Circular No. 75 TC/KBNN GUIDING THE ISSUANCE AND PAYMENT OF GOVERNMENT BONDS

CIRCULAR

Guidelines for the issuance and settlement of various types of government bonds

types of government bonds

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Implementing Decree No. 72/CP dated July 26, 1994 of the Government on the issuance regulations of various types of government bonds, the Ministry of Finance guides as follows:

I/ GENERAL PROVISIONS

1/ Government bonds are debt certificates issued by the Ministry of Finance in the following forms:

- Treasury bills: These are short-term bonds under one year, raising funds to cover temporary budget deficits of the State in the fiscal year.

The balance of treasury bills outstanding at the end of the fiscal year (December 31) that have not yet matured shall be considered as loans to cover budget deficits and will be repaid in the following fiscal year.

- Treasury bonds: These are bonds with terms of one year or more, raising funds to cover budget deficits and meet the demand for investment spending within the approved state budget plan.

- Project bonds: These are bonds with terms of one year or more, raising funds for specific projects according to the state's investment plan. Project bonds include two types:

+ Government bonds for central projects, guaranteed for payment by the Ministry of Finance (Central Budget).

+ Government bonds for local projects, guaranteed for payment by the People's Committee of the province or city (Local Budget).

2/ Government bonds include registered and bearer bonds:

- Registered bonds are bonds with the name of the agency, unit, or individual (referred to as the bond buyer) recorded on the bond certificate or registered with the bond issuing authority.

- Bearer bonds are bonds without the name of the bond buyer recorded on the bond certificate or registered with the bond issuing authority.

3/ Government bonds can be issued in the form of bond certificates or book-entry form:

- Bond certificates are standardized by the Ministry of Finance (State Treasury Department) and printed uniformly nationwide, including two types:

+ Type with interest coupons applicable to government bonds with periodic interest payments.

+ Type without interest coupons applicable to government bonds without periodic interest payments (interest paid once upon maturity).

- Bonds issued in book-entry form involve registering the buyer's name with the issuing authority and issuing a certificate of ownership to the buyer.

4/ Government bonds have different denominations, depending on each issuance period, printed on the bond certificate or not printed on the bond but recorded on the bond certificate (or ownership certificate) by the issuing authority according to the buyer's requirements.

5/ Government bonds are recorded and settled in Vietnamese dong. In cases where bonds are purchased with gold or convertible foreign currency, the issuing authority will collect gold and foreign currency and convert them into Vietnamese dong for recording and settlement. The conversion of gold and foreign currency into Vietnamese dong at the time of bond issuance is carried out as follows:

- For gold: Calculated based on the purchase price published by the state-owned jewelry company in the province or city at the time of purchasing the bond.

- For foreign currency: Calculated based on the foreign exchange buying rate published by the Vietnam Commercial Bank or state-owned commercial bank in the province or city at the time of purchasing the bond.

If the amount of gold or foreign currency converted into Vietnamese dong does not match the bond denomination, the issuing authority will handle it as follows: The bond buyer must pay the additional difference to purchase a higher denomination bond or receive the excess difference converted into Vietnamese dong from the issuing authority compared to the bond denomination.

6/ Interest rates on government bonds:

- The interest rate on government bonds is announced by the Ministry of Finance for each issuance period (after consultation with the State Bank of Vietnam) to ensure that bond buyers receive the actual interest rate plus the inflation index.

- Basis for determining the interest rate on bonds:

+ Inflation rate and price fluctuations during each period as published by the General Statistics Office.

+ Term of the bond: Bonds with longer terms have higher interest rates than those with shorter terms.

+ Demand for capital raising and ability to issue bonds.

- Methods for determining the interest rate:

+ Fixed interest rate applied throughout the issuance period.

+ Annual interest rate applied during the issuance period, adjusted according to market price fluctuations and average projected inflation, and the need for capital raising each year to determine and announce the interest rate.

+ Directed interest rate for organizations to bid for the issuance interest rate: this is the maximum bidding rate for bonds that participating organizations can bid. The directed interest rate will be announced by the Ministry of Finance in the tender notice.

7/ Subjects eligible to purchase government bonds include:

- Vietnamese citizens residing in Vietnam, overseas Vietnamese; foreigners legally working and living in Vietnam (including foreigners visiting or conducting short-term business trips in Vietnam).

- Vietnamese enterprises in all sectors and economic components, including commercial banks, credit organizations, finance companies, insurance companies, insurance funds, investment funds...

- Mass organizations using their legitimate funds to purchase government bonds.

- Foreign-invested enterprises operating in Vietnam under the Law on Foreign Investment and the Banking Ordinance, must submit a request to purchase government bonds along with a copy of their business license to the Ministry of Finance (State Treasury Department) for review and approval of the sale of government bonds.

Article 8. The buyer of government bonds has the right to choose various types of government bonds without any quantity limit. Government bonds can be freely bought, sold, transferred, inherited, and used as collateral in credit relationships.

The transfer of ownership of registered government bonds shall be carried out at the State Treasury where the bonds were issued, without charge.

Government bonds may not be used to replace currency in circulation or to pay taxes to the state.

Article 9. Organization of printing, distribution, and storage of government bonds:

- The Ministry of Finance (State Treasury Department) organizes the printing, storage, and distribution of government bonds to State Treasury units or government bond selling agents. The handover, transportation, storage, and management of government bonds shall be conducted like cash and other valuable instruments.

- Units and individuals entrusted with the issuance, payment, and management of government bonds who lose or damage a bond must bear material compensation according to current regulations and disciplinary action depending on the severity of the violation.

- The owner of the bond is responsible for storing the bond as they would with cash.

- For bearer bonds: If lost, the bond will not be paid.

- For registered bonds that are lost, if the bondholder proves their ownership and the bond has not been fraudulently used for payment, the State Treasury will pay the principal and interest when due.

- Bonds that are torn, damaged, repaired, erased... will have no payment value. Any actions creating counterfeit bonds will be dealt with according to the Law.

- The bondholder may deposit the bond at the State Treasury or Bank for safekeeping and must pay a storage fee as stipulated in Point 4, Section B, Part III of this Circular.

II/ SPECIFIC PROVISIONS

A. ISSUANCE.

1. The issuance of government bonds is carried out in batches; seven days before each batch of government bond issuance, the Ministry of Finance (State Treasury Department) will announce on mass media the relevant contents related to the issuance of government bonds such as: issuance amount, term, interest rate, face value, issuance time, location, benefits for bond buyers, and other regulations regarding the issuance and repayment of principal and interest of bonds.

2. Ministries, Sectors, Provincial People's Committees, City People's Committees wishing to issue construction bonds must meet the following conditions and submit the following documents:

- The project is included in the national investment plan.

- There is an approved investment project by the competent authority: Sector Management Ministry (for central programs), Provincial People's Committee, City People's Committee (for local projects).

- There is an approved bond issuance plan by the Ministry of Finance ensuring the recovery of funds to repay the principal and interest as prescribed.

- There is a request to the Ministry of Finance for permission to issue construction bonds according to the form prescribed by the Ministry of Finance (State Treasury Department).

- There is a designated agency responsible for managing, using funds, and recovering funds to repay debt, which has been agreed upon by the Ministry of Finance.

These documents must be submitted to the Ministry of Finance (State Treasury Department) 45 days before the planned issuance date for review and issuance of a decision on the issuance of construction bonds.

3. Methods of issuing government bonds:

3.1. For Treasury bills:

a) The Ministry of Finance agrees with the Central Bank on the total issuance amount, term, maximum interest rate, issuance time to organize the auction of Treasury bills according to the government bond auction regulation prescribed by the Ministry of Finance. Successful bidders can resell Treasury bills directly to the target groups and enjoy the discount rate as specified by the Governor of the Central Bank.

b) Provincial, city, district, and county State Treasury units can directly sell retail Treasury bills to the target groups.

3.2. For Treasury bonds and construction bonds:

a) Direct issuance through the State Treasury system: Provincial, city, district, and county State Treasury units directly organize the issuance of various types of Treasury bonds and construction bonds to the target bond buyers according to the regulations of the Ministry of Finance and specific guidance from the State Treasury Department.

b) Issuance through agents:

- Agents for issuing bonds include commercial banks, financial companies, insurance companies, and credit organizations under provincial and central management. Agents receive a commission as stipulated in Point 1, Part B, Section III of this Circular.

- Bond-selling agents must meet the following conditions:

+ Have legal entity status, operating capital of VND 5 billion or more.

+ Be an effective business unit with good financial and monetary management.

+ Submit a request to become a bond-selling agent to the State Treasury Department or Branch, and deposit a guarantee fund at the State Treasury agency where the agent is appointed, equal to 5% of the total value of bonds sold as an agent in each batch.

- State Treasury Branches select and sign contracts with agent units for issuing government bonds according to the guidance of the State Treasury Department.

- At the end of each day, bond-selling agents must transfer the proceeds from bond sales to the State Treasury agency where the agency contract was signed. At the end of each issuance batch, the State Treasury and the agency carry out contract settlement.

c) Issuance through bidding: The Ministry of Finance will issue separate regulations and guidelines.

B. PAYMENT:

1. The principal and interest of government bonds are paid according to the following principles:

a) The principal of the bond is paid once when it matures.

- In case the bondholder encounters special difficulties and requests early payment, the State Treasury will consider and resolve the matter but will not receive interest.

- In case the bondholder does not come to make payment when it is due, they will receive interest equivalent to the interest rate of non-fixed-term savings deposits at the bank; or depending on each issuance batch, the Ministry of Finance may stipulate the transfer of the principal amount to purchase newly issued government bonds from the due date of payment.

b) Interest on government bonds is calculated according to the following methods:

- Immediate payment upon issuance: Government bonds that pay interest immediately upon issuance are also known as discount bonds. Instead of paying interest at maturity, the bonds are sold below face value equivalent to the lump-sum interest received and redeemed at face value at maturity.

- Periodic payment: every six months or annually depending on each issuance period.

- Single payment at maturity together with the principal of the bond.

If the interest payment due date arrives but the bondholder has not come to make the payment, the amount of interest will be reserved for repayment when the bondholder requests it, without compound interest.

The Ministry of Finance shall specify the specific method of paying interest on government bonds for each issuance period.

2/ The method of paying government bonds is implemented as follows:

a) For Treasury bills issued through the State Bank: The Ministry of Finance (National Treasury Department) transfers funds to the Central State Bank to pay the principal and interest of Treasury bills due directly to the owners of the Treasury bills.

b) For Treasury bonds and Treasury bills issued directly by the National Treasury or issued through agents, they are paid at the National Treasury units. Specifically, construction bonds are paid at local or regional National Treasury offices where the bonds were issued.

3/ Bondholders may submit a request accompanied by the bond to the National Treasury to transfer the entire principal and interest of the bond to the address or account requested by the bondholder and must pay the fee specified in Point 5, Section B, Part III of this Circular, which is deducted from the amount of the bond received.

4/ In cases where the bondholder is overseas Vietnamese or foreign individuals wishing to convert the principal and interest of the bond from Vietnamese dong to foreign currency, it must be carried out in accordance with the foreign exchange management regulations of Vietnam and the provisions on buying, selling, and converting foreign currency of the Bank.

III/ MANAGEMENT OF REVENUE SOURCES AND EXPENSES FOR THE ISSUANCE,

PAYMENT OF GOVERNMENT BONDS.

A/ MANAGEMENT OF REVENUE SOURCES AND FUNDS FOR PAYING

GOVERNMENT BONDS.

1/ All revenues from issuing Treasury bills and Treasury bonds are centralized at the National Treasury Department to record in the Central Budget.

2/ For revenues from construction bonds (central and local), they are recorded in separate accounts managed by the National Treasury Department and Branches, directly providing capital for projects under the state's investment capital management and disbursement system.

3/ Sources of funds for payments:

- For Treasury bills and Treasury bonds, the State Budget Revenue Department regularly processes the transfer of central budget funds to the National Treasury Department to transfer to the Central State Bank and Branches of the National Treasury to pay bondholders. In case of maturity, if the central budget funds are insufficient, the National Treasury can borrow from the reserve fund to pay according to the current advance payment system for the state budget.

- For construction bonds: Regularly, project managers must transfer basic depreciation income, remaining income after tax payment as prescribed by Law, and other project funds to the National Treasury (National Treasury Department for central projects, Branches of the National Treasury for local projects); In case of insufficient revenue, the National Treasury notifies the State Budget Revenue Department and the Department of Finance and Prices to draw from the central budget or local budget to guarantee payment and reimbursement when the project generates revenue.

B/ EXPENSES:

1/ All expenses related to issuing and paying Treasury bills and Treasury bonds are guaranteed by the Central Budget, including:

a) Expenses for printing bonds and stamps: paid according to contracts with printing agencies.

b) Issuance and payment expenses for Treasury bills at 0.5% of the issuance volume, of which the commission for agents selling is 0.25% of the total value of bonds sold.

2/ All expenses serving the issuance and payment of construction bonds are guaranteed by the project owner and recorded in the project cost.

The content and expense standards are implemented as stipulated in Point 1 above.

3/ Expenses for issuing and paying Treasury bills through the State Bank are calculated according to the standards prescribed in Point 1 b above and recorded in the operational costs of the Bank and settled with the state budget.

4/ Fees for safekeeping and custodial services for government bonds are paid by bondholders at 0.1% of the bond value throughout the issuance period.

5/ Transfer fees for paying bondholders are charged at the postal service rate (if in cash) and bank transaction fees (if by bank transfer).

6/ National Treasury units and agents issuing government bonds have the responsibility to settle periodically monthly, quarterly, annually, and for each issuance period, the payment of government bonds with the Ministry of Finance (National Treasury Department). The National Treasury Department is responsible for consolidating and settling all bond issuance and payment activities with the Ministry of Finance (state budget), specifically as follows:

- Revenues from government bonds deposited in the state budget, amounts paid for principal and interest, amounts already paid by the state budget, temporarily advanced funds through the National Treasury, temporarily advanced funds still owed by the National Treasury. Amounts already guaranteed by the state budget (central budget, local budget) for the payment of construction bonds; amounts repaid by enterprises and amounts still owed to the state budget.

- The total number of bonds issued, damaged, torn, lost, currently existing, and the usage status of various stamps.

IV/ RESPONSIBILITIES AND LIMITATIONS OF THE AUTHORITIES INVOLVED IN

THE ISSUANCE AND PAYMENT OF GOVERNMENT BONDS.

1/ The National Treasury System is responsible for:

- Annually, together with the State Budget Department, prepare plans for issuing and settling (principal and interest) government bonds to be included in the State Budget plan, to be submitted to the Government and the National Assembly for approval.

- Organize printing, storage, and transfer of bonds to units tasked with issuing bonds, ensuring absolute safety.

- Organize the sale and settlement of government bonds, ensuring promptness, accuracy, and convenience for buyers in accordance with current regulations.

- Organize guidance on accounting entries for bond issuance and settlement operations, ensuring safekeeping and retention of documentation related to the issuance and settlement of government bonds, ensuring the safety of state assets.

- Fully and promptly concentrate all proceeds from the sale of government bonds into the Central State Budget.

- Concentrate the revenue from construction bonds to directly allocate for projects according to the state's management and allocation system for basic construction capital.

- Closely coordinate with banking agencies to plan and regulate cash flow to ensure timely and convenient settlement of government bonds for their holders upon maturity.

- Implement regular reporting and comprehensive reporting after the completion of each bond issuance and settlement period.

2/ The State Bank of Vietnam:

- Coordinate with the Ministry of Finance to calculate and determine the interest rates for various types of government bonds.

- Coordinate with the Ministry of Finance to organize the issuance, management, and settlement of Treasury bills through the banking system.

3/ Ministries, sectors, and localities with project issuance of construction bonds:

- Prepare annual plans for issuing construction bonds to send to the Ministry of Finance and the State Planning Commission.

- Approve economic and technical feasibility studies for investment projects and proposals for issuing construction bonds, and issue written requests to the Ministry of Finance to consider and decide on bond issuance.

- Provincial People's Committees (local budgets) are responsible for guaranteeing the settlement of local construction bonds.

- Coordinate with the Ministry of Finance to inspect and supervise bond issuance and settlement, the use of funds, and the recovery of investment capital.

- Annually prepare comprehensive reports on the issuance and settlement of bonds, and on investment projects funded by bond issuance proceeds, to be sent to the Ministry of Finance for consolidation.

4/ Agents:

- Perform agency duties for issuing various types of government bonds according to signed contracts.

- Organize strict management and storage of bonds in accordance with the Ministry of Finance's regulations.

- Are permitted to buy and sell various types of government bonds that have not yet reached maturity at agreed prices with bondholders.

V/ IMPLEMENTATION

- This Circular takes effect from the date of signature. Previous provisions contrary to this Circular are no longer in effect.

- Ministers of ministries, heads of ministerial-level agencies, heads of government-affiliated agencies, and Chairmen of provincial and municipal People's Committees directly under the central government are responsible for coordinating with the Ministry of Finance to implement this Circular.

- Director of the State Treasury, heads of relevant units under the Ministry of Finance, and Directors of Provincial and Municipal Departments of Finance and Prices are responsible for guiding and organizing the implementation of the provisions of this Circular./.