Decision No. 251/2001/QD-NHNN on the issuance of the Regulation on short-term collateralized lending by the State Bank to banks.

Pursuant to …;

Regarding the issuance of the Regulation on secured lending through pledge of short-term negotiable instruments by the State Bank for commercial banks.

STATE BANK DECREE

______________________

Pursuant to the Government Decree No. 15/CP dated March 2, 1993, regarding the tasks, powers, and responsibilities of ministries and ministerial-level agencies in state management;

Pursuant to the Law on Government Organization dated December 25, 2001;

At the proposal of the Head of the Credit Department;

This Decision promulgates the Regulation on secured lending through pledge of short-term negotiable instruments by the State Bank for commercial banks.

DECISION:

Article 1: This Decision shall take effect fifteen days from the date of signature and shall replace the provisions on rediscounting in the form of collateralization of Treasury Bills stipulated in the Regulation on Rediscounting issued pursuant to Decision No. 285/QĐ-NHNN14 dated November 10, 1994 of the Governor of the State Bank, Decision No. 431/1997/QĐ-NHNN14 dated December 24, 1997 supplementing the provisions on rediscounting issued pursuant to Decision No. 285/QĐ-NH14 dated November 10, 1994 of the Governor of the State Bank, and Circular No. 97/CV-NH14 dated February 4, 1997 of the State Bank on delegating authority to the Director of the State Bank Branches to provide rediscounting loans to non-state-owned credit organizations within their jurisdiction.

Article 2: As for the outstanding balance of rediscounting of the State Bank with commercial banks up to the end of the day before this Decision takes effect, the State Bank and commercial banks shall continue to implement according to the terms already agreed upon in the debt acceptance agreement until the State Bank has fully recovered its debt.

Article 3: The Heads of the Office, the Heads of the Accounting and Finance Department, the Head of the Credit Department, the Director of the State Bank Trading Department, the Heads of Inspection, the Heads of relevant units under the State Bank, the Directors of State Bank Branches in provinces and centrally-administered cities, and the General Managers (Directors) of commercial banks are responsible for implementing this Decision.

Article 4: Regulation on secured lending through pledge of short-term negotiable instruments

REGULATIONS

(Issued together with Decision No. 251/2001/QĐ-NHNN dated March 30, 2001)

STATE BANK DECREE

______________________

This Regulation stipulates the rediscounting in Vietnamese Dong by the State Bank for commercial banks in the form of secured lending through pledge of short-term negotiable instruments aimed at providing short-term capital and payment means for commercial banks.

of the Governor of the State Bank)

PART I

GENERAL PROVISIONS

Article 1: Scope of regulation.

Objectives eligible for rediscounting.

Article 2: Commercial banks eligible for rediscounting 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;

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

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:

2. Secured lending through pledge of short-term negotiable instruments (hereinafter referred to as pledge lending) is a form of rediscounting by the State Bank for borrowing banks based on the pledge of short-term negotiable instruments to secure the obligation to repay debts.

3. Pledge lending limit is the maximum amount of capital that the State Bank can lend in a quarter or year in the form of pledge lending.

4. Interest rate on pledge lending (hereinafter referred to as pledge interest rate) is the rediscount rate used to calculate and collect interest on the actual principal when the State Bank provides pledge lending.

Principles of pledge lending.

Article 4: Pledge lending by the State Bank must be implemented in accordance with the following principles:

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

1. Secured credit provision;

2. Supply short-term capital and payment instruments to banks.

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

Article 5: Conditions for pledge loans.

1. The State Bank shall examine and decide to grant pledge loans when the bank meets the following conditions:

1.1. Is a bank as prescribed in Article 2 of this Regulation.

1.2. Not placed under special supervision.

1.3. A participant in the open market and inter-bank domestic currency market;

1.4. Has a loan demand.

1.5. Does not have overdue debt with the State Bank.

1.6. Complies with the provisions on collateral for loans as stipulated in this Regulation.

2. The State Bank will not grant pledge loans to banks that do not meet any one of the pledge conditions specified in Clause 1 of this Article.

Article 6: Interest rate for pledge 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, it shall be converted into overdue debt and the overdue interest rate as prescribed by the Governor of the State Bank shall apply from the date the loan is converted into overdue debt.

Chapter II

SPECIFIC PROVISIONS

Article 7: Collateral includes:

1. Treasury Bills;

2. State Bank bills;

3. Apart from the pledged assets mentioned in Clauses 1 and 2 of this Article, the acceptance of other short-term negotiable instruments as pledged assets shall be determined by the Governor of the State Bank during each period.

Article 8: Conditions for accepting pledged assets.

Short-term negotiable instruments shall be accepted by the State Bank as pledged 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. Can be traded and settled with the State Bank 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 pay the State Bank when the borrowing bank (beneficiary) has due debt but has not yet paid.

Article 9: Documents for requesting pledge loans.

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

1. A loan request including basic contents: name, address of the borrowing bank; amount requested; purpose of the loan; commitment regarding loan security, repayment of principal and interest, and other commitments;

2. A list of short-term negotiable instruments proposed for pledge to borrow funds at the State Bank (Form 01/CC);

3. Relevant documents to prove that the pledged assets meet the conditions as stipulated in Article 8 of this Regulation.

Article 10: Acceptance of pledged assets and approval of pledge loans.

1. In case the borrowing bank meets the conditions prescribed in Article 5 of this Regulation, and the pledged assets of the borrowing bank meet the conditions for pledge as stipulated in Article 8 of this Regulation, the State Bank shall base on the value and payment term of the negotiable instruments accepted for pledge to determine the value of the pledged assets, the pledge term, and the loan amount on the List of short-term negotiable instruments accepted for pledge to borrow funds at the State Bank (Form 02/CC).

2. Within a maximum of two working days from the date of receipt of the pledge request documents as prescribed in Article 9 of this Regulation, the State Bank must notify the borrowing bank about the approval or non-approval of the pledge loan (Form 03/CC or Form 04/CC).

Article 11: Maximum loan amount for pledge loans.

1. The State Bank bases on the borrowing bank's capital needs; remaining pledge loan limit to decide the loan amount for pledge on the List of short-term negotiable instruments accepted for pledge at the State Bank.

2. The maximum loan amount for pledge loans shall not exceed the total amount payable of the pledged negotiable instruments when they mature.

Article 12: Implementation of pledge loans.

1. After receiving the State Bank's notification of approval for pledge loan, the borrowing bank shall prepare a loan agreement secured by pledge of short-term negotiable instruments (four original copies) (Form 05/CC) and send it to the State Bank.

2. The State Bank and the borrowing bank shall base on the List of short-term negotiable instruments accepted for pledge to borrow funds at the State Bank; Notification of the State Bank's approval for pledge loan to complete the signing of the loan agreement secured by pledge of short-term negotiable instruments (four original copies). Each party retains two copies as accounting basis and transfers the loan amount.

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

Article 13: Determination of loan term and repayment periods.

The State Bank and the borrowing bank shall agree on the loan term and determine the repayment periods based on the purpose of the loan and the remaining payment terms of the accepted negotiable instruments, but not exceeding the remaining payment term of the accepted negotiable instruments.

Article 14: Repayment of principal and interest.

1. The borrowing bank shall be responsible and proactive in fulfilling all commitments regarding borrowing and repaying debts to the State Bank according to the agreed repayment periods recorded on the loan agreement secured by pledge of short-term negotiable instruments.

2. The State Bank will not consider extending the term for pledge loans.

Article 15: Recovery of debt and pledged assets for debt recovery.

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

1. Deduct from the borrowing bank's deposit account at the State Bank to recover compulsory debt for each repayment period.

2. In case the borrowing bank's deposit account at the State Bank is insufficient to recover the debt, the overdue principal of the pledge loan must bear the overdue interest rate from the due payment date of the loan to the date the debt (principal and interest) is recovered from the proceeds of the matured pledged negotiable instruments.

3. Recover the debt from the proceeds of the matured pledged negotiable instruments when the State Bank is the issuing organization or authorized to settle for the rightful owner (beneficiary).

4. Require the organization responsible for payment of the pledged negotiable instruments at the State Bank to make direct payment to the State Bank according to the obligation committed by the rightful owner (beneficiary). If the issuing organization does not fulfill its obligation, it shall be fully liable under the law.

Chapter III

IMPLEMENTATION

Article 16: Hierarchical implementation of pledge loans.

The State Bank shall implement pledge loans at the State Bank Trading Department and the State Bank branches in provinces and cities.

1. The Director of the State Bank Trading Department shall implement pledge loans for banks with headquarters in Hanoi.

2. The Director of the State Bank branch in provinces and cities shall implement pledge loans for banks with headquarters within their respective jurisdictions (excluding Hanoi).

Article 17: 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. Fulfill all commitments with the State Bank when borrowing under a secured loan agreement with short-term negotiable instruments as collateral, repay the loan on time, and use the borrowed funds for the intended purpose.

3. Hand over all short-term negotiable instruments accepted as collateral when borrowing. Retrieve the entire pledged asset upon full repayment of the loan (principal and interest) to the State Bank.

Article 18: Responsibilities of units under the State Bank:

1. The Monetary Policy Department: Determine the limit and interest rate for pledge loans during each period, submit them for approval by the Governor of the State Bank, and notify relevant units under the State Bank 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. Report to the Governor of the State Bank on the usage of the pledge loan limit at the State Bank Trading Department and State Bank branches in provinces and cities.

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

a. Develop the operational procedures for pledge loans to be implemented at the State Bank Trading Department and branches, submit them for approval by the Governor of the State Bank;

b. Publicly announce the interest rate for pledge loans at the State Bank Trading Department;

c. Receive and review applications for pledge loans and implement pledge loans according to the operational procedures for pledge loans.

d. Implement the receipt, storage, preservation, and safe transfer of pledged assets, related documents, and records concerning pledge loans, and accounting entries in accordance with regulations;

đ. Monthly compile information and data on pledge loan operations, promptly identify any difficulties or issues arising during implementation, report to the Governor of the State Bank, and simultaneously send to the Credit Department, the Monetary Policy Department, and the Accounting and Finance Department.

4. The Accounting and Finance Department: Guide the accounting for pledge loans.

5. State Bank branches in provinces and cities:

a. Publicly announce the interest rate for pledge loans at the branch;

b. Receive and review applications for pledge loans from banks requesting loans within their jurisdiction; Implement pledge loan operations within the scope of authority delegated by the Governor of the State Bank.

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

d. Monthly compile information and data on pledge loan operations, promptly identify any difficulties or issues arising during implementation, report to the Governor of the State Bank, and simultaneously send to the Credit Department, the Monetary Policy Department, and the Accounting and Finance Department.

6. The General Supervision Department is responsible for inspecting and supervising pledge loan activities of the State Bank Trading Department and State Bank branches in provinces and cities authorized by the Governor of the State Bank within its authority, functions, and responsibilities.

7. The State Bank Inspectorate is responsible for inspecting and supervising compliance with pledge loan regulations at banks within its authority, functions, and responsibilities.

Article 19: Implementation clause.

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