Decision No. 208/QD-NH7 Issuing Regulations on Management of Foreign Currency Funds of the State Bank

 DECISION
REGARDING THE ISSUANCE OF REGULATIONS ON THE MANAGEMENT OF FOREIGN EXCHANGE FUNDS BY THE STATE BANK

STATE BANK OF VIETNAM

DECISION OF THE GOVERNOR OF THE STATE BANK 

Pursuant to the Ordinance on the State Bank promulgated by Decree No. 37/LCT-HĐNN8 dated May 24, 1990 of the Chairman of the State Council;

Pursuant to the Government Decree No. 15/CP dated March 2, 1993 on the tasks, powers, and responsibilities for state management of Ministries and agencies at the ministerial level;

Pursuant to Decision No. 105-CT dated April 10, 1991 of the Chairman of the Council of Ministers (now Prime Minister) regarding the establishment of the foreign exchange stabilization fund;

At the proposal of the Director of the Foreign Exchange Management Department.

Pursuant to …;

Article 1. The attached decision issues "Regulations on the Management of Foreign Exchange Funds by the State Bank."

Article 2. This decision takes effect from August 1, 1995.

Article 3.The Heads of the Governor's Office, the Heads of the Departments for Foreign Exchange Management, Economic Research, Accounting and Finance, the Director of the Trading Department of the State Bank, and the Heads of relevant units at the Central State Bank shall be responsible for implementing this decision.

 

REGULATIONS

ON THE MANAGEMENT OF FOREIGN EXCHANGE FUNDS BY THE STATE BANK
(Issued together with Decision No. 208/QĐ-NH7 dated July 26, 1995 of the Governor of the State Bank)

I. GENERAL PROVISIONS

Article 1. The foreign exchange funds at the State Bank include:

- The foreign exchange trading fund (including foreign exchange of the State Bank and other foreign exchange sources deposited at the State Bank).

- The centralized foreign exchange stabilization fund of the State managed by the State Bank.

Article 2. - Principles of managing foreign exchange funds:

- Preservation of foreign exchange capital.

- Ensuring payment capacity.

- Generating profit.

Article 3. The foreign exchange funds are mainly held in the following currencies: USD, JPY, DEM, FFr, BGBP, SFR, SDR, and some other foreign currencies. The proportion of each currency in the foreign exchange fund is decided by the Governor.

Article 4. Basis for determining the proportion of each currency in the foreign exchange fund:

4.1 - The proportion of foreign currencies in Vietnam's international payment structure (export-import payments, debt repayment, government payment needs...).

4.2 - Trends in the fluctuations of each foreign currency on the international money market.

4.3 - Stability in economy and politics of countries whose currencies are held in the State Bank's foreign exchange fund.

Article 5. Criteria for selecting banks to deposit or invest foreign exchange, or purchase bonds issued by governments or international financial organizations:

5.1 - Selecting central banks:

+ Having large foreign exchange reserves, listed among the world's largest banks.

+ Having a liberal foreign exchange management policy.

5.2 - Selecting commercial banks:

+ Having large capital.

+ Ranked with credit ratings of AA or higher on the international financial market, according to the ranking by one of the two major American companies widely recognized for credit rating: Moody Investor, Inc and Standard and Poors Co.

+ Offering high deposit interest rates.

5.3 - Selecting government bonds and international financial organizations' bonds.

+ Bonds issued by governments with highly developed economies, or international organizations, and the issuer having a high credit rating.

+ Bonds denominated in freely convertible foreign currencies.

+ Bonds that can be easily traded on the international financial market.

+ High interest rates.

II - REGULATIONS ON THE MANAGEMENT OF THE FOREIGN EXCHANGE TRADING FUND:

Article 6. Purpose of use:

- Buying and selling foreign exchange on the inter-bank foreign exchange market in Vietnam to implement the State Bank's exchange rate policy.

- Trading foreign exchange on the international money market.

Article 7. The source of Vietnamese dong to buy foreign exchange for the foreign exchange trading fund comes from the State Bank's own resources.

Article 8. Reserve level of foreign exchange at the trading fund:

- The reserve level of foreign exchange at the trading fund is decided by the Governor during each period (This level does not include deposits of foreign exchange at the State Bank by credit institutions). In cases where the foreign exchange trading fund exceeds the limit set by the Governor, excess foreign exchange will be transferred to the foreign exchange stabilization fund for sale.

Article 9. Foreign exchange of the trading fund is only deposited or invested in short-term periods (no longer than one year). The investment or deposit at each bank, as well as the investment limit at each bank, is determined by the Governor during each period.

III - REGULATIONS ON THE MANAGEMENT OF THE FOREIGN EXCHANGE STABILIZATION FUND.

Article 10. Purpose of using the Foreign Exchange Stabilization Fund:

10.1 - Ensuring the value of the Vietnamese Dong, stabilizing exchange rates, and intervening in the domestic foreign exchange market when necessary.

10.2 - Meeting the government's foreign currency expenditure needs.

10.3 - Operating on the international financial markets.

Article 11. The source of Vietnamese Dong to purchase foreign currencies for the Foreign Exchange Stabilization Fund is taken from additional money supply sources within the annual money supply plan approved by the Government.

Article 12. Additional foreign currencies for the Foreign Exchange Stabilization Fund are purchased from the foreign currencies of the Trading Fund and commercial banks.

Article 13. - A portion of the foreign currencies of the Foreign Exchange Stabilization Fund shall be deposited short-term at banks or invested short-term. The remainder shall be invested long-term in the form of bank deposits, bonds, or entrusted investments, but not exceeding five years. The selection of banks for depositing funds or choosing types of government or international organization bonds, or organizations for entrusted investments shall be decided by the Governor.

IV- IMPLEMENTATION

Article 14. The Department of Foreign Exchange Management is responsible for:

14.1 - Studying and proposing policies and measures to manage the foreign currency fund of the State Bank.

14.2 - Coordinating with the Departments of Economic Research, International Relations, and the Trading Department to present to the Governor proposals for foreign currency deposits at banks, individual bank deposit limits, types of government and international organization bonds, entrusted investments, and the proportion of each type of foreign currency in the fund.

14.3 - Except in cases of sudden changes, every three months, the Department of Foreign Exchange Management will coordinate with the Trading Department of the State Bank to present to the Governor an evaluation of banks for foreign currency deposits and individual bank limits, current foreign currency reserve structure, deposit term, and bond term.

14.4 - Advising the Governor on purchasing, selling foreign currencies for the stabilization fund, and foreign currency expenditures from the stabilization fund according to government orders.

14.5 - Reporting monthly to the Governor on the status of the foreign exchange stabilization fund, and reporting every three months on the overall situation of foreign currency reserves, simultaneously sending reports to relevant departments.

Article 15. The Trading Department of the State Bank is responsible for implementing specific operations related to managing and trading the foreign currency fund as stipulated by the Governor:

15.1 - Buying and selling foreign currencies of the trading fund on the interbank foreign exchange market domestically.

15.2 - Conducting foreign currency trading of the trading fund on the international money market.

15.3 - Buying and selling foreign currencies or bonds of the foreign exchange stabilization fund on the international market.

15.4 - Opening domestic and foreign foreign currency accounts, conducting accounting records of the two funds according to current regulations.

15.5 - Reporting monthly to the Governor on the status of foreign currency deposits reserved by currency and term, and the amount of bond investments by issuing organization and term. At the same time, informing the Department of Foreign Exchange Management, the Department of Economic Research, and the Department of Accounting and Finance.

Article 16. The Department of Economic Research is responsible for proactively building plans for money supply, including allocating for the purpose of purchasing additional foreign currencies for the stabilization fund. Regularly coordinating with functional departments in monitoring the use of Vietnamese Dong for foreign currency purchases, ensuring reasonable and appropriate allocation in line with monetary policy objectives during each period.

Article 17. The Department of International Relations is responsible for coordinating the provision of information related to the situation of correspondent banks, monetary conditions related to reserve management, and participating in discussions with the Department of Foreign Exchange Management during the drafting of recommendations for the Governor's consideration and decision.

Article 18. The Department of Accounting and Finance is responsible for:

+ Guiding accounting records for the activities of foreign currency funds in domestic and international markets.

+ Monitoring and inspecting the accounting of foreign currency funds of the State Bank at the Trading Department to ensure consistency with the accounting sources at the Department of Accounting and Finance.