Circular No. 26/2009/TT-NHNN on foreign currency purchase and sale for certain State-owned Groups and Corporations

CIRCULAR

Regulations on foreign currency purchase and sale by certain State-owned Groups and Corporations

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Pursuant to Point 3 of Document No. 2578/TTg-KTTH dated December 23, 2009, issued by the Prime Minister, regarding the sale of foreign currencies by certain State-owned Groups and Corporations, the State Bank of Vietnam (hereinafter referred to as SBV) hereby provides guidance as follows:

Section I.

GENERAL PROVISIONS

1. Scope of regulation and applicable subjects:

1.1. These Circulars regulate the obligation of State-owned Groups and Corporations to sell foreign currencies to authorized credit institutions and their right to repurchase foreign currencies within the scope of the foreign currencies sold from authorized credit institutions for legitimate foreign currency usage needs.

1.2. The foreign currency purchase and sale activities stipulated herein shall apply to State-owned Groups and Corporations (including state-owned enterprises with more than 50% state capital as prescribed by the Enterprise Law 2005 and not being credit institutions) listed below:

a) Vietnam Oil and Gas Group

b) Vietnam Coal-Mineral Industries Group

c) Vietnam Chemical Industry Group (Vietnam Chemical Corporation)

d) Southern Vietnam Airports Corporation

đ) Southern Vietnam Foodstuff Corporation

e) Northern Vietnam Foodstuff Corporation

g) Vietnam Machinery Installation Corporation

2. Explanation of terms

In this Circular, the following terms are understood as follows:

2.1. Subject refers to State-owned Groups and Corporations (including state-owned enterprises with more than 50% state capital as prescribed by the Enterprise Law 2005) belonging to the State-owned Groups and Corporations specified in Clause 1 of this Circular.

2.2. Authorized credit institution refers to credit institutions operating in Vietnam that are permitted to engage in foreign exchange transactions in accordance with the law.

2.3. Obligation to sell foreign currency means the obligation of the Subject to sell to authorized credit institutions the foreign currency received from current account transactions and balances on foreign currency deposit accounts at authorized credit institutions.

2.4. Right to purchase foreign currency means the right of the Subject to purchase foreign currency from authorized credit institutions to meet current account payment requirements and other lawful transactions based on presenting valid documentation.

2.5. Current account revenue refers to the revenue of the Subject from current account transactions as defined in Decree No. 160/2006/NĐ-CP dated December 28, 2006, detailing the implementation of the Foreign Exchange Ordinance.

2.6. Balance on foreign currency deposit account of the Subject includes both demand deposits and time deposits held by the Subject at authorized credit institutions.

2.7. "Management and custody" account refers to the foreign currency account opened separately by the authorized credit institution for each Subject to facilitate the purchase of foreign currency from the balance on the Subject's deposit account as prescribed in this Circular.

2.8. Foreign currency refers to freely convertible foreign currencies.

Scope of foreign currency purchase and sale:

3.1. Sources of foreign currency that the Subject must sell to authorized credit institutions:

a) Foreign currency on time deposit accounts of the Subject at authorized credit institutions as of December 31, 2009.

b) Foreign currency on demand deposit accounts of the Subject at authorized credit institutions as of December 31, 2009.

c) Foreign currency revenue from current account transactions arising from January 1, 2010.

3.2. Foreign currency needs that the Subject may repurchase from authorized credit institutions:

When the need to use foreign currency for legitimate purposes (payment, collateral, or advance payment) in a month exceeds the current balance on the Subject's foreign currency account and the foreign currency revenue for the month, the Subject is allowed to repurchase the shortfall to meet its usage needs in accordance with the provisions of this Circular.

4. Principles of foreign currency purchase and sale:

4.1. The Subject shall sell foreign currency in the form of time deposits and demand deposits as of December 31, 2009, to the authorized credit institution where the Subject has a foreign currency deposit account.

4.2. If the Subject sells foreign currency to a specific authorized credit institution, it must repurchase foreign currency from the same authorized credit institution. The authorized credit institution is responsible for monitoring and ensuring that the Subject can repurchase up to the amount of foreign currency sold to it according to this Circular.

4.3. In cases where the Subject has already repurchased the full amount of foreign currency sold to the authorized credit institution as stipulated in this Circular but still requires additional foreign currency, the purchase and sale of foreign currency between the Subject and the authorized credit institution shall be conducted based on mutual agreement, complying with current regulations on foreign exchange management.

4.4. The authorized credit institution is responsible for balancing foreign currency to execute foreign currency purchase and sale transactions with the Subjects as prescribed in this Circular. The authorized credit institution must ensure compliance with SBV regulations on maintaining foreign exchange status at the time of executing foreign currency purchase and sale transactions with the Subjects. Should the purchase of foreign currency from the Subject exceed the authorized credit institution's foreign exchange status, the authorized credit institution shall immediately sell the excess foreign currency to SBV at the SBV's quoted buying rate for foreign currency in the interbank market at the time of transaction. SBV will resell this foreign currency to the authorized credit institution at the SBV's quoted selling rate for foreign currency in the interbank market at the time of transaction so that the authorized credit institution can sell it to the Subject upon request.

4.5. In cases where there is insufficient VND to purchase foreign currency from the Subject, the authorized credit institution shall sell the foreign currency that it cannot arrange VND to purchase from the Subject to SBV at the SBV's quoted buying rate for foreign currency in the interbank market at the time of transaction. SBV will resell this foreign currency to the authorized credit institution at the SBV's quoted selling rate for foreign currency in the interbank market at the time of transaction so that the authorized credit institution can have foreign currency to sell to the Subject when requested.

4.6. The exchange rate for the purchase and sale of foreign currency between the authorized credit institution and the Subject shall be implemented in accordance with the current regulations of SBV.

4.7. For the amount of foreign currency that the Licensed Credit Institution is permitted to purchase from the Organization and sell to the State Bank pursuant to Points 4.4 and 4.5 of Section I of this Circular, the Licensed Credit Institution may use the selling exchange rate for foreign currency to the State Bank to settle with the Organization. Similarly, for the amount of foreign currency that the Licensed Credit Institution is permitted to purchase from the State Bank to sell to the Organization upon request, the Licensed Credit Institution may sell such foreign currency to the Organization at the exchange rate equal to the rate at which it purchased the foreign currency from the State Bank.

Chapter II.

OBLIGATION TO SELL FOREIGN CURRENCY FROM THE BALANCE ON DEPOSIT ACCOUNTS

5. Amount of foreign currency required to be sold:

5.1. As regards the balance of term deposits of the Organization with the Licensed Credit Institution as of December 31, 2009 (excluding amounts pledged, deposited, or guaranteed for future liabilities): The Organization shall immediately sell 30% of the balance of term foreign currency deposits as of December 31, 2009. The remaining foreign currency, the Organization shall sell to the Licensed Credit Institution within the first two months of 2010.

5.2. As regards the balance of non-term deposits of the Organization with the Licensed Credit Institution on December 31, 2009: The Organization retains the necessary foreign currency to meet payment needs and the foreign currency currently held for purposes of pledging, depositing, or guaranteeing future liabilities; the remaining foreign currency, the Organization must immediately sell to the Licensed Credit Institution.

6. Procedures for selling the balances of deposits under Point 5 of Chapter II of this Circular:

6.1. As regards the balance of term deposits as of December 31, 2009:

a) The Licensed Credit Institutions are responsible for accurately identifying and freezing the balance of foreign currency on the term foreign currency deposit accounts of the Organizations with the Licensed Credit Institutions as of December 31, 2009.

b) The Licensed Credit Institution transfers 30% of the foreign currency on the term deposit account of the Organization into the "management and custody" Account. Simultaneously, the Licensed Credit Institution notifies the Organization not later than January 6, 2010, to sell to the Licensed Credit Institution the foreign currency transferred to the aforementioned "management and custody" Account.

c) After January 6, 2010, if the Organization does not sell the foreign currency transferred to the "management and custody" Account to the Licensed Credit Institution, the Licensed Credit Institution shall immediately purchase such foreign currency; simultaneously, credit the equivalent amount in Vietnamese dong to the Organization's Vietnamese dong account opened at the Licensed Credit Institution. In case the Organization has not yet opened a Vietnamese dong account at the Licensed Credit Institution, the Licensed Credit Institution shall open a Vietnamese dong account for the Organization to immediately purchase foreign currency and require the Organization to complete the procedures for opening a Vietnamese dong account according to the regulations of the Licensed Credit Institution.

d) The Licensed Credit Institution shall coordinate with the Organization to develop a plan to purchase the remaining foreign currency of the Organization no later than February 1, 2010, and proactively implement the plan to purchase foreign currency in accordance with the provisions of this Circular.

đ) As regards the foreign currency purchased from the balance of term deposits, at the time of purchase, the Licensed Credit Institution shall pay interest on the foreign currency that the Organization is required to sell at the interest rate agreed upon for the term deposit period and calculated based on the actual number of days the Organization has deposited foreign currency at the Licensed Credit Institution. This interest amount shall be paid to the Organization in foreign currency, serving as the Organization’s foreign currency income for the month of occurrence and calculated according to the provisions of Section III of this Circular.

6.2. As regards the balance of non-term foreign currency deposits as of December 31, 2009:

a) Within five working days from December 31, 2009, the Organization must present documentation proving to the Licensed Credit Institution the reasonableness of the foreign currency needed to be retained for payment needs in January 2010 and the foreign currency currently held for the purpose of pledging, depositing, or guaranteeing the Organization. The Licensed Credit Institution shall base its determination of the accurate amount of foreign currency the Organization needs to retain from the balance of non-term deposits as of December 31, 2009, on the documentation presented by the Organization.

b) After deducting the amount of foreign currency determined to be retained in accordance with Subparagraph a of Point 6.2 above, the Licensed Credit Institution shall transfer the remaining foreign currency on the non-term deposit account as of December 31, 2009, of the Organization into the "management and custody" Account. Simultaneously, the Licensed Credit Institution shall notify the Organization not later than January 13, 2010, to sell to the Licensed Credit Institution the foreign currency transferred to the aforementioned "management and custody" Account.

c) After January 13, 2010, if the Organization does not sell the foreign currency transferred to the "management and custody" Account to the Licensed Credit Institution, the Licensed Credit Institution shall immediately purchase such foreign currency in accordance with the method prescribed in Subparagraph c of Point 6.1 of Chapter II of this Circular.

d) The Licensed Credit Institution shall pay interest in foreign currency to the Organization at the applicable interest rate and based on the actual number of days the Organization has deposited foreign currency at the Licensed Credit Institution. This interest amount shall be calculated as the Organization’s foreign currency income for January 2010.

Section III.

OBLIGATIONS TO SELL FOREIGN CURRENCY FROM REVENUES

7. Amount of foreign currency to be sold:

7.1. As for foreign currency deposits on December 31, 2009 in accounts for guarantees, pledges, or sureties to settle future debts, Organizations are not required to sell such amounts to permitted credit institutions. Upon expiration of the guarantee, pledge, or surety period; if the guarantee, pledge, or surety period is not renewed or if it is not used or fully used to settle the debt obligation, this amount will be considered as newly generated foreign currency and calculated as new foreign currency revenues according to Section III of this Circular.

7.2. For foreign currency revenues generated from January 1, 2010, based on self-balancing with the Organization's foreign currency usage needs and newly generated guarantees or pledges within the month, the remaining amount must be immediately sold to permitted credit institutions as stipulated in this Circular.

8. Selling process:

8.1. Within the first five working days of the month, the Organization must submit a plan regarding its foreign currency usage needs (for payment, guarantee, or pledge purposes) expected to arise during the month to the permitted credit institution along with supporting documents and materials proving the legitimacy of the Organization's need to use the aforementioned foreign currency.

8.2. The permitted credit institution, based on the documents and materials presented by the Organization, accurately determines the amount of foreign currency that the Organization needs to retain from monthly revenue sources to meet legitimate foreign currency usage needs.

8.3. Upon receiving the Organization's foreign currency revenues, the permitted credit institution credits the Organization's foreign currency deposit account and freezes the Organization's foreign currency balance to execute purchases and sales as prescribed in Section III of this Circular. The permitted credit institution balances the acquired foreign currency resources against the Organization's monthly foreign currency usage needs. In cases where newly generated revenues and the current account balance exceed the Organization's remaining foreign currency usage needs for the month as previously determined, the permitted credit institution notifies the Organization to sell the excess foreign currency within three working days from the date of notification. If the Organization fails to sell the excess foreign currency within the three working days, the permitted credit institution will purchase it immediately according to the method specified in item c Point 6.1 Section II of this Circular.

8.4. After determining the Organization's legitimate monthly foreign currency usage needs, in cases where additional foreign currency usage needs arise during the month, the Organization must notify and submit to the permitted credit institution documents and materials proving the legitimacy of the increased foreign currency usage needs. The permitted credit institution verifies the legitimacy of the additional foreign currency usage needs within the month to have accurate data for balancing the Organization's usage needs with the foreign currency revenues obtained in the month and executing the purchase of excess foreign currency as stipulated in Point 8.3 Section III of this Circular.

Section IV.

RIGHTS OF ORGANIZATIONS TO BUY FOREIGN CURRENCY

9. The Organization has the right to retain on its foreign currency deposit account the amount of foreign currency from monthly revenue sources to fulfill its usage needs based on proof of the legitimacy of the Organization's foreign currency usage needs for the month.

10. In cases where the Organization's monthly foreign currency usage needs for payment and guarantee or pledge purposes exceed the amount received and the current foreign currency account balance, the Organization has the right to purchase the shortfall from permitted credit institutions based on presenting valid documents and certificates to the permitted credit institution to serve legitimate usage needs.

11. Purchase procedures:

The permitted credit institution is responsible for verifying the legitimacy of the Organization's foreign currency purchase needs for its own usage purposes, and implementing the sale of foreign currency to the Organization as stipulated in this Circular and relevant current regulations.

PART V.

RESPONSIBILITIES OF CREDIT ORGANIZATIONS

12. IMPLEMENTATION OF FOREIGN CURRENCY PURCHASE AND SALE WITH ORGANIZATIONS:

12.1. SELF-BALANCE FUNDS TO IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE WITH THE ORGANIZATION IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR AND RELATED FOREIGN EXCHANGE MANAGEMENT REGULATIONS.

12.2. VERIFY AND CROSS-CHECK DOCUMENTS PRESENTED BY THE ORGANIZATION TO ACCURATELY DETERMINE THE AMOUNT OF FOREIGN CURRENCY TO BE RETAINED FOR THE ORGANIZATION TO MEET ITS REASONABLE NEEDS; THE REMAINING FOREIGN CURRENCY THAT THE CREDIT ORGANIZATION IS PERMITTED TO PURCHASE FROM THE ORGANIZATION IN ACCORDANCE WITH THIS CIRCULAR.

12.3. OPEN A "MANAGEMENT AND SAFEKEEPING" ACCOUNT FOR EACH ORGANIZATION AT THE PERMITTED CREDIT ORGANIZATION TO IMPLEMENT FOREIGN CURRENCY PURCHASES FROM THE ORGANIZATIONS AS PROVIDED FOR IN THIS CIRCULAR.

12.4. USE THE FOREIGN CURRENCY DEPOSIT ACCOUNT OF THE ORGANIZATION AT THE PERMITTED CREDIT ORGANIZATION TO IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS WITH THE ORGANIZATIONS AS PROVIDED FOR IN THIS CIRCULAR.

13. WHEN PERMITTED CREDIT ORGANIZATIONS PURCHASE AND SELL FOREIGN CURRENCY WITH ORGANIZATIONS IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR, THEY MUST:

13.1. GUIDE, URGE, AND NOTIFY ORGANIZATIONS TO IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS IN ACCORDANCE WITH THE PROVISIONS OF THE STATE BANK OF VIETNAM IN THIS CIRCULAR.

13.2. MONITOR AND CONTROL TO ENSURE THE PRINCIPLES REGARDING THE QUANTITY OF FOREIGN CURRENCY PURCHASED AND SOLD AS PROVIDED FOR IN THIS CIRCULAR.

13.3. MAINTAIN THE FOREIGN EXCHANGE STATUS IN ACCORDANCE WITH CURRENT REGULATIONS OF THE STATE BANK OF VIETNAM.

13.4. IMPLEMENT CHECKS AND CONTROLS ON DOCUMENTS WHEN CONDUCTING FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS WITH THE ORGANIZATION IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR AND CURRENT LAWS, ESPECIALLY THE NEEDS FOR FOREIGN CURRENCY PURCHASE BY THE ORGANIZATION.

13.5. DETECT VIOLATIONS BY THE ORGANIZATION RELATING TO FOREIGN CURRENCY PURCHASE AND SALE REGULATIONS AND REPORT PROMPTLY TO THE STATE BANK OF VIETNAM FOR APPROPRIATE ACTION.

13.6. KEEP DOCUMENTS RELATED TO FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS AS PROVIDED FOR IN THIS CIRCULAR FOR FUTURE AUDIT PURPOSES.

13.7. IMPLEMENT REPORTING REQUIREMENTS TO THE STATE BANK OF VIETNAM AS PROVIDED FOR IN THIS CIRCULAR.

PART VI.

1. To perform the functions, tasks, and powers of the specialized civil aviation administration agency and the Civil Aviation Authority according to the laws on air cargo transportation.

14. ORGANIZATIONS HAVE THE FOLLOWING RESPONSIBILITIES AND OBLIGATIONS:

14.1. STRICTLY IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR.

14.2. ACCURATELY DECLARE MONTHLY FOREIGN CURRENCY EXPENDITURE NEEDS TO REQUEST THE PERMITTED CREDIT ORGANIZATION TO RETAIN THE COLLECTED FOREIGN CURRENCY TO BALANCE THE MONTHLY FOREIGN CURRENCY INCOME AND EXPENSES OF THE ORGANIZATION. THE CHAIRMAN OF THE BOARD OF MANAGEMENT, GENERAL MANAGER (DIRECTOR) OF THE ORGANIZATION SHALL BE RESPONSIBLE FOR THE ACCURACY AND REASONABILITY OF THE SELF-BALANCING OF MONTHLY FOREIGN CURRENCY INCOME AND EXPENSES TO IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE REGULATIONS FOR THE PERMITTED CREDIT ORGANIZATION AS PROVIDED FOR IN THIS CIRCULAR.

14.3. COMPLY WITH REGULATIONS, FULLY PROVIDE DOCUMENTS AND MATERIALS AS REQUIRED BY THE PERMITTED CREDIT ORGANIZATION WHEN IMPLEMENTING FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS.

14.4. KEEP DOCUMENTS RELATED TO FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS AS PROVIDED FOR IN THIS CIRCULAR FOR FUTURE AUDIT PURPOSES.

14.5. STATE GROUPS AND STATE ENTERPRISES ARE RESPONSIBLE FOR GUIDING AND REQUIRING SUBSIDIARY COMPANIES TO SERIOUSLY IMPLEMENT FOREIGN CURRENCY PURCHASE AND SALE TRANSACTIONS IN ACCORDANCE WITH THE PROVISIONS OF THIS CIRCULAR.

Chapter VII.

REPORTING REQUIREMENTS

15. Authorized credit organizations shall be responsible for implementing reporting requirements on foreign currency buying and selling activities to the State Bank of Vietnam for data consolidation and reporting to the Prime Minister. The contents of the report are as follows:

15.1. Report on the volume of foreign currency purchases according to the content specified in sub-item b and sub-item c of point 6.1 of Section II of this Circular regarding the total amount of foreign currency purchased from term deposits of Organizations. The report shall be carried out using Form No. 1 and submitted to the State Bank of Vietnam (Department of Foreign Exchange Management and Trading Department) no later than January 8, 2010.

15.2. Report on the volume of foreign currency purchases according to the content specified in sub-item b and sub-item c of point 6.2 of Section II of this Circular regarding the total amount of foreign currency purchased from non-term deposits of Organizations. The report shall be carried out using Form No. 2 and submitted to the State Bank of Vietnam (Department of Foreign Exchange Management and Trading Department) no later than January 15, 2010.

15.3. Monthly, no later than the fifth working day of the following month, report on the volume of foreign currency buying and selling activities in the previous month for Organizations to the State Bank of Vietnam (Department of Foreign Exchange Management and Trading Department). The report shall be carried out using the attached Form No. 3.

15.4. In case of urgent reports on data, implementation of foreign currency buying and selling activities, and other related matters concerning foreign currency buying and selling with Organizations, authorized credit organizations shall implement them according to the requirements of the State Bank of Vietnam.

16. Periodically or urgently when necessary, the State Bank of Vietnam shall be responsible for consolidating the situation and data on foreign currency buying and selling activities of authorized credit organizations for Organizations and report to the Prime Minister.

Chapter VIII.

INSPECTION AND VIOLATION HANDLING WORK

17. Periodically or when necessary, the State Bank of Vietnam and relevant agencies shall conduct inspections on the implementation of foreign currency buying and selling activities of Organizations with authorized credit organizations as stipulated in this Circular. Organizations and authorized credit organizations shall be responsible for providing all necessary documents for timely and effective inspections.

18. In cases where violations of the provisions of this Circular occur, depending on the level of violation, Organizations and authorized credit organizations will be handled according to the provisions of the law.

19. In cases where other issues arise related to foreign currency buying and selling activities as stipulated in this Circular, Organizations and authorized credit organizations shall be responsible for reporting to the State Bank of Vietnam for consideration and resolution.

Chapter IX.

IMPLEMENTATION

20. This Circular takes effect from the date of issuance.

21. Implementation:

21.1. Any amendments or supplements to this Circular shall be decided by the Governor of the State Bank of Vietnam.

21.2. The Director of the Office, the Chief Inspector, the Head of the Inspection and Supervision Agency, the Heads of units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam Branches in Provinces and Cities directly under the Central Government, the General Directors (Directors) of authorized credit organizations; Chairmen of the Board of Directors, General Directors (Directors) of Organizations shall be responsible for implementing this Circular.

21.3. Ministries, sectors, and management agencies of Organizations shall coordinate in directing the implementation of this Circular according to their functions and tasks./.