Circular No. 39/2000/TT-BTC guiding the issuance of Treasury bills through the state budget

CIRCULAR

Guidelines for the issuance of Treasury bills through the State Bank

 

Implementing Decree No. 01/2000/NĐ-CP dated January 13, 2000 of the Government on the issuance of government bonds, after coordinating with the State Bank of Vietnam, the Ministry of Finance guides the issuance of Treasury bills through the State Bank as follows:

 

I. GENERAL PROVISIONS

1. The issuance of Treasury bills through the State Bank shall be conducted in the form of auction as specified in this Circular.

2. The auction of Treasury bills is an interest rate auction. The bid interest rate and winning bid interest rate are calculated annually (365 days).

3. The Ministry of Finance, based on the annual budget estimates and the revenue and expenditure situation of the state budget, forecasts the volume of Treasury bills to be issued, time, form of sale, term, and interest rate, and directs and notifies the State Bank before organizing the Treasury bill auction.

4. The State Bank acts as the agent for the Ministry of Finance in issuing and paying Treasury bills, conducting Treasury bill auction operations, organizing and supervising the secondary market for Treasury bills after the auction.

 

II. SPECIFIC PROVISIONS

1. Auction principles:

Confidentiality of all bidding information of the bidding units and the directed interest rate of the Ministry of Finance (if applicable).

Organize public and equal auctions regarding rights and obligations among participating members.

The winning bidder is responsible for purchasing Treasury bills according to the volume and interest rate announced upon winning the bid.

2. Participants in the auction must meet the following conditions as stipulated in Article 14 of the Government Bond Issuance Regulation issued together with Decree No. 01/2000/NĐ-CP:

Having legal entity status, established in accordance with current Vietnamese laws;

Having a minimum statutory capital of 20 billion Vietnamese dong;

Having a Vietnamese dong account opened at a bank;

Submitting an application to participate in the Treasury bill auction market to the State Bank.

Annually, the State Bank reviews the conditions and standards of participants applying to join the auction to issue or revoke membership certificates.

3. Term of Treasury bills:

Treasury bills have terms of 91 days, 182 days, 273 days, and 364 days.

4. Interest rate on Treasury bills: Formed based on the results of each auction session.

5. Forms of selling Treasury bills:

The auction of Treasury bills through the State Bank shall be carried out in one of the following two forms:

Par value form: Treasury bills are sold at par value; principal and interest are paid once at maturity.

Discount form: Treasury bills are sold below par value and paid at par value at maturity.

6. Forms of Treasury bills:

Treasury bills are issued in the form of certificates or book entries.

Treasury bill certificates are regulated by the Ministry of Finance, organized for printing, and distributed by the State Bank according to each issuance period.

Book entries: recorded and managed by the State Bank.

7. Organization of Treasury bill auctions:

Treasury bill auctions are organized regularly every week, every two weeks, or monthly depending on the state budget's capital needs and the money market situation.

7.1. Auction announcement:

Two days before the auction date, based on the Ministry of Finance's proposal to issue Treasury bills, the State Bank sends an announcement of Treasury bill issuance to participating members in the Treasury bill auction market and publishes it on mass media.

7.2. Registration for auction:

7.2.1. Before 13:00 on the day of opening bids, participating members in the auction must submit bid forms to the State Bank.

7.2.2. The minimum bid amount is 100,000,000 VND (One hundred million VND). In cases where Treasury bills are issued in the form of certificates, the face value of the Treasury bills is determined by the Ministry of Finance and published in the issuance announcement.

7.2.3. Participating members in the auction must complete a 5% deposit on the volume of Treasury bills bid at the State Bank Trading Department or designated branch of the State Bank, without earning interest during the deposit period.

7.3. Bid Opening:

The bid opening time is set at 13:30 on the auction day. The auction may be conducted via computer network, with the State Bank guiding the procedures and formalities for online auctions to ensure accuracy, safety, and high security.

Procedures for registration, sequence of bid submission, verification of bid form validity, as well as the sequence and formalities of the auction are regulated by the State Bank.

7.4. Determination of the volume and interest rate of winning Treasury bills:

7.4.1. The determination of the volume and interest rate of winning Treasury bills is based on:

The volume and interest rate of bids from participating members.

The expected volume of Treasury bills to be issued and the directed interest rate (if applicable).

7.4.2. In cases where the directed interest rate is used, the volume of winning Treasury bills is calculated in ascending order of bid interest rates within the range of the directed interest rate.

At the highest bid interest rate within the range of the directed interest rate, if the volume of bids exceeds the expected issuance volume, the volume of winning Treasury bills will be allocated proportionally to each bid based on their respective bid volumes at that interest rate.

7.4.3. If the directed interest rate is not used, the volume of winning Treasury bills is calculated in ascending order of bid interest rates until the expected issuance volume is reached.

In cases where multiple bids have the same interest rate and the total bid volume exceeds the expected issuance volume, the volume of winning Treasury bills will be allocated proportionally to each bid based on their respective bid volumes at that interest rate.

7.4.4. The issuance interest rate of Treasury bills is the highest winning bid interest rate applied uniformly to all successful bidders.

7.5. Method of calculating the selling price and interest on Treasury bills:

7.5.1. For Treasury bills issued in the par value form:

The selling price of Treasury bills is 100% of the face value.

The total amount to be paid for Treasury bills at maturity is calculated using the following formula:

                                                                         n        

                                     T = G + (G × Ls × n / 365) x Ls x -----)

365

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry

T: Total amount (principal + interest) of Treasury bills to be paid at maturity.

G: Selling price of Treasury bills.

Ls: Winning bid interest rate of Treasury bills (as a percentage per 365 days).

n: Number of days in the term of the Treasury bill.

7.5.2. For treasury bills issued through discounting:

The selling price of treasury bills is calculated according to the following formula:

                                     MG

G = ------------------

                                     Ls x n

1+ --------

365 x 100

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry

G:        Selling price of treasury bills

MG:     Face value of treasury bills

Ls:       Auction-winning interest rate for treasury bills (expressed as a percentage per 365 days)

n:         Number of days within the term of the treasury bill

The State Bank shall specify in detail the method for rounding the price of treasury bills.

7.6. Announcing the auction results

After the auction has ended, the auction committee determines the volume and winning interest rate, signs confirmation on the Summary of Auction Results at the venue where the bid evaluation takes place, and sends the auction results to the Ministry of Finance. Based on the Summary of Auction Results, the State Bank notifies the successful bidders, publishes the auction results on mass media, and posts them at the headquarters of the State Bank.

8. Payment of treasury bills

8.1. Payment of auction-winning treasury bills

Within two working days following the auction date, successful bidders must pay the full amount for purchasing treasury bills at the selling price determined in the winning bid notification, and simultaneously receive a certificate from the State Bank or have their treasury bill account credited (for book-entry type).

In case a successful bidder delays payment procedures, the State Bank will deduct the deposit money and the bank account balance of the successful bidder (if the successful bidder is a banking organization) or request the bank where the successful bidder maintains an account to transfer funds from the successful bidder's account (if the successful bidder is an entity specified in Point 2, Article 14 of the Government Bond Issuance Regulation issued together with Decree No. 01/2000/NĐ-CP dated January 13, 2000) to the State Bank.

If the balance in the successful bidder's bank account is insufficient to make the payment, then the successful bidder's winning result will be canceled, and the entire deposit held at the State Bank will be transferred to the state budget.

The State Bank credits the Central Treasury's account opened at the State Bank Trading Department with the total actual revenue (selling price of treasury bills) on the day the successful bidders pay for purchasing treasury bills.

8.2. Payment of treasury bills upon maturity

One day before the maturity date of the treasury bill, the Ministry of Finance (Central Treasury) transfers the payment amount to the Central State Bank. On the maturity date of the treasury bill, if the Central State Bank has not received the transfer document from the Central Treasury, it will automatically deduct funds from the Central Treasury's account at the State Bank Trading Department to settle the bill holder.

If the maturity date for principal and interest repayment of treasury bills falls on a holiday, the principal and interest will be paid on the first working day after the holiday.

The State Bank and the Treasury must ensure their payment responsibilities as stipulated above. Violations of payment deadlines and delayed capital payments will be penalized according to current regulations of the State Bank.

9. Costs for organizing issuance and payment of treasury bills

9.1. Costs for auction and payment of treasury bills

All costs for organizing auctions and paying treasury bills are guaranteed by the state budget, up to a maximum of 0.1% of the total sales volume of treasury bills issued, and are transferred to the State Bank quarterly based on the auction results. These expenses are used for the following purposes:

Purchasing equipment for the auction of treasury bills;

Regular maintenance and emergency repairs of machinery and equipment;

Design and construction of software programs for the auction of treasury bills;

Advertising and information dissemination about the auction of treasury bills on mass media;

Direct costs for each auction session;

Seminars, surveys, and learning experiences related to the auction of treasury bills;

Annual customer meetings to summarize the organization of auctions;

Unexpected and regular rewards for members of the auction committee, staff supporting the auction work, and related agencies, not exceeding 10% of the total auction and treasury bill payment costs;

Regular meetings of the treasury bill auction committee to review auction situations and discuss work directions;

Office supplies;

Other expenses serving the auction of treasury bills.

These expenses are implemented according to the Ministry of Finance's financial management regulations for the State Bank and are settled in the annual expenses of the State Bank.

9.2. Costs for printing treasury bill certificates

The Ministry of Finance pays the printing costs according to the contract with the printing agency.

10. Responsibilities of relevant sectors in organizing the auction of treasury bills

10.1. Coordination between the Ministry of Finance and the State Bank in the auction of treasury bills is carried out through the Treasury Bill Auction Committee. The inter-ministerial auction committee consists of ten members: five from the State Bank including one Deputy Governor of the State Bank as the head; five from the Ministry of Finance (Central Treasury) including one or two leaders of the Central Treasury. The duties of the Treasury Bill Auction Committee include:

10.1.1. Preparing contents related to the auction period for approval by the leadership of the Ministry of Finance:

Volume of treasury bills expected to be issued in each auction period;

Term of treasury bills;

Directed interest rate for each treasury bill issuance period (if applicable);

Form of sale and form of treasury bills;

Timing of treasury bill issuance.

10.1.2. Checking the conditions of participating entities;

10.1.3. Supervising the opening of bids, determining the winning volume, issue price, and interest on treasury bills;

10.1.4. Approving the auction results and confirming the announcement of the auction results;

10.1.5. Monitoring the auction market dynamics of treasury bills, advising the Ministry of Finance and the State Bank on measures to manage market activities.

10.2. The Ministry of Finance and the State Bank shall be responsible for resolving any disputes and complaints arising during the bidding process and the settlement of Treasury bills.

III. IMPLEMENTATION

1. This Circular takes effect from the date of issuance and replaces Circular No. 01/NHNN-TC dated February 10, 1995, issued jointly by the State Bank and the Ministry of Finance guiding the issuance of Treasury bills through the State Bank, and Circular No. 02/NHNN-TC dated June 4, 1997, amending and supplementing Joint Circular No. 01/NHNN-TC.

2. The State Bank shall coordinate with the Ministry of Finance to issue detailed regulations guiding the bidding for Treasury bills through the State Bank and to organize the implementation of the provisions of this Circular./.