Circular No. 30/2019/TT-NHNN on the implementation of mandatory reserves by credit institutions and foreign bank branches

CIRCULAR

Regulations on the implementation of mandatory reserves by credit institutions,

foreign bank branches

 

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; the Law Amending and Supplementing Certain Articles of the Law on Credit Institutions dated November 20, 2017;

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;

Article 1.

The Governor of the State Bank of Vietnam issues this Circular to regulate the implementation of mandatory reserves by credit institutions and foreign bank branches.

Article 1. Scope of Regulation

This Circular stipulates the determination, maintenance, and implementation of mandatory reserves by credit institutions and foreign bank branches for the purpose of implementing national monetary policy.

Article 2. Applicability

Credit institutions and foreign bank branches (hereinafter referred to as credit institutions) established and operating under the Law on Credit Institutions, except for credit institutions specified in Article 3 of this Circular.

1. Credit institutions under special control: The period during which they are exempt from mandatory reserves starts from the month following the month in which the State Bank of Vietnam (hereinafter referred to as the State Bank) decides to place the credit institution under special control until the end of the month in which the State Bank decides to terminate special control.

2. Credit institutions that have not commenced operations: The period during which they are exempt from mandatory reserves ends at the end of the month in which the credit institution commences operations; the credit institution must notify the State Bank (Trading Department) in writing about the date of commencement of operations within three working days from the date of commencement of operations.

3. Credit institutions approved for dissolution or with a decision to initiate bankruptcy proceedings or with a decision to revoke their license by the competent authority: The period during which they are exempt from mandatory reserves starts from the month following the month in which the credit institution is approved for dissolution or the decision to initiate bankruptcy proceedings or revoke the license becomes effective; the credit institution with a decision to initiate bankruptcy proceedings must submit the decision to the State Bank (Trading Department) within three working days from the date of receipt of such decision.

Article 4. Mandatory Reserves

Mandatory reserves are amounts of money that credit institutions must deposit with the State Bank, determined according to the provisions of Article 5, maintained according to the provisions of Article 9, and guided by the Appendix attached to this Circular.

Article 5. Determination of Mandatory Reserves

1. The mandatory reserve amount for the period of maintaining mandatory reserves is determined by the State Bank for each credit institution by multiplying the mandatory reserve ratio prescribed for the credit institution according to each type of deposit in the period of maintaining mandatory reserves with the average balance of deposits subject to mandatory reserves at the credit institution during the period of determining mandatory reserves corresponding to each type of deposit.

The formula for calculating mandatory reserves is as follows:

Where:

DTBB: The amount of money that the credit institution must hold as mandatory reserves for the period of maintaining mandatory reserves;

DTBBi Ratio: The mandatory reserve ratio prescribed for the credit institution corresponding to deposit type i applicable during the period of maintaining mandatory reserves;

HĐi: The average balance of deposits subject to mandatory reserves type i at the credit institution during the period of determining mandatory reserves.

2. The average balance of deposits subject to mandatory reserves at the credit institution during the period of determining mandatory reserves is calculated by summing up the balances of deposits subject to mandatory reserves at the end of each day across the entire system of the credit institution (including headquarters, domestic branches, and domestic dependent units of the credit institution or the headquarters of foreign bank branches) during the period and dividing by the total number of days in the period of determining mandatory reserves.

The formula for calculating the average balance of deposits subject to mandatory reserves for each type of deposit is as follows:

3. The period of maintaining mandatory reserves is the time frame of the current month from the first day of the month to the last day of the month, including holidays and public holidays.

4. The period of determining mandatory reserves is the time frame of the preceding month from the first day of the month to the last day of the month, including holidays and public holidays.3. The period of maintaining mandatory reserves is the time frame of the current month from the first day of the month to the last day of the month, including holidays and public holidays.

Article 6. Required Reserve Ratio, Interest Rates on Required Reserves and Excess Reserves

1. Required Reserve Ratio for Credit Institutions

a) The Governor of the State Bank shall decide the required reserve ratio applicable to each type of credit institution and each type of deposit in accordance with the national monetary policy objectives during each period, except for the required reserve ratio for deposits in Vietnamese dong for credit institutions as stipulated in point b of this Clause;

b) For credit institutions providing loans to develop agriculture and rural areas through the required reserve tool, the required reserve ratio for deposits in Vietnamese dong shall be applied according to the guidelines issued by the State Bank on implementing measures to manage monetary policy tools to support credit institutions providing loans to develop agriculture and rural areas.

2. Interest rates on required reserves and excess reserves for each type of credit institution and each type of deposit shall be decided by the Governor of the State Bank in accordance with the national monetary policy objectives during each period.

Credit institutions supporting as specified in Clause 40, Article 4 of the Law on Credit Institutions (amended and supplemented in 2017) shall be entitled to a 50% reduction in the required reserve ratio for such credit institutions as stipulated in Clause 1 of Article 6 of this Circular for all types of deposits subject to required reserves according to the recovery plan approved in accordance with Clause 7, Article 148d of the Law on Credit Institutions (amended and supplemented in 2017).

Article 8. Deposit Bases Subject to Required Reserves

Deposit bases subject to required reserves include:

1. Deposits from organizations (excluding other credit institutions established and operating in Vietnam) and individuals at credit institutions in the forms of demand deposits, time deposits, savings deposits, and dedicated capital deposits.

2. Funds obtained by credit institutions from issuing deposit certificates, bills, promissory notes, and bonds.

3. Other deposits at credit institutions under the principle of full repayment of principal and interest to depositors as agreed, excluding margin deposits and deposits from other credit institutions established and operating in Vietnam.

Article 9. Maintenance of Required Reserves

1. Credit institutions maintain required reserves on settlement accounts opened at the State Bank.

2. Credit institutions must fully maintain required reserves at the State Bank during the reserve maintenance period according to the following principles:

The formula for calculating actual reserves is as follows:

b) The daily balance of the credit institution's settlement account at the State Bank during the reserve maintenance period may be lower or higher than the required reserves for that period.

3. Determination of Excess and Shortfall of Required Reserves for Credit Institutions

a) Excess required reserves are the portion by which actual reserves exceed required reserves during the reserve maintenance period;

b) Shortfall of required reserves is the portion by which actual reserves fall short of required reserves during the reserve maintenance period.

4. Credit institutions failing to maintain required reserves shall be subject to administrative penalties in accordance with current laws on administrative penalties in the field of currency and banking.

Article 10. Implementation of mandatory reserves for foreign currency deposits

1. Foreign currency deposits at credit institutions serving as the basis for calculating mandatory reserves are foreign currency deposits at credit institutions converted into USD and maintained as mandatory reserves in USD.

2. In cases where a credit institution has an average balance of deposits subject to mandatory reserves in one of the foreign currencies EUR, JPY, GBP, CHF accounting for more than 50% of the total deposits subject to mandatory reserves in foreign currencies, foreign currency deposits subject to mandatory reserves may be converted and maintained as mandatory reserves in this foreign currency.

3. The conversion of various foreign currencies into USD to implement the provisions of Clause 1 of this Article or into the foreign currency specified in Clause 2 of this Article shall be conducted through the Vietnamese dong and according to the exchange rate used by the credit institution to convert foreign currencies into the Vietnamese dong for preparing the Balance Sheet Accounting Table in accordance with the current regulations of the State Bank of Vietnam on the accounting system of credit institutions corresponding to the month when the mandatory reserve period is determined.

Article 11. Reporting the Average Balance of Deposits Subject to Mandatory Reserves

1. Within three working days at the beginning of each month, credit institutions are responsible for reporting the average balance of deposits subject to mandatory reserves during the period for determining mandatory reserves using Form DTBB001 attached to this Circular as the basis for calculating mandatory reserves for the maintenance period, to be sent to the State Bank of Vietnam's Trading Department in writing directly or via postal service, or electronically through the mandatory reserve management information system, or by other methods as directed by the State Bank of Vietnam (Trading Department); the credit institution bears legal responsibility for the accuracy, legality, and validity of the reported data.

2. For credit institutions that apply a zero percent reserve ratio for all types of deposits subject to mandatory reserves, they are not required to submit reports as stipulated in Clause 1 of this Article during periods when the zero percent reserve ratio applies.

6. Supervise, inspect, and penalize violations within their authority regarding credit institutions' implementation of the provisions of this Circular.

Article 13. Responsibilities of the State Bank of Vietnam Trading Department

1. Fulfill the responsibilities of the management unit for mandatory reserve requirements of credit institutions as follows:

a) Serve as the focal point and coordinate with the Information Technology Department and related units to guide credit institutions in submitting average deposit balance reports required for calculating mandatory reserves and receiving mandatory reserve notifications through the mandatory reserve management information system;

b) Within five working days at the beginning of each month, based on the average deposit balance reports required for calculating mandatory reserves submitted by credit institutions, the State Bank of Vietnam Trading Department shall determine and notify the amount of mandatory reserves to be maintained during the period, and report the implementation of mandatory reserves in the previous maintenance period to credit institutions according to Form DTBB002 attached to this Circular;

c) Within seven working days at the beginning of each month, pay interest on mandatory reserve deposits and excess reserve deposits during the previous maintenance period to credit institutions;

2. Timely and accurately update the credit institution's settlement account opened at the State Bank of Vietnam Trading Department on the mandatory reserve management information system according to the guidance of the Information Technology Department;

3. Serve as the focal point and coordinate with the Information Technology Department to ensure the accuracy and timeliness of the balance data of credit institutions' settlement accounts opened at the State Bank of Vietnam Trading Department on the mandatory reserve management information system;

Article 14. Responsibilities of the Information Technology Department

2. Coordinate with the State Bank of Vietnam Trading Department to guide credit institutions in submitting average deposit balance reports required for calculating mandatory reserves and receiving mandatory reserve notifications through the mandatory reserve management information system;

3. Guide the issuance and revocation of access codes and electronic signature codes for members participating in the mandatory reserve management information system.

Article 15. Responsibilities of the Monetary Policy Department

1. Based on the objectives of monetary policy, submit to the Governor of the State Bank for consideration and decision:

a) The reserve requirement ratio for each type of credit institution and each type of deposit during each period;

b) The interest rate on required reserves and excess reserves for each type of credit institution and each type of deposit during each period.

2. Serve as the point of contact for handling any issues arising from the provisions of this Circular.

1. Based on the content of reduced reserve requirements for supporting credit institutions (if any) in the recovery plan that has been approved (excluding recovery plans approved by the Branch Governor according to regulations), the Banking Supervision Agency shall send a document to the State Bank Trading Office regarding the reduction of reserve requirements for supporting credit institutions, specifying the name of the supporting credit institution, the month the reduction begins to apply, and the duration of the reduction.

2. Send to the State Bank Trading Office all documents and decisions of the State Bank concerning special control measures, termination of special control measures, dissolution, and revocation of licenses of credit institutions within three working days from the date the State Bank issues these documents and decisions, except for those issued by State Bank branches.

3. Within thirty working days from the date of receiving the State Bank Trading Office's report on the compliance with reserve requirements of credit institutions, handle according to authority or recommend the Governor of the State Bank to take measures against credit institutions failing to meet reserve requirements under current regulations, report to the Governor of the State Bank, and simultaneously send the decisions on handling credit institutions failing to meet reserve requirements to the Monetary Policy Department and the State Bank Trading Office.

4. Supervise, inspect, and handle violations within its authority regarding credit institutions' implementation of the provisions of this Circular.

Article 17. Effective Date

1. This Circular takes effect from March 1, 2020.

1. This Circular takes effect from February 26, 2018.

a) Decision No. 581/2003/QĐ-NHNN dated June 9, 2003, of the Governor of the State Bank on the issuance of the Regulation on Reserve Requirements for Credit Institutions;

b) Circular No. 27/2011/TT-NHNN dated August 31, 2011, of the State Bank on amending and supplementing certain articles of the Regulation on Reserve Requirements for Credit Institutions issued together with Decision No. 581/2003/QĐ-NHNN dated June 9, 2003, of the Governor of the State Bank;

c) Circular No. 23/2015/TT-NHNN dated December 4, 2015, of the Governor of the State Bank on amending and supplementing certain articles of the Regulation on Reserve Requirements for Credit Institutions issued together with Decision No. 581/2003/QĐ-NHNN dated June 9, 2003, of the Governor of the State Bank.

3. For credit institutions subject to special control before the effective date of this Circular and not implementing reserve requirements according to State Bank documents, the time when they cease to implement reserve requirements according to State Bank documents currently in use.

4. For credit institutions approved for dissolution or having a bankruptcy proceeding initiated or a license revocation decision made by the competent authority before the effective date of this Circular and implementing reserve requirements according to current regulations, the time when they cease to implement reserve requirements from the month following the effective date of this Circular.

5. Before the effective date of this Circular, for the period maintaining reserve requirements for which the State Bank Trading Office, State Bank branch has notified reserve requirements to credit institutions under their management, the State Bank Trading Office, State Bank branch will continue to pay interest on required reserves and excess reserves for credit institutions under their management for this period of maintaining reserve requirements according to the Regulation on Reserve Requirements for Credit Institutions issued together with Decision No. 581/2003/QĐ-NHNN dated June 9, 2003, of the Governor of the State Bank, amended and supplemented by Circulars No. 27/2011/TT-NHNN dated August 31, 2011, and No. 23/2015/TT-NHNN dated December 4, 2015, of the State Bank.

Article 18. Implementation Organization

The Head of the Office, the Director of the Monetary Policy Department, the Heads of units under the State Bank, the Governors of State Bank branches in provinces and centrally-administered cities, the Chairmen of the Board of Directors, the Chairmen of the Board of Members, and the General Managers (Directors) of credit institutions and foreign bank branches are responsible for organizing the implementation of this Circular./.