Consolidated Document number 33/VBHN-NHNN on the issuance of State Bank bills

CIRCULAR

Regulations on the issuance of State Bank bills

Circular No. 16/2019/TT-NHNN dated October 22, 2019, issued by the Governor of the State Bank of Vietnam, regarding the issuance of State Bank bills, shall take effect from December 9, 2019, amended and supplemented by:

Circular No. 44/2024/TT-NHNN dated August 30, 2024, issued by the Governor of the State Bank of Vietnam, amending and supplementing Clause 2 of Article 2 of Circular No. 16/2019/TT-NHNN dated October 22, 2019, issued by the Governor of the State Bank of Vietnam, regarding the issuance of State Bank bills, shall take effect from October 23, 2024.

Based on the Law on the State Bank dated June 16, 2022 2010;

Based on the Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing Certain Provisions 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 regulating the issuance of State Bank bills^[1].

Chapter I. GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular stipulates the issuance of State Bank bills by the State Bank of Vietnam (hereinafter referred to as the State Bank) for implementing national monetary policy.

Article 2. Applicability

1. The State Bank.

2.^[2] Commercial banks, foreign bank branches, comprehensive finance companies, specialized finance companies, cooperative banks, policy banks (hereinafter referred to as credit institutions).

3. Deposit Insurance Corporation of Vietnam.

Article 3. Explanation of Terms

1. State Bank bill is a short-term negotiable instrument issued by the State Bank to implement national monetary policy.

2. Payment date of State Bank bill is the date when credit institutions must transfer funds to purchase State Bank bills to the State Bank.

3. Issuance date of State Bank bill is the payment date of the State Bank bill and serves as the basis for determining the due date of the State Bank bill.

4. Term of State Bank bill is the period calculated from the day following the issuance date of the State Bank bill to the due date of the State Bank bill.

Chapter II. SPECIFIC PROVISIONS

Article 4. Basic conditions and terms of State Bank bills

1. Object: State Bank bills are issued to credit institutions with settlement accounts denominated in Vietnamese dong at the State Bank.

2. Currency of issue: State Bank bills are issued, recorded, and settled in Vietnamese dong.

3. Term: The term of State Bank bills is determined by the State Bank and does not exceed 364 days.

4. Face value: State Bank bills have a face value of VND 100,000 (one hundred thousand dong) or multiples thereof.

5. Form: State Bank bills are issued in book-entry form.

6. Interest rate: The interest rate on State Bank bills is determined by the State Bank, in line with market money supply trends and monetary policy objectives during each period.

7. State Bank bills are issued at a price lower than their face value and are paid once at face value on the due date of the State Bank bill.

Article 5. Sale price of State Bank bills

1. The sale price of one (01) State Bank bill is determined according to the following formula:

Where:

G: Sale price of one (01) State Bank bill;

MG: Face value of State Bank bill;

L: Interest rate on State Bank bill (% per annum);

t: Term of State Bank bill (number of days).

2. The amount sold of State Bank bills is determined according to the following formula:

GG = G  N

Where:

GG: Amount sold of State Bank bills;

G: Sale price of one (01) State Bank bill;

N: Number of State Bank bills issued.

Article 6. Methods of Issuing State Bank Treasury Bills

1. State Bank Treasury Bills shall be issued through auction methods or mandatory methods.

2. Issuance through Auction Method:

The issuance of State Bank Treasury Bills through the auction method shall be carried out in accordance with the State Bank's regulations on auctions through open market operations.

3. Issuance through Mandatory Method:

a) Based on monetary policy objectives for each period and actual conditions, the State Bank decides to issue State Bank Treasury Bills through the mandatory method to credit institutions. Credit institutions must purchase State Bank Treasury Bills issued through the mandatory method in accordance with the Governor's Decision of the State Bank;

b) In necessary cases, the State Bank may consider purchasing back before maturity State Bank Treasury Bills issued through the mandatory method. The Governor of the State Bank decides on the early redemption of State Bank Treasury Bills issued through the mandatory method.

Article 7. Settlement of State Bank Treasury Bills

1. Credit Institutions shall settle the amount paid for State Bank Treasury Bills issued through the auction method in accordance with the State Bank's regulations on open market operations.

2. Credit Institutions shall settle the amount paid for State Bank Treasury Bills issued through the mandatory method as follows: Credit institutions must transfer the purchase price of State Bank Treasury Bills into the account designated by the State Bank on the settlement date of State Bank Treasury Bills. Credit institutions must ensure that all required information is recorded on the payment order as requested by the State Bank.

3. On the due date of State Bank Treasury Bills, the State Bank shall settle the amount equal to the face value of State Bank Treasury Bills to credit institutions. If the due date of State Bank Treasury Bills falls on a weekend or public holiday, the settlement of State Bank Treasury Bills shall be carried out on the next working day following the holiday.

Article 8. Costs of Issuance and Interest Payment on State Bank Treasury Bills

The costs of issuing and paying interest on State Bank Treasury Bills shall be accounted for as operational expenses of the State Bank.

Article 9. Use of State Bank Treasury Bills in Transactions of the State Bank

State Bank Treasury Bills shall be used in transactions of the State Bank according to the Governor's decision for each period.

Article 10. Purchase, Sale, and Pledge of State Bank Treasury Bills

1. Credit institutions may purchase, sell, and pledge State Bank Treasury Bills among themselves in compliance with relevant laws.

2. The Deposit Insurance Corporation may purchase State Bank Treasury Bills from credit institutions based on agreements between the Deposit Insurance Corporation and credit institutions.

Article 11. Custody of State Bank Treasury Bills

State Bank Treasury Bills shall be custodied at the State Bank in accordance with the State Bank's regulations on custody and use of securities at the State Bank.

Article 12. Handling cases where credit institutions fail to pay or pay insufficient amounts for purchasing State Bank bills

1. The handling of credit institutions that fail to pay or pay insufficient amounts for purchasing State Bank bills issued through auction shall be carried out in accordance with the State Bank's regulations on open market operations.

2. The handling of credit institutions that fail to pay or pay insufficient amounts for purchasing State Bank bills issued compulsorily shall be carried out as follows:

a) By the end of the bill payment day, the State Bank (Trading Department, State Bank branch in provinces and centrally-administered cities) will automatically deduct from the credit institution's settlement account at the State Bank until the full amount of the purchased State Bank bills is recovered and notify the credit institution in writing.

b) In case the credit institution's settlement account at the State Bank does not have sufficient funds to cover the remaining amount of the purchased State Bank bills, the credit institution must bear late payment penalties on the remaining amount of the purchased State Bank bills at the overnight interbank lending rate. The daily late payment penalty amount is calculated according to the following formula:

Where:

P: Daily late payment penalty amount;

of_{session number}: Remaining amount of the purchased State Bank bills as of the end of the day;

L_{session number}: Overnight interbank lending rate as decided by the Governor of the State Bank at the time of calculating the late payment penalty (% per annum);

c) Within five consecutive working days following the payment date, the State Bank (Trading Department, State Bank branch in provinces and centrally-administered cities) will automatically deduct from the credit institution's settlement account at the State Bank until the full remaining amount of the purchased State Bank bills and the unpaid late payment penalties are recovered; first recover the remaining amount of the purchased State Bank bills, then recover the late payment penalties.

d) Upon expiration of the deduction period specified in point c Clause of this Article:

(i) Credit institutions failing to pay the full amount of the purchased State Bank bills will be subject to administrative fines in accordance with regulations on administrative sanctions in the field of monetary policy and banking;

(ii) The State Bank (Trading Department, State Bank branch in provinces and centrally-administered cities) will implement: cancel the uncollected portion of the State Bank bills based on their face value and rounded up to the nearest multiple of the State Bank bill denomination; stop calculating late payment penalties; simultaneously, continue to automatically deduct from the settlement account or collect from other sources (if available) of the credit institution to fully recover the late payment penalties.

đ) The State Bank (Trading Department, State Bank branch in provinces and centrally-administered cities) will determine the remaining amount of the purchased State Bank bills and the unpaid late payment penalties at the end of each working day and automatically deduct from the settlement account to recover these amounts on the next working day; simultaneously, notify the credit institution in writing.

Chapter III. IMPLEMENTATION^[3]

Article 13. Responsibilities of units under the State Bank of Vietnam

1. Monetary Policy Department

Take the lead and coordinate with relevant units to submit to the Governor of the State Bank decisions regarding the issuance of State Bank bills: quantity, interest rates, terms, payment dates, issuance methods, and other related matters; early redemption of State Bank bills issued compulsorily.

2. Trading Department

a) Implement responsibilities as currently prescribed regarding State Bank bill auctions through open market operations;

b) For the compulsory issuance of State Bank bills:

(i) Notify credit institutions about the compulsory issuance of State Bank bills according to the Governor's Decision;

(ii) Carry out the issuance, collection of sale proceeds, calculation of late payment penalties, and payment of State Bank bills to credit institutions upon maturity, accounting in accordance with regulations;

(iii) Handle cases where credit institutions fail to pay or pay insufficient amounts for purchasing State Bank bills issued compulsorily as stipulated in Clause 2 of Article 12 of this Circular; Send a written report to the Banking Supervision Agency listing credit institutions that fail to pay the full amount for purchasing State Bank bills issued compulsorily immediately after the deduction period expires;

(iv) Serve as the focal point for resolving difficulties and issues arising during the compulsory issuance of State Bank bills;

c) Handle registration and procedures for transferring ownership of State Bank bills; Serve as the focal point for advising the Governor of the State Bank to decide on allowing the Vietnam Deposit Insurance Corporation to open a registration account for State Bank bills at the State Bank;

d) Summarize and report to the Governor of the State Bank, and send copies to the Monetary Policy Department, the results of State Bank bill issuance after each issuance round.

3. State Bank branch in provinces and centrally-administered cities

a) Notify credit institutions about the compulsory issuance of State Bank bills according to the Governor's Decision;

b) Carry out the issuance, collection of sale proceeds, calculation of late payment penalties, and payment of State Bank bills issued compulsorily to credit institutions upon maturity, accounting in accordance with regulations;

c) Handle cases where credit institutions fail to pay or pay insufficient amounts for purchasing State Bank bills issued compulsorily as stipulated in Clause 2 of Article 12 of this Circular; Send a written report to the Banking Supervision Agency listing credit institutions that fail to pay the full amount for purchasing State Bank bills issued compulsorily immediately after the deduction period expires;

d) Prepare reports on the issuance and payment of State Bank bills issued compulsorily and send them to the Trading Department immediately after each issuance round;

d) The entity responsible for handling difficulties and obstacles arising during the implementation of mandatory issuance of central bank bills.

4. Department of Finance and Accounting

Guide the accounting entries for transactions related to central bank bills.

Article 14. Effective Date

1. This Circular takes effect from December 9, 2019.

2. This Circular replaces Decision No. 362/1999/QĐ-NHNN dated October 8, 1999 of the Governor of the State Bank of Vietnam on the issuance of regulations on the issuance of central bank bills.

3. Repeal the provisions of Clause 2, Article 13 of Circular No. 24/2014/TT-NHNN dated September 6, 2014 guiding certain contents regarding deposit insurance activities.

Article 15. Implementation Organization

The Director of the Office, the Head of the Monetary Policy Department, the Heads of relevant units under the State Bank of Vietnam, the Governors of the State Bank of Vietnam branches in provinces and centrally-administered cities, the Chairmen of the Boards of Directors, the Chairmen of the Boards of Members and General Directors (Directors) of credit organizations, the Chairmen of the Boards of Directors and General Directors of Deposit Insurance Corporation of Vietnam are responsible for implementing this Circular.

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