Decree No. 50/2014/ND-CP on State Foreign Exchange Reserves Management

DECREE

On State foreign exchange reserves management

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Pursuant to the Law on Organization of the Government dated December 25, 2001;

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

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

At the proposal of the Governor of the State Bank of Vietnam,

The Government promulgates the Decree on State foreign exchange reserves management.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree stipulates State foreign exchange reserves, State foreign exchange reserves management, accounting entries, reporting, and disclosure of information on State foreign exchange reserves.

Article 2. State foreign exchange reserves management agency

The State Bank of Vietnam (hereinafter referred to as the State Bank) is the agency managing State foreign exchange reserves in accordance with this Decree and relevant laws.

Article 3. Explanation of Terms

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

1. State foreign exchange reserves are foreign currency assets reflected in the balance sheet of the State Bank including:

a) Official State foreign exchange reserves (hereinafter referred to as official foreign exchange reserves) are foreign currency assets owned by the State entrusted by the Government to the State Bank for direct management;

b) Foreign currency deposits and gold of credit institutions, branches of foreign banks (hereinafter referred to as credit institutions), and the National Treasury deposited at the State Bank;

c) Other foreign currency sources.

2. Official foreign exchange reserves include the Foreign Exchange Reserve Fund and the Exchange Rate Stabilization Fund and Gold Market Management Fund.

3. Safeguarding State foreign exchange reserves means ensuring the safety of State foreign exchange reserves through compliance with the approved structure, standards, and investment limits of State foreign exchange reserves.

4. Liquidity of State foreign exchange reserves is the ability to meet foreign currencies and gold for national monetary policy objectives, exchange rate and gold policies, foreign exchange market intervention to ensure international payment capability and to meet urgent foreign currency needs of the State.

5. Profitability is having a positive difference between total income minus investment costs of official foreign exchange reserves in the fiscal year.

6. Investing State foreign exchange reserves means the State Bank depositing, buying, and selling foreign currencies and gold; purchasing and selling securities and other negotiable instruments denominated in foreign currencies; entrusting investments and implementing other forms of investment on the international market as prescribed by the Governor of the State Bank during each period.

7. Investment structure of official foreign exchange reserves includes: Ratios of various foreign currencies and gold quantities; short-term, medium-term, and long-term investment ratios; foreign currency deposit, securities, other negotiable instrument, and other investment form ratios within official foreign exchange reserves and the maximum amount of foreign currency to purchase gold on the international market of the Exchange Rate Stabilization Fund and Gold Market Management Fund as prescribed by the Governor of the State Bank during each period.

8. Investment standards of State foreign exchange reserves include: Credit ratings of partners permitted to invest State foreign exchange reserves, types of securities and negotiable instruments permitted to invest State foreign exchange reserves as prescribed by the Governor of the State Bank during each period.

9. Investment limits of State foreign exchange reserves are the maximum amounts of foreign currency permitted to invest according to partners and investment forms as prescribed by the Governor of the State Bank during each period.

10. Domestic market intervention is the State Bank's purchase, sale, and swap of foreign currencies and gold and implementation of other intervention forms on the domestic market.

Article 4. Components of State Foreign Exchange Reserves

1. Foreign currency cash and foreign currency deposits abroad.

2. Securities and other negotiable instruments denominated in foreign currency issued by the Government, foreign organizations, and international organizations.

3. Special Drawing Rights and reserves at the International Monetary Fund.

4. Gold managed by the State Bank.

5. Other types of foreign exchange of the State.

Article 5. Sources for Forming State Foreign Exchange Reserves

1. Foreign exchange purchased from the state budget and the foreign exchange market.

2. Foreign exchange from bank loans and international financial organizations.

3. Foreign exchange from foreign currency deposits of the State Treasury and credit institutions.

4. Foreign exchange from profits generated from investments in state foreign exchange reserves.

5. Foreign exchange from other sources.

Article 6. Structure, Standards, and Investment Limits for State Foreign Exchange Reserves

1. The State Bank shall stipulate the structure, standards, and investment limits for state foreign exchange reserves, including:

a) Regulations on standards and investment limits applicable to state foreign exchange reserves;

b) Regulations on the investment structure applicable to official foreign exchange reserves, including the investment structure of the foreign exchange reserve fund and the investment structure of the foreign exchange rate stabilization fund and gold market management.

2. Basis for establishing the investment structure of the foreign exchange reserve fund:

a) Trends in foreign exchange rates, interest rates, and gold prices on the international market;

b) Investment situations in various foreign currencies and gold in international reserves of countries worldwide according to statistics from the International Monetary Fund.

3. Basis for establishing the investment structure of the foreign exchange rate stabilization fund and gold market management:

a) Main objectives of monetary policy, exchange rate policy, and gold price policy;

b) Situations of fluctuations in foreign exchange rates and gold prices on domestic and international foreign exchange markets;

c) Usage situations of various foreign currencies in trade payments and debt repayment of Vietnam;

d) Foreign exchange limits of the foreign exchange rate stabilization fund and gold market management determined by

4. Basis for establishing investment standards and limits:

a) Scale of state foreign exchange reserves;

b) Forecasts of developments in the international financial market and the domestic foreign exchange market;

c) Rating systems of reputable global credit rating organizations.

5. Annually and when necessary, the Governor of the State Bank decides to approve the structure, standards, and investment limits for state foreign exchange reserves and reports to the Prime Minister while sending the Ministry of Finance for coordination.

Article 7. Types of Foreign Currency Permitted for Investment in State Foreign Exchange Reserves

Foreign currency permitted for investment in state foreign exchange reserves includes freely convertible foreign currency and other foreign currency as committed in bilateral and multilateral currency swap agreements signed by the State Bank with central banks and international financial organizations.

Article 8. Supervision of Management of State Foreign Exchange Reserves

Annually, the Ministry of Finance supervises the State Bank's management of state foreign exchange reserves in accordance with the provisions of this Decree.

Chapter II

MANAGEMENT OF OFFICIAL FOREIGN EXCHANGE RESERVES

Section 1

GENERAL PROVISIONS

Article 9. Principles of Management of Official Foreign Exchange Reserves

Management of official foreign exchange reserves must ensure the following principles:

1. Preservation.

2. Liquidity.

3. Profitability.

Article 10. Official foreign exchange reserve management operations

The State Bank manages the official foreign exchange reserves through the following operations:

1. Investing in international markets.

2. Intervening in the domestic market.

3. Implementing foreign exchange derivative transactions.

4. Implementing bilateral and multilateral currency swap agreements with central banks and international financial organizations.

5. Other official foreign exchange reserve management operations decided by the Governor of the State Bank for each period.

Article 11. Purchase and sale of foreign currencies between the official foreign exchange reserves and the state budget

1. The Ministry of Finance is responsible for transferring the entire amount of foreign currencies held by the National Treasury at the State Bank.

2. Annually, the Ministry of Finance submits

3. By March 31 each year, the Ministry of Finance sends a document to the State Bank notifying the detailed plan for selling foreign currencies throughout the year by quarter to replenish the official foreign exchange reserves.

4. In cases where the state budget cannot balance foreign currencies for the government's foreign debt repayment and other foreign currency needs of the state budget, the Ministry of Finance will coordinate with the State Bank to develop a plan to balance the sale of foreign currencies for the state budget.

Article 12. Export, import, and conversion of gold

1. Based on the structure, standards, investment limits of the official foreign exchange reserves, and the need for intervention in the domestic gold market during each period, the Governor of the State Bank decides on the export, import of standard international gold, other gold belonging to the official foreign exchange reserves, and the conversion of gold within the official foreign exchange reserves from standard international gold to other types of gold and vice versa.

2. Standards for selecting partners for gold export, import, and conversion are decided by the Governor of the State Bank for each period.

Section 2

MANAGEMENT OF THE FOREIGN EXCHANGE RESERVE FUND

Article 13. Scope of Use of the Foreign Exchange Reserve Fund

The Foreign Exchange Reserve Fund is used for:

1. Investing in international markets.

2. Implementing foreign exchange derivative transactions.

3. Implementing bilateral and multilateral currency swap agreements with central banks and international financial organizations.

4. Transferring and swapping foreign exchange with the Exchange Rate Stabilization Fund and Gold Market Management Fund,

5. Using foreign exchange to meet urgent and critical foreign exchange needs of the State.

Article 14. Swapping Foreign Exchange Between the Foreign Exchange Reserve Fund and the Exchange Rate Stabilization Fund and Gold Market Management Fund

The Governor of the State Bank decides on the swapping of foreign exchange between the Foreign Exchange Reserve Fund and the Exchange Rate Stabilization Fund and Gold Market Management Fund to ensure compliance with the approved investment structure of both funds without changing their balances when converted to US dollars at the time of the swap.

Article 15. Use of the Foreign Exchange Reserve Fund for Urgent and Critical Needs of the State

1. The Ministry of Finance, in coordination with the State Bank, submits to the Prime Minister for a decision on using foreign exchange from the Foreign Exchange Reserve Fund for urgent and critical needs of the State. In cases of temporary advance and loans using foreign exchange, the Ministry of Finance is responsible for recovery and repayment according to the Prime Minister's decision and legal regulations.

2. Based on the Prime Minister's decision and the Ministry of Finance's proposal, the Governor of the State Bank issues a decision on using foreign exchange from the Foreign Exchange Reserve Fund.

Section 3

MANAGEMENT OF THE EXCHANGE RATE STABILIZATION FUND AND GOLD MARKET MANAGEMENT

Article 16. Scope of Use of the Exchange Rate Stabilization Fund and Gold Market Management

The Exchange Rate Stabilization Fund and Gold Market Management shall be used for:

1. Intervening in the domestic foreign exchange and gold markets.

2. Investing on international markets, excluding entrusted investment activities.

3. Implementing foreign exchange derivative transactions.

4. Transferring and swapping foreign currencies with the Foreign Exchange Reserve Fund.

5. Selling or temporarily advancing foreign currencies to meet foreign currency needs arising from operational and management activities of the State Bank.

6. Selling foreign currencies to the state budget according to the approved foreign currency balance plan.

Article 17. Foreign Currency Limit of the Exchange Rate Stabilization Fund and Gold Market Management and the Transfer of Foreign Currencies Between the Exchange Rate Stabilization Fund and Gold Market Management and the Foreign Exchange Reserve Fund

1. The foreign currency limit of the Exchange Rate Stabilization Fund and Gold Market Management shall be decided by the Prime Minister for each period.

2. Based on the foreign currency limit of the Exchange Rate Stabilization Fund and Gold Market Management decided by the Prime Minister and the situation of the domestic foreign exchange and gold markets, the Governor of the State Bank shall decide the maximum amount of foreign currency to purchase gold on international markets by the Exchange Rate Stabilization Fund and Gold Market Management for each period.

3. The Governor of the State Bank shall decide the transfer of foreign currencies from the Exchange Rate Stabilization Fund and Gold Market Management to the Foreign Exchange Reserve Fund when the balance of the Exchange Rate Stabilization Fund and Gold Market Management exceeds the limit decided by the Prime Minister.

4. In cases where the foreign currency balance of the Exchange Rate Stabilization Fund and Gold Market Management does not meet the requirements for domestic market intervention, the Governor of the State Bank shall submit to the Prime Minister for approval to transfer foreign currencies from the Foreign Exchange Reserve Fund to the Exchange Rate Stabilization Fund and Gold Market Management.

Article 18. Domestic Market Intervention

1. Based on the national monetary policy objectives and the fluctuation of exchange rates and gold prices on the domestic market, the State Bank shall establish mechanisms for domestic market intervention for each period.

2. The Governor of the State Bank shall decide specific intervention plans, including:

a) The time of intervention;

b) The type of foreign currency, quantity of foreign currency, and volume of gold for intervention;

c) The exchange rate and gold price for intervention;

d) The form of intervention including buying, selling, and swapping foreign currencies and gold;

đ) The counterparties implementing the intervention;

e) The conversion between international standard gold and other types of gold when necessary;

g) Other related contents.

3. The Governor of the State Bank shall submit to the Prime Minister for approval of intervention forms other than those specified in Point d Clause 2 of this Article.

Article 19. Purchase and Sale of Gold on International Markets for Domestic Market Intervention

1. Based on the structure, standards, investment limits of the Exchange Rate Stabilization Fund and Gold Market Management, the need for gold to intervene in the market during each period, the volume of gold already used for intervention, and national security requirements, the Governor of the State Bank shall decide the purchase and sale of gold on international markets for domestic gold market intervention.

2. The criteria for selecting counterparties for the purchase and sale of gold on international markets for domestic market intervention shall be decided by the Governor of the State Bank for each period.

Chapter III

MANAGEMENT OF FOREIGN CURRENCY DEPOSITS AND GOLD OF THE STATE TREASURY,

CREDIT ORGANIZATIONS AND OTHER SOURCES OF FOREIGN CURRENCIES

Article 20. Principles for managing foreign currency deposits and gold of the State Treasury, credit organizations, and other foreign exchange sources

The State Bank shall manage foreign currency deposits and gold of the State Treasury, credit organizations at the State Bank, and other foreign exchange sources, ensuring the following principles:

1. Ensuring safety through compliance with national foreign exchange reserve investment standards and limits.

2. Timely meeting the foreign exchange needs of the State Treasury and credit organizations when necessary.

3. Liquidity.

Article 21. Business operations for managing foreign currency deposits and gold of the State Treasury, credit organizations, and other foreign exchange sources

The State Bank manages foreign currency deposits and gold of the State Treasury, credit organizations at the State Bank, and other foreign exchange sources through the following business operations:

1. Investing in international markets.

2. Cash in the vault or stored in the warehouse.

3. Other management operations determined by the Governor of the State Bank for each period.

Chapter IV

ACCOUNTING RECORDS, REPORTS, AND INFORMATION DISCLOSURE

Article 22. Accounting entries

1. National foreign exchange reserves are recorded in their original currencies and Vietnamese Dong according to the provisions of the law.

The State Bank conducts revaluation of national foreign exchange reserves on its balance sheet to monitor changes in the value of national foreign exchange reserves in Vietnamese Dong, reflecting fluctuations in domestic and international foreign exchange rates and gold prices.

2. Income and expenses arising from the management of national foreign exchange reserves are recorded as income and expenses of banking operations of the State Bank according to the provisions of the law. Income and expenses arising from the purchase and sale of gold on the international market to serve interventions in the domestic market, exports, imports, gold conversion, and other domestic foreign exchange market interventions are income and expenses serving the objectives of monetary policy, exchange rate policy, and gold management.

Article 23. Reporting System

1. Every six months, the State Bank reports to the Prime Minister on the scale and usage situation of national foreign exchange reserves, concurrently sending it to the Ministry of Finance.

2. Annually and when necessary, the State Bank reports to the Prime Minister on the implementation of the management of national foreign exchange reserves, the projected level of national foreign exchange reserves, the limit of the Exchange Rate Stabilization Fund, and gold market management for the following year, concurrently sending it to the Ministry of Finance.

Article 24. Disclosure of information on national foreign exchange reserves

1. The State Bank discloses information on national foreign exchange reserves according to the provisions of the law.

2. National foreign exchange reserves are converted into US dollars for statistical work, management information, and data publication. The State Bank determines the exchange rate and gold price to convert types of foreign currencies and gold within national foreign exchange reserves into US dollars.

Chapter V

IMPLEMENTING PROVISIONS

Article 25. Effective Date

1. This Decree takes effect from July 15, 2014.

2. This Decree replaces Decree No. 86/1999/NĐ-CP dated August 30, 1999 of the Government on the management of national foreign exchange reserves.

Article 26. Responsibility for Implementation

1. The State Bank is responsible for guiding and organizing the implementation of this Decree.

2. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial and centrally-administered city People's Committees, and related organizations and individuals are responsible for implementing this Decree./.