Decision No. 17/1998/QĐ-NHNN7 Issuing Foreign Exchange Transaction Operation Regulations

Pursuant to …;

Issuing foreign exchange trading regulations

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the State Bank Ordinance promulgated by Decree No. 37-LCT/HĐNN8 dated May 24, 1990 of the Chairman of the National Assembly of the Socialist Republic of Vietnam;

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 No. 161/HĐBT of October 18, 1988, issued by the Council of Ministers regarding the "Regulations on Foreign Exchange Management" of the Socialist Republic of Vietnam;

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

DECISION:

Article 1: This Decision issues the "Foreign Exchange Trading Regulations" attached hereto.

Article 2: This Decision shall take effect fifteen days from the date of signature. All previous provisions contrary to this Decision are hereby abolished.

Article 3: The Director of the Governor's Office, Heads of Departments and Bureaus at the Central State Bank, Branch Directors of Provincial and Municipal State Banks, General Directors, and Directors of Credit Organizations are responsible for implementing this Decision.

REGULATIONS
FOREIGN EXCHANGE TRADING ACTIVITIES
(Issued together with Decision No. 17/1998/QĐ-NHNN7
dated January 10, 1998 of the Governor of the State Bank)

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

Article 1: Purpose

These foreign exchange trading regulations are issued to create a legal basis for foreign exchange business activities, diversify transaction types on the market; provide risk management tools against future fluctuations in exchange rates and interest rates on the market; help exporters, importers, and economic units be proactive in their operations; promote and develop foreign exchange transactions to contribute to perfecting the foreign exchange market in Vietnam.

Article 2: Types of Transactions

A foreign exchange transaction is a transaction involving the purchase and sale of foreign currency. The types of foreign exchange transactions specified in these regulations include:

1. Spot foreign exchange transactions (English name: SPOT):

A spot foreign exchange transaction is a transaction where two parties buy or sell a certain amount of foreign currency at the spot rate prevailing at the time of the transaction, and the settlement is completed within two working days following the commitment to buy or sell.

2. Forward foreign exchange transactions (English name: FORWARD):

A forward foreign exchange transaction is a transaction in which both parties agree to buy or sell a certain amount of foreign currency at a predetermined exchange rate, and the payment will be made in the future.

3. Swap foreign exchange transactions (English name: SWAP):

A swap foreign exchange transaction is a foreign exchange transaction that simultaneously includes two transactions: a purchase transaction and a sale transaction of the same amount of one currency for another (only two currencies are used in the transaction), where the payment terms of the two transactions differ and the exchange rates of the two transactions are determined at the time of signing the contract.

Article 3: Participants in Transactions

The following entities are permitted to participate in and use the types of foreign exchange transactions:

1. Credit organizations

2. Economic organizations that are Vietnamese legal entities

3. Other organizations and individuals

4. State Bank

Article 4: Scope of Transactions

Entities stipulated in Article 3 may only conduct foreign exchange transactions within the following scope:

1. Credit organizations:

a) Non-commercial bank credit organizations:

Non-commercial bank credit organizations meeting the conditions set out in point a, Section 1, Article 5 are permitted to conduct spot foreign exchange transactions with the entities stipulated in Article 3 of these regulations.

b) Commercial banks, Investment and Development Bank:

Commercial banks and the Investment and Development Bank meeting the conditions set out in point a, Section 1, Article 5 are permitted to conduct spot foreign exchange transactions with the entities stipulated in Article 3 of these regulations.

Commercial banks and the Investment and Development Bank meeting the conditions set out in point b, Section 1, Article 5 are permitted to conduct forward and swap foreign exchange transactions among themselves and with the entities stipulated in Article 3, except those stipulated in Section 3, Article 3.

2. Vietnamese legal entity economic organizations:

Vietnamese legal entity economic organizations with foreign currency revenue or foreign currency transaction needs in compliance with current foreign exchange management regulations are only permitted to conduct spot foreign exchange transactions with credit organizations and are only allowed to conduct forward and swap foreign exchange transactions with commercial banks and the Investment and Development Bank.

3. Other entities:

Other organizations and individuals are only permitted to conduct spot foreign exchange transactions in compliance with current foreign exchange management regulations and are only allowed to conduct transactions with credit organizations.

4. State Bank:

The State Bank conducts foreign exchange transactions (spot, forward, swap) with credit organizations through the interbank foreign exchange market.

Article 5: Conditions for foreign exchange trading and procedures for granting licenses to conduct spot, forward, and swap foreign exchange transactions for credit institutions.

1. Conditions:

a. Credit institutions conducting spot foreign exchange transactions must have a Decision of the Governor of the State Bank of Vietnam allowing foreign exchange operations.

b. Only Commercial Banks and Investment and Development Banks that meet the following conditions will be considered by the State Bank for a license to conduct forward and swap foreign exchange transactions:

Meeting the conditions specified in point a, Section 1, Article 5.

Having a good information and statistical reporting system, capable of monitoring the status of foreign currencies at branches and throughout the entire system on a daily basis.

Having regulations governing the status of foreign currencies for foreign exchange business units within the system.

Regularly and fully reporting data on turnover and foreign currency status to the State Bank.

Having a staff trained and proficient in foreign exchange transaction operations.

2. Application Procedures:

Commercial Banks and Investment and Development Banks submit an application for a license (according to the attached form in this Regulation) to the State Bank (Department of Foreign Exchange Management). Within thirty days from the date of receipt of the application, the State Bank will review and examine the actual situation of the bank and its reporting process to decide whether to grant or deny the license for forward and swap foreign exchange transactions.

Article 6: Transaction Currency

1. Foreign exchange transactions may be conducted between foreign currencies and the Vietnamese Dong or between different foreign currencies.

2. Based on actual circumstances, the General Directors (Directors) of credit institutions are permitted to specify the types of foreign currencies used in their own business activities.

3. In necessary cases, the State Bank will stipulate currencies that are not allowed to be traded.

Article 7: Trading fee

The State Bank sets the maximum transaction fee applicable to fees that credit institutions are allowed to collect.

Article 8: Duration of Forward and Swap Transactions

The maximum duration allowed for forward and swap foreign exchange transactions is six months from the date of signing the transaction contract.

Article 9: Principles of Pricing

Credit institutions authorized to conduct foreign exchange business must simultaneously post both the buying rate and selling rate.

II. SPECIFIC PROVISIONS ON TECHNICAL TRANSACTION PRINCIPLES

Article 10: Principles of Spot Transaction Execution

1. Spot Rate:

The spot rate is the rate posted by the credit institution at the time of the transaction or agreed upon by both parties but must be within the current permissible range set by the State Bank.

2. Settlement:

Settlement between the parties must be completed no later than two working days after the commitment to buy or sell. The parties involved in the transaction may agree specifically on the transfer point within the two working days specified above.

Article 11. Principles of Forward Transaction Execution

1. Rate:

The forward transaction rate is the rate posted by the Commercial Bank, Investment and Development Bank or calculated and agreed upon by the parties involved in the transaction, but must be within the current permissible range set by the State Bank at the time of signing the contract.

2. Settlement:

a. The settlement date is the last working day of the transaction period and is clearly recorded in the contract when signed.

b. The parties can only transfer funds when the payment is due. The transfer between the parties must be completed no later than two working days after the settlement date.

Article 12: Principles of Swap Transaction Execution

1. Rate:

The swap transaction rate is the rate executed by the Commercial Bank, Investment and Development Bank or agreed upon by the parties at the time of signing the contract according to the principle: If the swap transaction includes a spot foreign exchange transaction, the spot transaction rate must comply with the provisions for spot rates under Section 1, Article 10 of this Regulation.

If the swap transaction includes a forward foreign exchange transaction, the forward transaction rate must comply with the provisions for forward transaction rates under Section 1, Article 11 of this Regulation.

2. Settlement:

If the swap transaction includes a spot transaction and a forward transaction, the settlement is based on the principles established for spot and forward transactions.

If the swap transaction includes two forward transactions, the settlement is based on the principles established for forward transactions.

Article 13: Deposit

1. To ensure compliance with forward foreign exchange transaction contracts or swap transaction contracts, the General Directors (Directors) of Commercial Banks and Investment and Development Banks have the right to require their trading partners to provide a deposit. The amount of the deposit for different customers is determined by the General Directors (Directors) of Commercial Banks and Investment and Development Banks. These banks must pay interest on the deposit at the corresponding deposit rate for the term of the deposit.

2. Commercial Banks and Investment and Development Banks are responsible for returning the full amount of the deposit and the interest earned on the deposit to the trading partner when the partner fulfills all obligations.

Article 14: Transaction Methods

Parties involved in foreign exchange transactions may conduct transactions directly through telephone, telex, fax, and computer networks.

1. Telephone, Telex, Fax Transactions:

After agreeing to the transaction, for spot foreign exchange transactions, the parties may confirm in writing the quantity of foreign currency bought or sold, the rate, and the method of settlement or sign a detailed contract according to Article 15 of this Regulation. For forward and swap transactions, the parties must sign a detailed contract according to the provisions of Article 15 of this Regulation.

2. Computer Network Transactions:

In the case of transactions conducted through a computer network using codes and conventions of the network, the parties only need to confirm in writing without having to sign a contract.

Article 15: Foreign Exchange Transaction Contracts

A foreign exchange transaction contract must include the following provisions:

Name of the transaction type

Names, addresses, codes of the parties involved in the transaction.

Account numbers of the parties.

Date of signing the contract.

Term of the contract (if applicable).

Transaction currencies (foreign currency with foreign currency or foreign currency with Vietnamese dong).

Quantity of the transaction

Exchange rate of the transaction

Payment method.

Payment date.

Deposit amount (if any) - Transaction fee if applicable

Remitting location, receiving location.

Signature of the authorized representative of each party.

III. REPORTING REGIME

Article 16: Each day, before 10:00 AM, credit institutions permitted to trade spot transactions, forward transactions, and swaps must submit a report on the previous day's foreign currency trading volume to the State Bank of Vietnam (Department of Foreign Exchange Management) according to the sales and purchase report form attached to this regulation.

IV. HANDLING OF VIOLATIONS

Article 17: Handling of breach of foreign exchange transaction contracts

In case of breach of a foreign exchange transaction contract, the aggrieved party has the right to file a complaint with the Commercial Court.

If the depositing party refuses to perform the contract, the deposit money belongs to the Commercial Bank, Investment and Development Bank that received the deposit; If the Commercial Bank, Investment and Development Bank that received the deposit refuses to perform the contract, it must return the deposit amount, interest, and an amount equal to the deposit amount to the depositing party, and may be warned or have its business license revoked in case of repeated violations.

Article 18: Handling of breaches in payment

Late payment beyond the agreed term in the foreign exchange transaction contract will be penalized as follows:

In case the payment currency is foreign currency, the maximum penalty rate will be 150% of the current ceiling lending rate for foreign currency set by the Governor of the State Bank of Vietnam, calculated based on the number of days overdue and the amount overdue.

In case the payment currency is Vietnamese dong, the maximum penalty rate will be 150% of the current ceiling lending rate for short-term loans set by the Governor of the State Bank of Vietnam, calculated based on the number of days overdue and the amount overdue.

Article 19: Handling of breaches of this regulation

1. Credit institutions must strictly comply with the reporting system, in accordance with the forms prescribed by the State Bank, ensuring timely submission and accurate data.

When conducting spot, forward, and swap transactions, credit institutions must ensure compliance with all regulations stipulated in this regulation and the limits on foreign currency positions as currently defined by the State Bank (Forward transactions also contribute to the credit institution's foreign currency position).

2. Credit institutions violating the reporting system and other regulations of the State Bank regarding exchange rate bands, transaction fees, transaction terms, and other provisions will be subject to penalties under the law or handled through one of the following measures:

a. Violation of the reporting system: Warning for late submission of reports. Suspension of part or all foreign currency buying and selling activities for frequent late submissions or non-submissions of reports.

b. Violation of exchange rate bands, transaction fees, and transaction terms: Suspension of all foreign currency buying and selling activities or revocation of the foreign currency business license.

V. IMPLEMENTATION

Article 20.- The Director of the Department of Foreign Exchange Management is responsible for coordinating with relevant Departments and Bureaus to implement this regulation and issue forward and swap foreign exchange trading licenses to commercial banks and investment and development banks meeting the required conditions.

Article 21.- The Director of the Accounting and Finance Department is responsible for guiding accounting entries for foreign exchange transactions: forwards, swaps.

Article 22.- The Governor of the Branches of the State Bank in provinces and cities is responsible for supervising the implementation of this regulation by credit institutions within their jurisdiction.

Article 23.- The General Directors (Directors) of credit institutions are responsible to the Governor of the State Bank of Vietnam for organizing the implementation of this regulation within their units.

Article 24.- Any amendments or supplements to this regulation shall be decided by the Governor of the State Bank of Vietnam.

CREDIT INSTITUTIONS OF THE SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

Date...Month...Year 1998

APPLICATION FOR BUSINESS LICENSE
FORWARD AND SWAP FOREIGN EXCHANGE TRANSACTIONS

Respectfully submitted to: Governor of the State Bank of Vietnam

Name of credit institution:...

Foreign exchange business license number:...

Issued on:...Month...Year...

Main office address:...

Telephone:...Fax:...

Total registered capital:...

Internal information systems, technical equipment:...

.................................................................

.................................................................

Number of staff trained and proficient in foreign exchange transaction operations:...

.................................................................

Types of foreign exchange transactions requesting permission to operate:

Forward transactions:

Swap transactions:

We request the State Bank of Vietnam to consider and approve our application to engage in the above types of foreign exchange transactions.

We hereby solemnly commit to strictly adhere to the current foreign exchange management regulations of the State Bank of Vietnam.

HEAD OF THE UNIT

(Signature, stamp)

Credit Institution:

FOREIGN EXCHANGE TRANSACTION REPORT (FORWARDS, SWAPS)

Type of foreign currency:

Date: Month: Year:

Note: Report each transaction according to the terms, clearly stating the quantity, exchange rate, and counterparty.

Sum up all transactions according to each term and record in the total column.

Report each type of foreign currency separately in a table according to the model provided.

For swap transactions (SWAP) involving one spot transaction (SPOT) and one

forward transaction, record the spot portion in the spot transaction sales report form, and record the forward portion in this form.

For swap transactions involving two forward transactions, record both transactions in this report form.

Prepared by: Checked by: Representative of the unit (General Director/Director)

FOREIGN EXCHANGE TRANSACTION REPORT (SPOT)

Credit Institution:

Date: Month: Year:

I. US Dollar:

Purchase volume

Currency name

Example: On a given day, the unit had four transactions at three different exchange rates: Transaction 1: 10,000 USD at 11,200; Transaction 2: 15,000 USD at 11,195; Transaction 3: 20,000 USD at 11,205; Transaction 4: 15,000 USD at 11,200. Reporting is done as follows:

25,000 USD

For reporting bank transactions at the same exchange rate and with the same counterparties, follow the above principle.

If transactions have the same exchange rate but different counterparties, they must be reported specifically for each counterparty. Credit institutions only need to use the transaction code of each counterparty according to the interbank market convention to record in the buyer/seller column.

Prepare a table: Control: Representative of the unit (CEO/Director)./