Circular No. 02/2021/TT-NHNN on guiding forex transactions of licensed credit institutions in forex market

CIRCULAR

On guiding forex transactions of licensed credit institutions in forex market

^__________

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

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010 and the Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions No. 17/2017/QH14 dated November 20, 2017;

Pursuant to the Ordinance on Foreign Exchange dated December 13, 2005 and the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange dated March 18, 2013;

Pursuant to the Government’s Decree No. 70/2014/ND-CP dated July 17, 2014, detailing a number of articles of the Ordinance on Foreign Exchange and the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government’s Decree No. 16/2017/ND-CP dated February 17, 2017, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Monetary Policy Department;

The Governor of the State Bank of Vietnam hereby promulgates the Circular on guiding forex transactions of licensed credit institutions in forex market.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Circular guides on domestic foreign exchange transactions between credit institutions licensed to engage in foreign exchange transactions and domestic foreign exchange transactions between credit institutions licensed to engage in foreign exchange transactions and their customers in forex market.

2. Foreign exchange transactions between credit institutions licensed to engage in foreign exchange transactions and the State Bank of Vietnam (hereinafter referred to as the State Bank) shall comply with specific regulations of the State Bank.

3. This Circular does not regulate international foreign exchange transactions. licensed credit institutions shall conduct such transaction within the scope specified in the establishment and operation licenses or decisions amending and supplementing licenses according to the State Bank’s regulations or decisions on approval of other foreign exchange transactions for a definite time and/or other documents issued by the Government, Prime Minister and the State Bank (hereinafter collectively referred to as licenses), be liable for such transactions, and comply with the law on assurance of safety and risk prevention.

Article 2. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Credit institutions licensed to engage in foreign exchange transactions mean banks, non-bank credit institutions and foreign bank branches licensed to engage in foreign exchange business and supply of foreign exchange services (hereinafter referred to as licensed credit institutions).

2. Customers include:

a) Residents being economic institutions (including credit institutions other than licensed credit institutions), other organizations and individuals;

b) Non-residents being organizations and individuals.

3. Economic institution means an organization established and operating under Vietnamese law, including enterprises, cooperatives, unions of cooperatives and other organizations engaged in investment business, excluding licensed credit institutions.

4. Other organizations mentioned at Point a, Clause 2 of this Article mean those established and operating under Vietnamese law, except for organizations prescribed in Clause 1 and Clause 3 of this Article.

5. Partners of licensed credit institutions include other licensed credit institutions and customers.

6. Types of foreign exchange transactions include: spot foreign exchange transactions; forward foreign exchange transactions; foreign exchange swap transactions; foreign currency option transactions.

The term “foreign currency transaction” in this Circular has the same meaning as the term “foreign exchange transaction” as stipulated in other legal normative documents promulgated by the State Bank Governor.

7. Spot foreign exchange transaction (hereinafter referred to as spot transaction) means a transaction where the two parties commit to buy or sell a volume of foreign currency with another foreign currency at a rate determined at the trading time and the payment period of maximum 02 (two) working days from the trading day.

8. Forward foreign exchange transaction (hereinafter referred to as forward transaction) means a transaction where the two parties commit to buy or sell a volume of foreign currency with another foreign currency at a rate determined at the trading time and the payment period of at least 03 (three) working days from the trading day.

9. Foreign exchange swap transaction (hereinafter referred to as swap transaction) means a transaction between two parties, including the purchase and sale of the same volume of foreign currency with another foreign currency, of which the payment date and rate determined at the trading time of two transactions are different.

Swap transaction includes two spot transactions or two forward transactions or one spot transaction and one forward transaction.

10. Foreign currency option transaction (hereinafter referred to as option transaction) means a transaction between two parties where the purchasing party pays for the selling party a premium to own the rights but not obligations to purchase or sell a volume of foreign currency with another foreign currency within a pre-determined settlement date at a rate determined at the trading time and make the payment in the future. If the purchasing party choose to perform rights, the selling must execute obligations as committed.

In the option transaction, the put option of this currency concurrently is the call option of another currency.

11. Premium means an amount of money that the purchasing party shall pay for the selling party to purchase the currency call option or currency put option in the option transaction.

12. Expiration date of the option transaction means the last date on which the purchasing party is entitled to choose to perform its rights, but not exceed 02 (two) working days before the payment date. 

13. Trading date means the date on which the two parties enter into a transaction agreement as prescribed in this Circular.

14. Settlement date means the date on which the two parties transfer the volume of currency purchased or sold according to the transaction agreement that has been made. If the settlement date falls on a holiday or weekend of Vietnamese foreign exchange market and/or the payment processing market of the foreign currency used in the transaction, then, it shall be on the next working day.

15. Transaction department means a professional department of a licensed credit institution, in charge of foreign exchange transaction negotiation with its partners.

16. Transaction assistance department means a professional department of a licensed credit institution, in charge of making, sending and receiving confirmation of the transactions with its partners.

17. Transaction representative means an individual in a transaction department who is authorized in writing by a licensed credit institution in accordance with law regulations. Such a power of attorney must determine competence to make transaction agreements with partners that are other licensed credit institutions.

18. Competent person means an individual who is responsible for approving contents within his/her functions and tasks assigned by a licensed credit institution in its internal regulations.

Article 3. Principles of transactions

1. Foreign exchange transactions must be carried out in accordance with this Circular and the scope of foreign exchange operations of each credit institution, foreign bank branch as stated in its license. For foreign exchange transactions that credit institutions and foreign bank branches are not licensed to trade or provide, such credit institutions and foreign bank branches shall only carry out foreign exchange transactions with licensed credit institutions as economic institutions as prescribed in this Circular.

2. Parties involved in foreign exchange transactions must make and implement transactions in an honest and precise manner and shall be responsible for its transaction-related decisions.

3. Foreign exchange transactions with a licensed credit institution shall only be carried out by head offices of a bank, non-bank credit institution or Vietnam-based head offices of a foreign bank branch licensed to conduct foreign exchange business or provide foreign exchange services. This regulation does not apply to currency transactions of countries sharing the same border with Vietnam in border areas or border gate economic zones.

Article 4. Types and scope of licensed transactions

1. Licensed credit institutions are entitled to carry out the spot transactions, forward transactions, swap transactions and option transactions with other licensed credit institutions.

2. Licensed credit institutions are entitled to perform the spot transactions, forward transactions, swap transactions, and transactions on sale of options with economic institutions.

3. Licensed credit institutions are entitled to perform the spot transactions and forward transactions with residents being organizations and individuals.

4. Licensed credit institutions are entitled to perform the spot transaction with non-residents being organizations and individuals and perform forward transactions on selling foreign currencies with non-residents as prescribed in Clause 5 of this Article.

5. Licensed credit institutions are entitled to perform forward transactions on selling foreign currencies with non-residents being foreign investors who hold Government bonds issued in Vietnam dong in domestic market in order to prevent risks for the invested bonds.

Article 5. Currency used in transaction and transaction exchange rate

1. Licensed credit institutions must stipulate foreign currencies used at credit institutions.

2. Spot rate between Vietnam dong and US dollar in spot transaction, spot transaction in swap transaction shall be determined according to the central rate announced by the State Bank on the trading day and in the amplitude decided by the State Bank.

3. Forward rate of Vietnam dong and US dollar in forward transaction, forward transaction in swap transactions shall be agreed among parties but not exceed the rate determined based on:

a) Spot rate at the trading day;

b) Differences between two applicable interest rates, including refinancing interest rate announced by the State Bank and federal funds target rate of the US Federal Reserve. In case the federal funds target rate falls within the amplitude, the lowest interest rate in such amplitude shall be applied.

c) Transaction term.

4. The foreign exchange rate between Vietnam dong and other foreign currencies excluding US dollar and the foreign exchange rate between foreign currencies in foreign exchange transactions shall be agreed by both parties.

5. Licensed credit institutions must list the spot rate between Vietnam dong and other foreign currencies in transactions with customers at foreign exchange transaction locations of the licensed credit institutions and on their official websites (if any). Licensed credit institutions shall carry out transactions with customers at the listed foreign exchange rate, unless otherwise agreed by both parties at the trading time.

Article 6. Term of transactions

1. Term of a forward transaction, forward transaction in swap transaction or option transaction shall be subject to both parties’ agreement, except for the case specified in Clause 2 of this Article.

2. Term of a forward transaction, forward transaction in swap transaction between Vietnam dong and foreign currencies shall be up to 365 (three hundred and sixty-five) days from the trading date.

Article 7. Method of transaction

1. Foreign currency transactions shall be carried out directly or via other means of transaction, including telephones and electronic devices.

2. Foreign exchange transactions shall be carried out via telephones and electronic devices as agreed by both parties. Both parties shall take responsibilities and ensure security, safety and protect data messages and information confidentiality in accordance with law regulations. Data messages have the same value as text if they meet requirements specified in Article 12 of the Law on E-transactions. Foreign exchange transaction made through electronic devices must be complied with the law on E-transactions and relevant guiding documents.

3. If a transaction is made via mobiles, the licensed credit institution must stipulate regulations and notify its partners of telephone numbers allowed to be used for transaction. The telephone must have a recording function and ensure that the content of the transaction agreement with the partner is accessible for use for the purpose of establishing transaction confirmation, credit institution's internal control and dispute resolution (if any).

Article 8. Transaction fees

Licensed credit institutions are not allowed to charge transaction fees on foreign exchange transactions.

Article 9. Trading time

1. Licensed credit institutions shall provide the trading time with their partners.

2. With regard to transactions incurred outside the prescribed time, the licensed credit institutions must organize transaction management and control measures in order to prevent risks. Transactions outside the prescribed time must be approved by the competent person and recorded as the foreign currency status of the licensed credit institution on the trading day.

Article 10. Contents of transaction agreements

1. Transaction agreements between the licensed credit institution and its partners must contain at least the following information:

a) Name of participants;

b) Trading date;

c) Pair of currencies used in the transaction;

d) Volume of foreign currency;

dd) Foreign exchange rate;

e) Settlement date;

g) Premium (for option transactions);

h) Expiration date (for option transactions).

2. In addition to contents prescribed in Clause 1 of this Article, transaction agreements among licensed credit institutions must contain the following information:

a) Transaction representative;

b) Payment instruction;

c) Means of transactions;

d) Form of transaction confirmation, competent persons to confirm the transaction for transactions conducted through the electronic devices and telephones.

3. In addition to contents prescribed in Clauses 1 and 2 of this Article, parties may reach an agreement on other contents in accordance with this Circular and other law regulations.

4. Transaction agreements prescribed in Clause 1, 2 and 3 of this Article shall be made in the form of frame agreements and/or specific agreements.

Chapter II

SPECIFIC PROVISIONS

Section I. FOREIGN EXCHANGE TRANSACTIONS BETWEEN LICENSED CREDIT INSTITUTIONS IN FOREX INTERBANK MARKET

Article 11. Transaction agreements

1. Transaction representatives of the two parties shall reach an agreement on contents of the foreign exchange transaction within the permitted limit and competence, ensuring at least information as prescribed in Clauses 1 and 2, Article 10 of this Circular.

2. Transaction agreements made by transaction representatives of the two parties through transaction means are commitments that are not allowed to unilaterally change, such agreements shall only be changed or canceled as agreed in writing by the two parties.

3. Licensed credit institutions shall take responsibilities for the authorization and allocation of limits for transaction representatives and be obliged to carry out foreign exchange transactions made by the transaction representatives and their partners.

Article 12. Confirmation of the transaction

1. After a transaction agreement is made through electronic device or telephone, both parties must make and send the transaction confirmation to each other. Transaction assistance departments of both parties shall made and send transaction confirmation within the trading day. For transactions incurred outside the prescribed time, the transaction confirmation must be sent on the day following the trading day at the latest.

2. Content of transaction confirmation shall be agreed by both parties, provided that, it must contain at least information prescribed in Clause 1, Article 10 of this Circular and approval from the person competent to confirm the transaction as prescribed at Point d, Clause 2, Article 10 of this Circular.

3. In case of confirming through SWIFT system (Society for Worldwide Interbank and Financial Telecommunication), the licensed credit institution must formulate a process of making, sending and receiving confirmation notice in order to ensure safety and prevent risks. The licensed credit institution must comply with the Law on E-Transactions and relevant laws.

4. If the transaction confirmation is sent by fax or via e-mail as an attached file, the two parties must send the original within 10 (ten) working days from the trading date.

Article 13. Documents in transactions

When licensed credit institutions perform foreign exchange transactions with other licensed credit institutions, they shall not be required to present documents to prove the purpose of using foreign currency.

Section II. FOREIGN EXCHANGE TRANSACTIONS BETWEEN LICENSED CREDIT INSTITUTIONS AND ITS CUSTOMERS

Article 14. Transaction agreements

1. The licensed credit institution and its customer shall make a transaction agreement in accordance with law regulations and such agreement must contain at least information prescribed in Clause 1, Article 10 of this Circular.

2. Transaction agreements shall be carried out by the transaction departments of licensed credit institutions according to internal regulations on foreign exchange transactions issued by the licensed credit institutions. Transaction agreements that have been made are commitments that are not allowed to unilaterally change, such agreements shall only be changed or canceled as agreed in writing by the two parties.

3. If customers make transactions directly at transaction locations of licensed credit institutions, both parties shall make transaction agreements in writing and such agreements must bear signatures of the competent persons.

Article 15. Confirmation of the transaction

1. If the transaction agreement is made through telephone or electronic device, both parties must make the transaction agreement in writing with signatures of the competent persons; such agreement must contain at least information prescribed in Clause 1, Article 10 of this Circular.

2. The transaction confirmation shall be made and sent on the day following the trading day at the latest.

3. If the two parties sign a written frame agreement which specifies that the licensed credit institution is allowed to automatically carry out foreign exchange transactions by the customer, then, the licensed credit institution shall comply with contents prescribed in the frame agreement but notify the customer information about transactions that have been made, and ensure at least information prescribed in Clause 1, Article 10 of this Circular.

4. If the transaction confirmation is sent by fax or via e-mail as an attached file, the two parties must send the original within 10 (ten) working days from the trading date.

Article 16. Documents in transactions

1. Customers shall present papers and documents with information on purposes, quantity, type of foreign currency, term of payment, money transfer according to current provisions on foreign exchange management and regulations of credit institutions when performing the following foreign exchange transactions with licensed credit institutions:

a) Purchasing foreign currencies in spot transactions, forward transactions;

b) Purchasing foreign currencies in swap transactions of Vietnam dong and another foreign currency; purchasing foreign currencies in swap transactions of a foreign currency with another foreign currency with the settlement dates come first;

c) Purchasing foreign currency options (presenting papers, documents for the type of foreign currencies the customers receive is required);

2. In case a customer's foreign currency payment plan changes due to objective reasons which have been previously agreed with by the credit institution and the customer, on the basis of the customer's written request and documents proving necessary reasons for modification of transaction term, the licensed credit institution and the customer may perform the swap transaction to modify the term of the signed forward transaction in accordance with the term on the presented papers or documents. Total terms of the forward transaction signed and swap transactions are up to356 (three hundred and sixty-five) days from the trading date.

3. For foreign loans denominated in foreign currencies with the initial loan term or the remaining loan term greater than 365 (three hundred and sixty-five) days, customers may use Vietnam dong to purchase foreign currencies with a term of 365 (three hundred and sixty-five) days from licensed credit institutions for the purpose of prevention of exchange rate risks. On the basis of the written request of the customer, within 02 (two) working days prior to the due date of the signed forward transaction, the licensed credit institution and the customer may perform swap transactions to extend the term of the signed transaction. Term of a forward transaction in swap transactions is 365 (three hundred and sixty-five) days or the remaining loan term when the latter is less than 365 (three hundred and sixty-five) days. Total terms of the forward transaction and subsequent swap transactions don't exceed the total term of the loan.

4. For forward foreign currency purchase of foreign investors as prescribed in Clause 5, Article 4 of this Circular:

a) When making forward foreign currency purchase with licensed credit institutions, foreign investors must provide documents proving the ownership of Government bonds, ensuring the value and term of the foreign exchange transaction do not exceed the purchase price and the remaining term of such government bond. Within 07 (seven) working days from the date of making forward foreign currency purchase, foreign investors must additionally provide escrow documents at the Vietnam Securities Depository and Clearing Corporation for above government bonds for the forward transaction to be effective.

b) Within 02 (two) working days prior to the due date of a forward transaction, in case foreign investors wish to continue preventing exchange rate risk for bonds, licensed credit institutions and customers shall perform swap transactions to extend the term of the signed forward transaction. Licensed credit institutions must ensure that the term of such swap transaction and subsequent swap transactions (if any) do not exceed the remaining term of the escrow bond.

The total terms of a forward transaction and swap transactions do not exceed the term of the escrow bond.

Article 17. Sale of foreign currency for transactions that are not due

1. For customers’ requests to use Vietnam dong to purchase foreign currencies 03 (three) working days or more prior to the due term of payment, using the papers and documents prescribed in Article 16 of this Circular, licensed credit institutions are only allowed to sell forward foreign currencies, except the following cases:

a) Foreign investors purchase foreign currencies and remit them abroad as prescribed in Article 9 of the Government's Decree No. 70/2014/ND-CP dated July 17, 2014, on detailing a number of articles of the Ordinance on Foreign Exchange and the Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

b) Individuals who are Vietnamese citizens purchase foreign-currency cash for the purposes specified in Clause 1, Article 2 of the Circular No. 20/2011/TT-NHNN dated August 29, 2011 of the Governor of the State Bank on the sale and purchase of foreign-currency cash between individuals and licensed credit institutions.

2. The last day of the term in forward transaction as prescribed in Clause 1 of this Article must not be preceded by the due date of payment according to the customer’s papers and documents by 05 (five) working days.

Chapter III

RESPONSIBILITIES OF INSTITUTIONS, INDIVIDUALS AND UNITS OF THE STATE BANK

Article 18. Responsibilities of licensed credit institutions

1. To promulgate the internal regulations on procedures of performing foreign exchange transactions in accordance with this Circular and other relevant law regulations, in which the following contents are required:

a) Regulations on responsibilities and competence of relevant individuals, departments when performing foreign exchange transactions, ensuring the compliance with the regulations on the internal control system of commercial banks, foreign bank branches.

b) Separation of functions and tasks between their transaction department and the transaction assistance department in transactions with other licensed credit institutions, ensuring the principle of establishing and performing a foreign exchange transaction with the participation in handling of these two departments.

2. To promulgate internal regulations on risk management in foreign exchange transaction in conformity with regulations of the State Bank and relevant legal normative documents.

3. To guide the customers in implementing this Circular and other relevant regulations on foreign exchange management before providing foreign exchange services and performing foreign exchange transactions with customers.

4. To check, review and archive customers' papers and documents in conformity with actual transactions to ensure foreign exchange transactions are performed for the right purpose and in accordance with the law regulations on foreign exchange management.

5. To report foreign exchange transactions according to the State Bank's regulations on statistical reporting regimes.

Article 19. Responsibilities of customers

When making foreign exchange transactions with licensed credit institutions, customers are responsible for:

1. Strictly complying with this Circular.

2. Taking responsibility before law for the authenticity of papers and documents presented to licensed credit institutions.

Article 20. Responsibilities of units of the State Bank

1. The Monetary Policy Department shall act as the focal point to deal with all arising problems related to performance of foreign exchange transactions during the course of implementing this Circular.

2. The Banking Inspection and Supervision Agency, branches of the State Bank in provinces and central affiliated cities shall be responsible for:

a) Examining, inspecting, supervising the implementation of this Circular and handling acts of violation according to law regulations;

b) Notifying the Monetary Policy Department of the grant of the establishment and operation license, decision on amending, supplementing the establishment and operation license, and documents approving foreign exchange activities or other documents related to foreign exchange activities granted to credit institutions, foreign bank branches by the State Bank;

3. The units of the State Bank, within the scope of their assigned functions and tasks, are responsible for handling problems related to the implementation of this Circular.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 21. Effect

1. This Circular takes effect from May 17, 2021 and replaces the Circular No. 15/2015/TT-NHNN dated October 02, 2015 on guiding forex transactions of licensed credit institutions in forex market.

2. For agreements on foreign exchange transactions that are signed and take effect before the effective date of this Circular, credit institutions, foreign bank branches and customers shall continue to implement according to such agreements. Amending and supplementing the above agreements after the effective date of this Circular shall be only made if contents of amendment, supplements are in accordance with this Circular.

Article 22. Responsibility of implementation organization

Chief of Office, director of the Monetary Policy Department and heads of units of the State Bank, credit institutions, foreign bank branches shall be responsible for organizing the implementation of this Circular.