Circular No. 26/2021/TT-NHNN guiding foreign currency transactions between the State Bank of Vietnam and credit institutions permitted to operate in foreign exchange.

CIRCULAR

Guidelines for foreign currency transactions between the State Bank of Vietnam

The Governor of the State Bank of Vietnam issues this Circular amending and supplementing certain provisions of Circular No. 26/2021/TT-NHNN dated December 31, 2021 of the Governor of the State Bank of Vietnam guiding foreign exchange transactions between the State Bank of Vietnam and credit institutions permitted to operate in foreign exchange. 

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Foreign Exchange Regulations dated December 13, 2005 and the Decree Amending and Supplementing Certain Provisions of the Foreign Exchange Regulations dated March 18, 2013;

Pursuant to Decree No. 70/2014/NĐ-CP dated July 17, 2014 of the Government detailing the implementation of certain provisions of the Foreign Exchange Law and the Ordinance Amending and Supplementing Certain Provisions of the Foreign Exchange Law;

Pursuant to Government Decree No. 16/2017/NĐ-CP dated February 17, 2017 on the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Trading Department;

The Governor of the State Bank of Vietnam issues this Circular guiding foreign currency transactions between the State Bank of Vietnam and credit institutions permitted to operate in foreign exchange.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

This Circular guides foreign currency transactions between the State Bank of Vietnam (hereinafter referred to as the State Bank) and credit institutions permitted to operate in foreign exchange.

Article 2. Activities of the State Bank on the domestic foreign exchange market

The State Bank conducts foreign currency transactions on the domestic foreign exchange market with credit institutions permitted to operate in foreign exchange according to intervention plans decided by the State Bank during each period.

Article 3. Explanation of Terms

In this Circular, the following terms shall be understood as follows:

1. Credit institution permitted to operate in foreign exchange is a credit institution, foreign bank branch permitted to engage in and provide foreign exchange services (hereinafter referred to as the credit institution permitted).

2. Spot foreign currency purchase and sale transactions (hereinafter referred to as spot transactions) are transactions where both parties buy and sell a certain amount of foreign currency at the spot rate prevailing at the time of transaction and settle within two consecutive working days following the transaction date.

3. Forward foreign currency purchase and sale transactions (hereinafter referred to as forward transactions) are transactions where both parties commit to buying and selling a certain amount of foreign currency at a predetermined exchange rate at the time of transaction, with settlement occurring at least three consecutive working days following the transaction date.

4. Foreign currency swap transactions (hereinafter referred to as swap transactions) are transactions between two parties, consisting of one purchase transaction and one sale transaction involving the same quantity of one currency against another currency at exchange rates determined at the time of transaction, with different settlement dates for the two transactions. Swap transactions include two spot transactions, two forward transactions, or one spot transaction and one forward transaction.

5. Foreign currency option purchase and sale transactions (hereinafter referred to as option transactions) are transactions between two parties, wherein the buyer pays the seller an option premium to have the right but not the obligation to buy or sell one currency against another within an agreed period at an execution rate determined at the time of transaction, with settlement occurring on a future date. If the buyer chooses to exercise the right, the seller must fulfill the commitment. In option transactions, the option to sell one currency simultaneously constitutes the option to buy the other currency.

6. Option premium is the amount that the buyer must pay the seller to purchase a foreign currency call option or put option in an option transaction.

7. Expiration date of an option transaction is the last day when the buyer may choose to exercise the right, but not later than two working days before the settlement date.

8. Transaction date is the date when the State Bank and the credit institution permitted establish a transaction agreement in accordance with this Circular.

9. Settlement date is the date when the State Bank and the credit institution permitted transfer the agreed amount of purchased or sold currency in the foreign currency transaction established on the transaction date.

10. Internal regulations on the process of conducting foreign currency transactions with the State Bank are internal documents issued by credit institutions permitted to operate, specifying the responsibilities and authorities of relevant individuals and departments and guiding the conduct of foreign currency transactions with the State Bank.

11. Standard payment instructions are payment guidelines registered by credit institutions permitted with the State Bank, clearly identifying the settlement account to be used in foreign currency transactions with the State Bank.

Article 4. Registration for Establishing Foreign Exchange Transaction Relationships

1. Credit institutions permitted wishing to establish foreign currency transaction relationships with the State Bank shall submit directly or send via postal service to the State Bank one set of registration documents for establishing foreign currency transactions in accordance with Article 5 of this Circular.

2. The State Bank confirms the establishment of foreign exchange transaction relationships with credit institutions permitted based on reviewing the dossier to ensure completeness and accuracy.

3. For each credit institution permitted, the State Bank will only establish a foreign currency transaction relationship with one representative entity, which is either the main office or one branch designated by the credit institution permitted and registered with the State Bank.

Article 5. Dossier for Registration for Establishing Foreign Exchange Transaction Relationships

The dossier for registration for establishing foreign exchange transaction relationships includes:

1. Application for establishing a foreign currency transaction relationship with the State Bank as stipulated in Appendix 1 attached to this Circular.

2. Internal regulations on procedures for conducting foreign exchange transactions with the State Bank.

3. Standard payment instructions for foreign currency transactions with the State Bank as stipulated in Appendix 2 attached to this Circular.

4. A description of the means of conducting foreign currency transactions by credit institutions permitted ensuring the ability to transact with the State Bank through the transaction methods prescribed in Clause 1 of Article 10 of this Circular.

Article 6. Acceptance and Processing of Dossiers for Registration for Establishing Foreign Exchange Transaction Relationships

Within seven working days from the date of receipt of complete registration documents for establishing foreign currency transaction relationships, the State Bank shall notify the credit institution permitted in writing about its agreement or disagreement to establish such a relationship (in case of disagreement, the State Bank shall specify the reasons).

In case the documents require amendments or supplements, the State Bank shall notify the credit institution permitted in writing within four working days from the date of receipt of the registration documents for establishing foreign currency transactions. The credit institution permitted shall amend and supplement the documents and resubmit them to the State Bank within ten working days from the date of receipt of the notification.

Chapter II

SPECIFIC PROVISIONS

Article 7. Transaction Currency, Buying and Selling Rates, and Option Purchase Price

1. The State Bank conducts transactions to buy and sell Vietnamese Dong and US Dollar with credit institutions permitted that have established foreign currency transaction relationships with the State Bank. In cases where transactions involve Vietnamese Dong and other foreign currencies, the State Bank shall inform credit institutions permitted that have established foreign currency transaction relationships.

2. The purchase price, sale price for each type of transaction, the purchase price of call options, and the purchase price of put options on foreign currencies are determined and announced by the State Bank to credit institutions permitted that have established foreign currency transaction relationships.

Article 8. Types of Transactions

The State Bank conducts foreign exchange transactions with credit institutions permitted that have foreign exchange transaction relationships through the following types of transactions:

1. Spot transactions.

2. Forward transactions.

3. Swap transactions.

4. Option transactions.

5. Other types of transactions decided by the State Bank during specific periods.

Article 9. Tenor of Transactions

The term of forward transactions, forward transactions within swap transactions, and option transactions according to the announcement of the State Bank in the foreign exchange intervention plan prescribed in Clause 1 of Article 12 of this Circular.

Article 10. Means and Languages of Transactions

1. The State Bank conducts transactions with credit institutions permitted through the electronic trading system of Refinitiv, Bloomberg, or other means of transaction as decided by the State Bank during each period.

2. Foreign currency transactions confirmed on the means of transaction specified in Clause 1 of this Article are considered irrevocable commitments. Any changes or cancellations must be agreed upon by both parties to the transaction.

3. In the case where foreign currency transactions are conducted via telephone, the permitted credit institution must ensure that the telephone has the capability to record, store, and retrieve the content of the transaction agreement. After agreeing over the phone, on the day of the transaction, the State Bank of Vietnam and the permitted credit institution must confirm in writing (paper or electronic document) signed and approved by the competent authority.

4. The language used in transactions through the means of transaction shall be Vietnamese or English.

Article 11. Transaction Time

1. The official time for foreign currency transactions between the State Bank and authorized credit institutions is during the administrative working hours of the State Bank on working days of the week.

2. In cases where foreign currency transactions occur outside the time frame specified in Clause 1 of Article 3 of this Circular, the permitted credit institution must organize the implementation of smooth and safe transactions, ensuring risk management.

Article 12. Transaction Procedures

1. The State Bank shall notify its intervention in foreign currencies to authorized credit institutions with which it conducts foreign currency transactions through one of the following means:

a) The State Bank's electronic information portal;

b) The means of conducting transactions as stipulated in Clause 1 of Article 10 of this Circular.

The foreign currency transaction request document of the permitted credit institution must be signed and approved by an authorized person included in the list submitted to the State Bank pursuant to Appendix 1 issued together with this Circular.

3. Based on the foreign currency transaction request of the permitted credit institution and the intervention plan of the State Bank, the State Bank will consider, agree upon, and establish the transaction with the permitted credit institution through one of the means of conducting transactions as stipulated in Clause 1 of Article 10 of this Circular.

4. After the transaction between both parties is established through one of the means of conducting transactions as prescribed in Clause 1 of Article 10 of this Circular, the transaction confirmation must be sent through the SWIFT system (Society for Worldwide Interbank Financial Telecommunication) or other means determined by the State Bank.

Article 13. Payment for Transactions

1. Payment for foreign currency transactions must be carried out according to the standard payment guidelines registered by the permitted credit institution with the State Bank as provided for in Clause 3 of Article 5 of this Circular.

2. In the event that the payment date coincides with a weekly holiday or a public holiday of the Vietnamese foreign exchange market and/or the settlement market for the foreign currency involved in the transaction, the payment date will be shifted to the next working day.

3. In cases where payment is delayed compared to the transaction agreement between the State Bank and the authorized credit institution, the party making the late payment shall bear the following penalty rate:

a) If in foreign currency, the maximum penalty rate equals 150% of the overnight interest rate applied by the clearing bank of the party being paid late on its standard foreign currency receiving account at the time of occurrence, calculated based on the amount and number of days overdue.

a) If the penalty is in foreign currency, the maximum penalty rate shall be 150% of the overnight interest rate applied by the clearing bank of the delayed party on the standard foreign currency receiving account at the time of occurrence, calculated based on the amount and number of days of delay.

Article 14. Suspension of transactions, cancellation of transaction relationships

b) If the penalty is in Vietnamese Dong, the maximum penalty rate shall be 150% of the refinancing interest rate of the State Bank of Vietnam at the time of occurrence of the delayed payment, calculated based on the amount and number of days of delay.

a) Failure to submit reports or submitting reports not in accordance with the provisions of Clause 1 of Article 15 of this Circular three times or more within one quarter (excluding cases as provided for in Clause 3 of Article 15 of this Circular).

b) The permitted credit institution failing to comply with the provisions of Clause 2 of Article 15 of this Circular.

a) Special control measures.

2. The State Bank of Vietnam will suspend foreign currency transactions with credit institutions in the event that the credit institution is subject to:

a) Suspension of foreign currency transactions pursuant to the Special Control Decision;

4. The State Bank shall notify in writing the authorized credit institution specifying the reasons for the suspension or cancellation of transaction relationships.

b) Suspension of foreign exchange activities.

a) In the case of not using the trading system of Refinitiv, report the situation of foreign currency transactions with other credit institutions according to the current reporting regime of the State Bank.

From the moment the foreign currency transaction is completed through the Refinitiv trading system, the parties involved in the transaction must report the transaction executed on the Refinitiv trading system within fifteen minutes. In the case where the parties do not execute the transaction on the Refinitiv trading system, the reporting of the transaction must be carried out by the parties on the Refinitiv trading system within forty-five minutes.

3. The permitted credit institution is exempted from complying with the reporting time requirements as stipulated in point b of Clause 1 of Article 15 of this Circular in the event of the following force majeure incidents:

b) In cases where the Refinitiv trading system is used, credit institutions must report in accordance with the guidelines issued by the State Bank of Vietnam regarding the reporting process for foreign currency transactions through the Refinitiv trading system.

From the moment foreign currency transactions are completed via the Refinitiv trading system, credit institutions must report transactions conducted on the Refinitiv trading system within fifteen (15) minutes. In cases where transactions are not conducted on the Refinitiv trading system, credit institutions must report such transactions on the Refinitiv trading system within forty-five (45) minutes.

c) Power outages caused by objective reasons or the electricity provider;

2. Credit institutions must notify the State Bank of Vietnam (National Office of Foreign Exchange Reserve Management

) in writing about any changes to information previously registered with the State Bank of Vietnam at

Chapter III

a) Network connection errors from the data reporting system of the credit institution to the State Bank of Vietnam caused by the network service provider;

Article 16. Permitted Credit Institutions

1. Permitted credit institutions shall be responsible for:

a) Transactions conducted by the transaction officers of the permitted credit institution through the means of conducting transactions registered with the State Bank; verification of the authority of individuals involved in foreign currency transactions with the State Bank.

b) Completeness, accuracy, validity, and compliance with the required timeframes for documents, files, and reports submitted to the State Bank.

2. Permitted credit institutions shall be responsible for complying with current regulations on activities in the foreign exchange sector and must ensure:

a) Having strict risk management processes and internal control systems for foreign currency transactions with the State Bank;

b) Adhering to foreign currency status regulations and other safety regulations in foreign exchange business operations as stipulated by the State Bank.

1. Processing applications, reviewing, and confirming with permitted credit institutions regarding their registration to establish foreign currency transaction relationships.

2. Announce foreign currency interventions and conduct foreign currency transactions with permitted credit institutions that have foreign exchange transaction relationships with the State Bank; announce reference exchange rates according to the regulations of the State Bank for each period.

3. Determine penalty interest rates and handle delayed payments under Clause 3, Article 13 of this Circular based on the assessment of the impact of each case of delayed payment by permitted credit institutions.

4. Implement suspension of transactions and termination of transaction relationships with permitted credit institutions as stipulated in Article 14 of this Circular.

5. Notify the Banking Inspection and Supervision Authority about the list of permitted credit institutions approved by the State Bank to establish foreign exchange transaction relationships, suspend and terminate foreign exchange transaction relationships.

6. Serving as the point of contact for resolving issues arising from foreign currency transactions between the State Bank and permitted credit institutions.

1. Announce the State Bank's intervention plan that has been approved to the Trading Department.

2. Coordinate with the Trading Department to resolve issues arising related to foreign exchange transactions between the State Bank and permitted credit institutions.

1. Provide copies (certified true copies or certified duplicates) of the establishment and operation license of the credit institution or the branch license of foreign banks in Vietnam and documents proving that the permitted credit institution is authorized to provide foreign exchange services in the domestic market issued by the State Bank within two working days from the date of receiving the request from the Trading Department.

2. Promptly notify the Trading Department when a permitted credit institution with a foreign exchange transaction relationship with the State Bank is placed under special supervision; suspended from foreign exchange operations; violates provisions of this Circular.

Chapter IV

IMPLEMENTING PROVISIONS

Article 20. Effective Date

1. This Circular takes effect from February 15, 2022.

2. Repealing the following Circulars:

a) Circular No. 02/2012/TT-NHNN dated February 27, 2012, guiding foreign exchange transactions between the State Bank of Vietnam and credit institutions, branches of foreign banks, issued by the Governor of the State Bank of Vietnam;

b) Circular No. 27/2013/TT-NHNN dated December 5, 2013, amending and supplementing certain articles of Circular No. 02/2012/TT-NHNN dated February 27, 2012, guiding foreign exchange transactions between the State Bank of Vietnam and credit institutions, branches of foreign banks, issued by the Governor of the State Bank of Vietnam;

c) Circular No. 45/2014/TT-NHNN dated December 29, 2014, amending and supplementing certain articles of Circular No. 02/2012/TT-NHNN dated February 27, 2012, guiding foreign exchange transactions between the State Bank of Vietnam and credit institutions, branches of foreign banks, issued by the Governor of the State Bank of Vietnam.

Article 21. Transitional Provisions

Permitted credit institutions that have established foreign exchange transaction relationships with the State Bank before the effective date of this Circular continue to conduct foreign exchange transactions with the State Bank according to the provisions of this Circular without having to re-register with the State Bank.

Article 22. Implementation organization

The Director of the Office, the Director of the Trading Department, heads of units under the State Bank, and permitted credit institutions, branches of foreign banks operating foreign exchange business are responsible for implementing this Circular./.