prescribed in Article 5 and the collateral assets of the borrowing bank meet the conditions as prescribed in Article 8 of this Regulation, the State Bank of Vietnam shall determine the value of the collateral assets, the pledge period, and the loan amount based on the value and repayment period of the negotiable instruments accepted for pledge on the Inventory of negotiable instruments accepted for pledge to obtain a loan at the State Bank of Vietnam (form 02/CC).

2. Within a maximum of two working days from the date of receipt of the complete pledge request documents as prescribed in Article 9 of this Regulation, the State Bank of Vietnam must notify the borrowing bank whether to approve (form number 03/CC) or not approve (form number 04/CC) the collateral loan.

Article 11. Maximum Loan Amount for Collateral Loans

1. The State Bank of Vietnam shall base on the borrowing bank's loan demand; the remaining collateral loan limit available to decide the loan amount for collateral loans on the Inventory of negotiable instruments accepted for pledge to obtain a loan at the State Bank of Vietnam.

2. The maximum loan amount for collateral loans shall not exceed the total amount payable of the pledged negotiable instruments at maturity.

Article 12. Determination of Loan Period and Repayment Terms

The State Bank of Vietnam and the borrowing bank shall agree on the loan period and determine the repayment terms based on the purpose of the loan and the remaining repayment period of the negotiable instruments accepted for pledge, but the loan period shall not exceed one year.

Article 13. Implementation of Loans

1. After receiving the notification from the State Bank of Vietnam about approval for collateral loans, the borrowing bank shall prepare a Loan Agreement secured by pledging negotiable instruments (four original copies) according to form number 05/CC and send it to the State Bank of Vietnam.

2. The State Bank of Vietnam and the borrowing bank shall base on the Inventory of negotiable instruments accepted for pledge to obtain a loan at the State Bank of Vietnam; Notification of the State Bank of Vietnam's approval for collateral loans to proceed with signing the Loan Agreement secured by pledging negotiable instruments (four original copies). Each party retains two copies as accounting basis and transfers the loan amount.

3. The loan amount for collateral loans shall be transferred into the deposit account of the borrowing bank at the State Bank of Vietnam.

Article 14. Principal and Interest Repayment

1. The borrowing bank shall be responsible and proactive in fulfilling all commitments regarding borrowing and repaying the State Bank of Vietnam according to the agreed repayment periods recorded on the Loan Agreement secured by pledging negotiable instruments.

2. The State Bank of Vietnam shall not consider extending the repayment period for collateral loans.

Article 15. Forced Debt Recovery Measures

In case the borrowing bank fails to repay the debt at maturity, the State Bank of Vietnam shall implement measures to forcibly recover the debt (principal and interest) and pay penalties (if any) as follows:

1. Deduct from the deposit account of the borrowing bank at the State Bank of Vietnam to forcibly recover the debt for each repayment period.

2. Recover from other sources (if any) of the borrowing bank.

3. In case after deducting from the deposit account of the borrowing bank at the State Bank of Vietnam and recovering the debt from other sources (if any) of the borrowing bank but still insufficient to recover the debt, the State Bank of Vietnam shall transfer the remaining unpaid debt (both principal and interest) to overdue debt and this debt must bear the overdue interest rate.

Article 16. Handling Collateral Assets When Forced Debt Recovery Is Necessary

1. Collection of debts from the payment of collateral securities upon maturity to recover debts in cases where the State Bank of Vietnam is the issuing entity or authorized to make payments on behalf of the beneficiary (the legitimate owner).

2. Requesting the responsible organization to pay the due negotiable instruments held in pledge at the State Bank of Vietnam to directly pay the State Bank of Vietnam, according to the obligations that the beneficiary (legitimate owner) has committed to.

III. Implementation Organization

Article 17. Classification for granting pledge loans

The State Bank of Vietnam shall grant pledge loans at the Branches and provincial/sub-provincial city branches of the State Bank of Vietnam.

1. The Director of the State Bank of Vietnam's Trading Department shall grant pledge loans to banks with headquarters in Hanoi.

2. The Director of the provincial/sub-provincial city branch of the State Bank of Vietnam shall grant pledge loans to banks with headquarters within their respective jurisdictions (excluding Hanoi).

Article 18. Responsibilities of the bank requesting a pledge loan

1. Providing complete and timely documents and materials as stipulated in this Regulation and bearing legal responsibility for the accuracy of the data and materials provided.

2. Fulfilling all commitments with the State Bank of Vietnam when borrowing under the Loan Agreement secured by pledge of negotiable instruments, repaying the debt on time, and using the pledged loan funds for the intended purpose.

3. Handing over all negotiable instruments accepted as collateral when borrowing. Receiving back the entire pledged assets once the full debt (principal and interest) has been repaid to the State Bank of Vietnam.

Article 19. Responsibilities of units under the State Bank of Vietnam

1. Monetary Policy Department: Determining the loan limit and interest rate for pledge loans during each period, submitting them for approval by the Governor of the State Bank of Vietnam, and notifying relevant units within the State Bank of Vietnam to implement.

2. Credit Department:

a. Announcing the loan limit for pledge loans used at the State Bank of Vietnam's Trading Department and provincial/sub-provincial city branches after approval by the Governor of the State Bank of Vietnam.

b. Reporting to the Governor of the State Bank of Vietnam on the usage of the pledge loan limit at the State Bank of Vietnam's Trading Department and provincial/sub-provincial city branches.

3. The State Bank of Vietnam's Trading Department shall be responsible for:

a. Publicly announcing the interest rate for pledge loans at the State Bank of Vietnam's Trading Department;

b. Receiving and reviewing loan application documents and implementing pledge loans in accordance with this Regulation;

c. Implementing the receipt, storage, preservation, safe transfer of pledged assets, related documents, and accounting records in accordance with regulations;

d. Monthly compiling information and data on pledge loan operations, promptly identifying and reporting difficulties and issues arising during implementation to the Governor of the State Bank of Vietnam, while also sending reports to the Credit Department and Monetary Policy Department.

4. Accounting and Finance Department shall guide accounting for pledge loans.

5. Provincial/sub-provincial city branches of the State Bank of Vietnam:

a. Publicly announcing the interest rate for pledge loans at the State Bank of Vietnam's headquarters.

b. Receiving and reviewing loan application documents from banks requesting loans within their jurisdiction; implementing pledge loan operations in accordance with this Regulation within the approved loan limit by the Governor of the State Bank of Vietnam;

c. Implementing the receipt, storage, preservation, safe transfer of documents, pledged assets, and accounting records in accordance with regulations;

d. Monthly compiling information and data on pledge loan operations, promptly identifying and reporting difficulties and issues arising during implementation to the Governor of the State Bank of Vietnam, while also sending reports to the Credit Department and Monetary Policy Department.

Article 20. Implementation Provisions

Any amendments or supplements to the contents of this Regulation shall be decided by the Governor of the State Bank./.