Circular No. 18/2016/TT-NHNN Amending and Supplementing Certain Articles of Circular No. 21/2012/TT-NHNN dated June 18, 2012, issued by the Governor of the State Bank of Vietnam on lending, borrowing activities; and term purchase and sale of securities between credit institutions and foreign bank branches.

CIRCULAR

Amending and supplementing certain Articles of Circular No. 21/2012/TT-NHNN dated June 18, 2012 issued by the Governor of the State Bank of Vietnam on lending, borrowing activities; buying and selling securities with terms between credit institutions, foreign bank branches ngày 18/6/2012 của Thống đốc Ngân hàng Nhà nước quy định về hoạt động cho vay, đi vay; mua, bán có kỳ hạn giấy tờ có giá giữa các tổ chức tín dụng, chi nhánh ngân hàng nước ngoài || ||

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

No. 06/2013/UBTVQH13 dated March 18, 2013;

Pursuant to Decree No. 156/2013/NĐ-CP dated November 11, 2013, of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

Article 1.

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain Articles of Circular No. 21/2012/TT-NHNN dated June 18, 2012 issued by the Governor of the State Bank of Vietnam on lending, borrowing activities; buying and selling securities with terms between credit institutions, foreign bank branches (hereinafter referred to as Circular No. 21/2012/TT-NHNN).

Article 1. Amending and supplementing certain Articles of Circular No. 21/2012/TT-NHNN

1. Market management agencies at all levels include: the Department of Domestic Market Management and Development under the Ministry of Industry and Trade; the Market Management Business Unit under the Department of Domestic Market Management and Development; the Market Management Sub-department under the Department of Industry and Trade of provinces and centrally-administered cities; and the Market Management Team under the Market Management Sub-department.

"Article 2. Scope of Application

1. The objects eligible for lending and borrowing include: credit institutions which are commercial banks, finance companies, financial leasing companies, policy banks, cooperative banks, people's credit funds, microfinance organizations; foreign bank branches operating in Vietnam in accordance with the Law on Credit Institutions.

2. The objects eligible for buying and selling securities with terms include: credit institutions which are commercial banks, finance companies, financial leasing companies, policy banks, cooperative banks; foreign bank branches operating in Vietnam in accordance with the Law on Credit Institutions.”

2. Amending and supplementing Clause 4 as follows:

“Article 4. General principles for implementing lending, borrowing transactions; buying and selling securities with terms (referred to as transactions)

1. Credit institutions, foreign bank branches shall implement transactions when:

a) Complying with the provisions of this Circular and regulations on organization and operation of credit institutions, foreign bank branches;

b) Having internal regulations on business procedures, risk management procedures for lending and borrowing activities (at least including regulations on customer credit rating, loan limit determination procedure, transaction implementation procedure applicable to each specific transaction form) and buying and selling securities with terms between credit institutions, foreign bank branches in compliance with the provisions of this Circular;

c) Not being subject to measures restricting, suspending, or temporarily suspending lending and borrowing activities; buying and selling securities with terms between credit institutions, foreign bank branches at the time of implementing transactions by the State Bank of Vietnam.

2. In addition to the principles stipulated in Clause 1 of this Article, at the time of implementing borrowing transactions, credit institutions, foreign bank branches shall not have overdue debts exceeding 10 days at other credit institutions, foreign bank branches, except for the following cases:

a) Special-controlled credit institutions may implement transactions according to the Consolidation Plan for the organization and operation of special-controlled credit institutions approved;

b) Credit institutions undergoing restructuring may implement transactions according to the Restructuring Plan for the organization and operation of credit institutions approved by the State Bank of Vietnam (if any).”

"The entity organizing the examination, issuance, and revocation of specialized bidding business certificates is a public service institution with training and enhancement functions under the management of ministries, ministerial-level agencies, provincial people's committees, or centrally governed municipalities."

“1. Comply with the principles stipulated in Article 4 of this Circular.”

4. Amending and supplementing Clause 1 and Clause 3 of Article 11 as follows:

“1. The interest rate for loans shall be agreed upon by credit institutions, foreign bank branches.”

“3. The interest rate applied to overdue principal shall be agreed upon in the loan contract by credit institutions, foreign bank branches but shall not exceed 150% of the interest rate for on-time loans; The interest rate applied to overdue interest payments shall be agreed upon in the loan contract by credit institutions, foreign bank branches but shall not exceed 10% per annum.”

5. Amending Point d of Clause 2 of Article 16 as follows:

“d) Immediately report in writing to the State Bank of Vietnam (Trading Department, Banking Supervision Department) if the borrower fails to fulfill their obligations as committed when the debt repayment period expires.”

6. Amending and supplementing Clause 1 of Article 18 as follows:

“1. Comply with the principles stipulated in Article 4 of this Circular.”

7. Amend Clause 1 of Article 19 as follows:

“1. Commercial banks, finance companies, policy banks, cooperative banks, foreign bank branches are allowed to buy and sell securities with terms as follows:

a) State Bank Treasury Bills;

b) Government Bonds;

c) Government-guaranteed bonds;

d) Local government bonds;

đ) Securities issued by credit institutions, foreign bank branches (including securities issued by the credit institution, foreign bank branch itself) in accordance with the regulations of the State Bank of Vietnam;

e) Bills, promissory notes, bonds issued by other organizations.”

8. Amend and supplement Clause 2 Article 23 as follows:

“2. Credit institutions, foreign bank branches shall determine the purchase price and repurchase price for each transaction based on the agreed purchase interest rate, term, remaining term of the security, and other relevant information.

The repurchase price is calculated using the formula:

Repurchase Price = Purchase Price x (1 + Purchase Interest Rate x Term / Actual number of days in the transaction year).”

9. Amending and supplementing Article 27 as follows:

“Article 27. Implementation Organization

1. Responsibilities of the Monetary Policy Department:

Handling issues related to the implementation of the provisions of this Circular.

2. Responsibilities of the Trading Department:

Monitoring and summarizing the situation of deposit-taking, lending, borrowing activities; buying and selling securities with terms between credit institutions, foreign bank branches as stipulated in this Circular and the reporting and statistical system of the State Bank of Vietnam; Publishing information about transactions in accordance with the State Bank of Vietnam’s regulations on information disclosure.

3. Responsibilities of the Banking Supervision Department:

a) Guiding credit institutions, foreign bank branches to classify debts, establish risk reserves, and maintain safety ratios in their operations regarding lending and buying and selling securities with terms;

b) Inspecting, auditing, supervising the implementation of the provisions of this Circular and handling violations within its authority;

c) Providing immediately to the Monetary Policy Department, Trading Department, and related units information about:

(i) Credit institutions and foreign bank branches subject to measures restricting, suspending, or temporarily suspending their lending, borrowing activities; and purchasing and selling securities with terms between credit institutions and foreign bank branches by the State Bank;

(ii) Credit institutions under special supervision may conduct transactions according to the Consolidation Plan for the organization and operation of credit institutions under special supervision that has been approved;

(iii) Credit institutions undergoing restructuring may conduct transactions according to the Restructuring Plan for the organization and operation of credit institutions that has been approved by the State Bank (if applicable).

4. Responsibilities of the Financial Accounting Department:

Guide accounting entries for activities related to lending, borrowing transactions; and purchasing and selling securities with terms between credit institutions and foreign bank branches in accordance with the provisions of this Circular.

5. Responsibilities of the State Bank branch at provincial and centrally-administered city level:

Inspect, audit, supervise the implementation of the provisions of this Circular and handle violations within its authority.

6. Responsibilities of credit institutions and foreign bank branches when participating in transactions:

Implement reporting and statistical systems as prescribed by the State Bank for credit institutions and foreign bank branches.

10. Amend and supplement point b, Clause 3, Article 28 as follows:

“b) At the time of conducting deposit receipt transactions, credit institutions and foreign bank branches shall not have overdue debts of 10 days or more at other credit institutions and foreign bank branches, except in the following cases:

(i) Credit institutions under special supervision may conduct transactions according to the Consolidation Plan for the organization and operation of credit institutions under special supervision that has been approved;

(ii) Credit institutions undergoing restructuring may conduct transactions according to the Restructuring Plan for the organization and operation of credit institutions and foreign bank branches that has been approved by the State Bank (if applicable).”

Article 2. Effective Date

1. This Circular takes effect from August 22, 2016.

2. Repeal Clause 3, Article 1 and the paragraph “At the time of conducting deposit receipt transactions, credit institutions and foreign bank branches shall not have overdue debts of 10 days or more at other credit institutions and foreign bank branches, except in cases where permission to receive deposits is granted by the Governor of the State Bank” at point b, Clause 13, Article 1 of Circular No. 01/2013/TT-NHNN dated January 7, 2013 on amending and supplementing certain articles of Circular No. 21/2012/TT-NHNN.

3. Transactions conducted before this Circular takes effect based on loan, borrowing contracts; securities purchase and sale contracts with terms; and deposit receipt contracts signed between credit institutions and foreign bank branches shall be carried out in accordance with the agreements already signed; in cases where supplementary agreements are made, they must comply with the provisions of this Circular.

4. The Director of the Office, Heads of the Monetary Policy Department, Heads of relevant units under the State Bank, Governors of State Bank branches at provincial and centrally-administered city level, Chairmen of Management Boards, Chairmen of Board of Members, and General Directors (Directors) of credit institutions and foreign bank branches are responsible for organizing the implementation of this Circular./.