Decision No. 1909/QD-NHNN on the use of certain types of government bonds by credit institutions in the central bank's refinancing transactions

 Pursuant to …;

On the use of certain types of bonds by credit institutions in rediscount transactions with the State Bank of Vietnam

______________________________

GOVERNOR OF THE STATE BANK OF VIETNAM

Pursuant to the Law on the State Bank of Vietnam No. 01/1997/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 Law on Credit Institutions No. 02/1997/QH10 dated December 12, 1997; the Law Amending and Supplementing Certain Provisions of the Law on Credit Institutions No. 20/2004/QH11 dated June 15, 2004;

Pursuant to Decree No. 52/2003/NĐ-CP dated May 19, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Head of the Monetary Policy Department,

DECISION:

Article 1. Credit institutions participating in rediscount transactions may use government bonds issued by the Development Support Fund, local government bonds issued by the People's Committee of Hanoi City and the People's Committee of Ho Chi Minh City (hereinafter referred to as "bonds") in rediscount transactions with the State Bank of Vietnam, including the following forms:

1. Buying on term in open market operations.

2. Secured lending through pledge of securities.

3. Discounting of securities with term.

4. Overdraft and overnight lending applied in inter-bank electronic payment.

Article 2. Bonds used in rediscount transactions with the State Bank of Vietnam as prescribed in Article 1 of this Decision must meet the following conditions:

1. Issued in Vietnamese dong.

2. Legally owned by credit institutions. Credit institutions shall be responsible for payment in case the bonds face payment risks.

3. Deposited at the State Bank of Vietnam.

4. Remaining maturity longer than the maturity of the rediscount transaction.

Article 3. The bonds and their values participating in each transaction (session) of rediscount shall be reviewed and announced by the heads of units under the State Bank of Vietnam as prescribed in Article 5 of this Decision before conducting the rediscount transaction. The value of the bonds participating in each transaction (session) of rediscount shall not exceed 50% of the value of that rediscount transaction.

Article 4. The value of bonds at the time of valuation in rediscount transactions shall be determined by discounting method. The amount of bonds purchased, secured lending through pledge, discounting, overdraft, and overnight lending by the State Bank of Vietnam shall be calculated as follows:

1. For government bonds issued by the Development Support Fund, up to 80% of the bond value at the time of valuation.

2. For local government bonds issued by the People's Committee of Ho Chi Minh City and Hanoi City, up to 70% of the bond value at the time of valuation.

Article 5. Responsibilities of units under the State Bank of Vietnam:

1. Head of the Open Market Operations Management Board decides on the bonds and their values for each session of open market operations.

2. State Bank of Vietnam Trading Center:

a. Issuing specific operational procedures to implement this Decision at the State Bank of Vietnam Trading Center and at State Bank of Vietnam Branches authorized to conduct rediscount transactions in cities and provinces.

b. Deciding on the bonds and their values for each discounting, overdraft, and overnight lending session.

3. Credit Department: Deciding on the bonds and their values for each secured lending session through pledge of bonds.

4. Monetary Policy Department: Coordinating with relevant units to resolve difficulties and obstacles arising during implementation.

5. Banking Information Technology Department: Taking the lead and coordinating with relevant units under the State Bank of Vietnam to develop software programs to implement rediscount transactions with bonds as prescribed in Article 1 of this Decision.

Article 6. This Decision takes effect from February 1, 2006. Credit institutions using bonds in rediscount transactions with the State Bank of Vietnam shall comply with the provisions of this Decision and current regulations of the State Bank of Vietnam regarding each form of rediscount.

Article 7. The Director of the Office, Heads of Departments under the State Bank of Vietnam, Heads of Branches in cities and provinces directly under the Central Government, Chairmen of the Boards of Directors and General Directors (Directors) of credit institutions are responsible for implementing this Decision./.