Circular No. 46/2017/TT-BTC guiding the settlement of government bond transactions, government-guaranteed bonds, and local government bonds.

CIRCULAR

Guidelines for the operation of government bond trading transactions, government-guaranteed bonds, and local government bonds

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Pursuant to the Securities Law dated June 29, 2006;

Pursuant to the Law Amending and Supplementing Certain Provisions of the Securities Law dated November 24, 2010;

Pursuant to Decree No. 58/2012/NĐ-CP dated July 20, 2012 of the Government detailing and guiding the implementation of certain provisions of the Securities Law and the Law amending and supplementing certain provisions of the Securities Law;

Pursuant to Decree No. 60/2015/NĐ-CP dated June 26, 2015 of the Government amending and supplementing certain provisions of Decree No. 58/2012/NĐ-CP dated July 20, 2012 of the Government detailing and guiding the implementation of certain provisions of the Securities Law and the Law amending and supplementing certain provisions of the Securities Law;

Pursuant to Decree No. 01/2011/NĐ-CP dated January 5, 2011 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013, promulgated by the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Chairman of the State Securities Commission;

The Minister of Finance issues this Circular guiding the operation of government bond trading activities, government-guaranteed bonds, and local government bonds.

Article 1. Scope of Regulation and Applicability

1. This Circular stipulates the operation of government bond trading activities, government-guaranteed bonds, and local government bonds (hereinafter referred to as government bonds) listed and traded at the Stock Exchange.

2. The subjects to which this Circular applies include: The Vietnam Securities Depository, State Treasury, government bond trading settlement bank, settlement member banks, direct account opening organizations, direct payment organizations, indirect payment organizations, and agencies, organizations, and individuals participating in government bond trading.

Article 2. Interpretation of Terms

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

1. Government bond trading settlement bank is the State Bank of Vietnam performing the function of settling payments for government bond transactions on the Stock Exchange.

2. is a commercial bank with a settlement account at the State Bank of Vietnam's Trading Center and a direct member of the interbank electronic payment system, performing the function of settling funds for indirect payment organizations and/or itself. is a commercial bank with a transaction deposit account at the State Bank of Vietnam's Stock Exchange and a direct member of the inter-bank electronic payment system, performing the function of settling payments for government bond transactions for indirect payment organizations and/or itself.

3. is a method of settling funds and debt instruments where the transfer of funds and debt instruments between parties involved in transactions through the State Bank of Vietnam and the Vietnam Securities Depository is carried out on a transaction-by-transaction basis immediately upon the buyer transferring funds and the seller transferring debt instruments. is a method of payment where the transfer of funds between parties involved in the transaction through the State Bank of Vietnam is carried out on a per-transaction basis immediately upon the buyer transferring funds.

4. is an organization that opens a direct securities custody account at the Vietnam Securities Depository and uses its custody and settlement services based on a service provision contract with the Vietnam Securities Depository. is an organization that opens a direct securities deposit account at the Vietnam Securities Depository and uses the deposit and settlement services of the Vietnam Securities Depository based on a service provision contract with the Vietnam Securities Depository.

5. is an organization that directly performs debt instrument transaction fund settlements within the interbank electronic payment system of the State Bank of Vietnam. is an organization that directly performs government bond transaction settlements within the inter-bank electronic payment system of the State Bank of Vietnam.

6. is an organization not a member of the interbank electronic payment system of the State Bank of Vietnam and must open an account at a member settlement bank to perform its own and its customers' debt instrument transaction settlements; including: securities companies that are custodians, direct account opening organizations that are not commercial banks, and the Vietnam Securities Depository. is an organization that is not a member of the inter-bank electronic payment system of the State Bank of Vietnam and must open an account at a settlement member bank to perform its own and its customers' government bond transaction settlements; including: securities companies that are deposit members, direct account opening organizations that are not commercial banks, and the Vietnam Securities Depository.

Article 3. Organizations participating in the government bond trading settlement system

1. Organizations transferring government bonds on the account custody system at the Vietnam Securities Depository Center include:

a) Custody members conducting settlements for their own government bond trading activities and those of their clients;

b) Direct account opening organizations conducting settlements for their own government bond trading activities;

c) State Treasury conducting settlements for secondary market transactions of government bonds;

d) The Vietnam Securities Depository Center conducting settlements for government bond trading activities serving derivative securities business operations in the role of central counterparty.

2. Organizations directly settling funds through the inter-bank electronic payment system of the State Bank of Vietnam include:

a) State Bank of Vietnam Trading Center;

b) Member banks settling according to Clause 2, Article 2 of this Circular, where custody members are commercial banks and direct account opening organizations are commercial banks;

c) State Treasury.

Article 4. Methods and principles for organizing the government bond trading settlement system

1. Settlements for the purchase and sale of listed government bonds on the Stock Exchange shall be conducted on a transaction-by-transaction basis.

2. Based on transaction data provided by the Stock Exchange, the Vietnam Securities Depository Center will determine each party's payment obligations for money and government bonds and transmit payment information to the State Bank of Vietnam.

3. Government bond transfers shall be carried out through the Vietnam Securities Depository Center's system based on the transfer of government bonds between custody accounts of organizations specified in Clause 1, Article 3 of this Circular, ensuring that the seller has sufficient government bonds for transfer on the settlement date and the buyer has sufficient funds to settle the government bond transaction.

4. Direct payment settlements among organizations specified in Clause 2, Article 3 of this Circular through the State Bank of Vietnam shall be conducted via the inter-bank electronic payment system.

5. In cases where customers open custody accounts with commercial bank custody members and place trading orders through securities companies acting as government bond trading members, the trading settlement shall be conducted by the commercial bank custody member.

6. Indirect payment organizations have the responsibility to select a member bank to settle payments for themselves and their clients.

7. The time for government bond trading settlements shall be determined by the Securities Commission based on consensus with the State Bank of Vietnam. The Vietnam Securities Depository Center shall guide the procedures and formalities for government bond trading settlements.

Article 5. Member Banks for Payment Settlements

1. Rights of the Payment Member Bank:

a) To be designated as the point of contact to perform the functions of a Payment Member Bank;

b) Shall request indirect payment organizations to comply with payment agreements between parties and provide necessary information to facilitate government bond trading settlements;

c) To collect service fees according to the provisions of the law.

2. Obligations of member banks for payment settlements:

a) To make full and timely payments as prescribed for their own government bond transactions and those of indirect payment organizations;

b) To support indirect payment organizations with settlement funds when such organizations temporarily lack sufficient funds for settlement, in accordance with pre-agreed settlement support arrangements between parties, consistent with applicable laws;

c) To register complete and accurate information in accordance with the guidelines of the State Bank of Vietnam and the Vietnam Securities Depository Center;

d) To connect with the Vietnam Securities Depository Center to receive information about government bond transaction payments;

đ) To comply with obligations under the regulations on inter-bank electronic payment system operations issued by the State Bank of Vietnam;

e) To comply with regulations on government bond trading settlement activities issued by the Vietnam Securities Depository Center;

g) To comply with information disclosure, reporting, and information security requirements as prescribed by law.

3. Commercial banks placed under special supervision by the State Bank of Vietnam shall not be eligible to register as member banks for payment settlements with the Vietnam Securities Depository Center.

4. Member banks for payment settlements failing to fully fulfill their obligations as stipulated in Clause 2 of this Article or being placed under special supervision by the State Bank of Vietnam shall be suspended from providing payment settlement services for indirect payment organizations.

5. The State Bank of Vietnam shall notify the Vietnam Securities Depository Center when a member bank for payment settlements is placed under or released from special supervision by the State Bank of Vietnam.

Article 6. Comparison, Confirmation, and Error Handling for Government Bond Transactions

1. After receiving the transaction results from the Vietnam Securities Depository Center, depositary members, direct account-opening organizations, and the State Treasury have the responsibility to compare and confirm again with the Vietnam Securities Depository Center.

2. In cases where the trading member is a securities company, the depositary member is a commercial bank, and the direct account-opening organization incorrectly enters the self-operating account number into the government bond trading system of the Stock Exchange, the Vietnam Securities Depository Center will adjust the account number to the correct self-operating account number of the trading member to execute the transaction settlement.

3. Except for the case stipulated in Clause 2 of this Article, the Vietnam Securities Depository Center will remove transactions and not settle for erroneous transactions of trading members. Trading members are responsible for compensating losses arising therefrom (if any) to related counterparties due to non-settlement of transactions.

4. The comparison, confirmation, and error handling for payment orders of government bond transactions shall be carried out in accordance with the regulations of the State Bank of Vietnam.

Article 7. Measures to Address Temporary Insufficiency in Payment Capability for Government Bond Transactions

1. An indirect payment organization temporarily lacking payment capability for government bond transactions may use loans from member banks according to the payment support agreement signed between the parties in compliance with the law. If the payment support agreement of both parties specifies the use of securities as collateral for the loan, the Vietnam Securities Depository Center will freeze the securities at the request of the member bank.

2. Member banks that temporarily lack payment capability for government bond transactions, depositary members which are commercial banks, and direct account-opening organizations which are commercial banks can be supported by the State Bank of Vietnam through overdraft operations and overnight lending to execute the payment of government bond transactions.

3. In cases where the buyer still lacks funds to make the payment by the specified deadline, the Vietnam Securities Depository Center will postpone the payment deadline for the transaction temporarily lacking payment capability upon the buyer's request and the seller's approval. The postponement of the payment deadline shall be carried out in accordance with Clause 4 of this Article.

4. The postponement of the payment deadline is carried out according to the following principles:

a) The maximum postponement period is two (02) working days from the payment date of the transaction lacking funds;

b) Where the buyer has sufficient funds to make the payment within the deadline specified in Point a of this Clause, the postponed payment transaction will be settled as a regular government bond transaction.

c) Where the buyer does not have sufficient funds to make the payment by the deadline, the Vietnam Securities Depository Center will remove the transaction payment according to the provisions of Article 8 of this Circular.

5. The buyer who lacks funds and whose transaction has been postponed must bear full responsibility for any losses incurred to customers and related members due to non-payment of the transaction according to the specified deadline. The compensation amount shall be agreed upon by the parties in accordance with current laws.

6. The Vietnam Securities Depository Center will provide detailed guidance on measures to address temporary insufficiency in payment capability for government bond transactions.

Article 8. Removal of Government Bond Transaction Settlements

1. The Vietnam Securities Depository shall remove Government Bond transaction settlements in the following cases:

a) Transactions as stipulated in Clause 3, Article 6 of this Circular;

b) Transactions lacking funds on the settlement date but not requesting the Vietnam Securities Depository to apply a deferred settlement period;

c) Transactions with deferred settlement periods that still lack sufficient funds for settlement upon expiration of the deferral period;

d) Short-selling transactions of Government Bonds without guidance from the Ministry of Finance.

2. The Vietnam Securities Depository shall promptly notify the Stock Exchange, relevant organizations immediately after implementing the removal of Government Bond transaction settlements.

3. The party causing errors leading to the removal of transaction settlements shall bear full responsibility for losses incurred to customers or counterpart members due to non-settlement of transactions. The compensation amount shall be agreed upon by the parties according to current laws.

Article 9. Handling Violations by Depository Members, Direct Account Opening Organizations, and Settling Member Banks with Insufficient Settlement Capacity

Depository members, direct account opening organizations, and settling member banks with insufficient settlement capacity for Government Bond transactions must implement support mechanisms or face deferred settlement periods, and transaction removals will be subject to handling based on the degree of violation. Violation handling shall be carried out according to current laws. Additionally, depository members must also comply with the regulations of the Vietnam Securities Depository.

Article 10. Reporting Obligations

1. The Vietnam Securities Depository has the obligation to report to the State Securities Commission according to current regulations to facilitate the Commission's supervisory work.

2. The Vietnam Securities Depository and settling member banks must report to the State Securities Commission within twenty-four (24) hours from when the Government Bond settlement system or payment system encounters issues.

3. In necessary cases, to protect investor interests, the State Securities Commission may request the Vietnam Securities Depository and settling member banks to report on Government Bond transaction settlement activities. Within forty-eight (48) hours from receiving the Commission's request, the Vietnam Securities Depository and settling member banks must submit reports as required.

Article 11. Implementation Organization

1. This Circular takes effect from August 1, 2017. From the date this Circular takes effect, the provisions of Circular No. 05/2015/TT-BTC dated January 15, 2015, issued by the Minister of Finance guiding the registration, custody, netting, and settlement of securities transactions for Government Bond transactions, guaranteed bond transactions, and local government bond transactions shall no longer be applied.

2. The State Securities Commission, Government Bond trading settlement banks, the Vietnam Securities Depository, and participants in Government Bond transactions have the responsibility to implement this Circular.

3. The Vietnam Securities Depository is responsible for improving systems, information technology infrastructure, and issuing operational regulations to guide the provisions of this Circular.