THE STATE BANK OF VIETNAM
Circular No. 04/2013/TT-NHNN of March 1, 2013, providing the discount of negotiable instruments and other valuable papers by credit institutions and foreign bank branches for clients
Pursuant to June 16, 2010 Law No. 46/2010/QH12 on the State Bank of Vietnam;
Pursuant to June 16, 2010 Law No. 47/2010/QH12 on Credit Institutions;
Pursuant to November 29, 2005 Law No. 49/2005/QH11 on Negotiable Instruments;
Pursuant to the Government’s Decree No. 96/2008/ND-CP of August 26, 2008, 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 promulgates the Circular providing the discount of negotiable instruments and other valuable papers by credit institutions and foreign bank branches for clients.
Article 1. Scope of regulation
This Circular provides the discount of negotiable instruments and other valuable papers by credit institutions and foreign bank branches for clients.
Article 2. Subjects of application
1. Credit institutions, including:
a/ Commercial banks;
b/ Financial companies;
c/ Financial leasing companies and cooperative banks as approved in writing by the State Bank.
2. Foreign bank branches.
3. Clients having negotiable instruments and other valuable papers discounted, who are beneficiaries of negotiable instruments permitted for trading in Vietnam or owners of valuable papers issued in the Vietnamese territory (below referred to as clients), including:
a/ Domestic institutions (excluding credit institutions and foreign bank branches) and domestic individuals;
b/ Foreign legal entities and foreign individuals who are lawfully operating and residing in Vietnam and have civil legal capacity as prescribed in the Civil Code regarding civil legal capacity of foreign legal entities and foreign individuals.
Article 3. Interpretation of terms
In this Circular, the terms below are construed as follows:
1. Contract on discount of negotiable instruments or other valuable papers means a written agreement between a credit institution or a foreign bank branch and a client aiming to establish, change or terminate the rights and obligations of the involved parties with regard to the discount (below referred to as discount contract).
2. Remaining term of negotiable instruments or other valuable papers means the period from the date on which a credit institution or a foreign bank branch accepts to discount the negotiable instruments or other valuable papers to the due date for payment of the whole amount written on such negotiable instruments or other valuable papers.
3. Discount duration of negotiable instruments or other valuable papers means the period from the date following the date on which a credit institution or a foreign bank branch accepts to discount the negotiable instruments or other valuable papers to the date on which a client must fulfill the obligation to commit to redeeming such negotiable instruments or other valuable papers, or to the due date for payment of the whole amount written on such negotiable instruments or other valuable papers, including weekends and holidays.
4. Discount price of negotiable instruments or other valuable papers means an amount paid by a credit institution or a foreign bank branch to a client when discounting negotiable instruments or other valuable papers.
Article 4. Conditions for credit institutions and foreign bank branches to discount negotiable instruments and other valuable papers
To discount negotiable instruments and other valuable papers, a credit institution or a foreign bank branch must fully satisfy the following conditions:
1. Being one of the subjects defined in Clause 1, Article 2 of this Circular.
2. Its establishment and operation license granted by the State Bank of Vietnam has the content of credit extension in the form of discounting negotiable instruments or other valuable papers.
3. Its internal regulations on the discount of negotiable instruments and other valuable papers comply with this Circular, the Law on Credit Institutions and relevant laws.
Article 5. Principles of discounting negotiable instruments and other valuable papers
Credit institutions and foreign bank branches that discount negotiable instruments and other valuable papers for clients shall comply with the following principles:
1. Credit institutions and foreign bank branches shall comply with the agreement between them and clients in conformity with the Law on Credit Institutions, the Law on Negotiable Instruments, this Circular, relevant laws, and international commercial practices issued by the International Chamber of Commerce.
2. Clients shall use discounts to pay for transactions not banned by law, must have financial capacity to redeem negotiable instruments or other valuable papers or fully pay discounts, discount interests and other lawful expenses to credit institutions or foreign bank branches as agreed in discount contracts.
3. Credit institutions and foreign bank branches shall consider and approve discounts on the principle of defining the responsibility between the appraisal stage and the stage of decision on the discount of negotiable instruments or other valuable papers.
4. Credit institutions or foreign bank branches and clients shall agree in discount contracts on clients’ payment of discounts ahead of schedule and collection or non-collection of charges for such payment.
5. When credit institutions or foreign bank branches conduct the discount by buying for a definite term immature negotiable instruments or other valuable papers, clients shall commit to redeem such negotiable instruments or other valuable papers immediately upon the expiration of the discount duration.
6. When conducting the discount of negotiable instruments or other valuable papers with the face value written in a foreign currency, credit institutions or foreign bank branches and clients shall comply with this Circular, regulations on foreign exchange management and relevant laws.
7. When conducting the discount of negotiable instruments involving foreign elements, credit institutions or foreign bank branches and clients shall comply with the Law on Negotiable Instruments regarding the application of treaties or international commercial practices in relations related to negotiable instruments involving foreign elements, regulations on civil relations involving foreign elements, regulations on foreign exchange management and this Circular.
8. Credit institutions and foreign bank branches shall consider and decide on the discount of negotiable instruments and other valuable papers to ensure safety and full and timely collection of discounts, interests and other discount-related lawful expenses.
Article 6. Types of negotiable instruments and other valuable papers permitted for discount
1. Credit institutions and foreign bank branches may choose to discount negotiable instruments which are issued in Vietnam or issued in foreign countries and permitted for negotiation in Vietnam, including:
a/ Bills of exchange;
b/ Promissory notes;
c/ Checks;
d/ Other negotiable instruments permitted for discount in accordance with law.
2. Credit institutions and foreign bank branches may choose to discount other valuable papers including:
a/ The State Bank’s bills;
b/ Government bonds;
c/ Government-guaranteed bonds;
d/ Local administration bonds;
dd/ Term bills, bills, deposit certificates and bonds issued by credit institutions and foreign bank branches in accordance with regulations of the State Bank of Vietnam;
e/ Term bills, bills and bonds issued by other institutions and discounted under current regulations.
Article 7. Conditions for negotiable instruments or other valuable papers to be discounted
1. To be discounted by credit institutions or foreign bank branches, negotiable instruments must fully meet the following conditions:
a/ Being lawfully issued in accordance with Vietnam’s law, laws of issuing countries or international commercial practices conformable with Vietnam’s law;
b/ Lawfully belonging to clients; not being under dispute; not being used for pledge or security for other obligations;
c/ Not bearing the phrase “Non-negotiable,” “Banned from negotiation,” “Not payable on order,” or other phrases having similar meaning;
d/ Being immature;
dd/ Being intact, not being erased or modified.
2. To be discounted by credit institutions or foreign bank branches, other valuable papers must fully meet the following conditions:
a/ Being lawfully issued in accordance with Vietnam’s law;
b/ Lawfully belonging to clients; not being under dispute, not being used for pledge or security for other obligations;
c/ Being permitted for transactions (purchase, sale, giving as gift, donation, conversion, transfer, pledge, guarantee or other lawful transactions) in accordance with law;
d/ Being immature;
dd/ Being intact, not being erased or modified.
Article 8. Currency used in discount
1. For negotiable instruments and other valuable papers on which Vietnam dong is written as payment currency, the currency used in discount is Vietnam dong.
2. For negotiable instruments and other valuable papers on which a foreign currency is written as payment currency, credit institutions or foreign bank branches and clients shall comply with the following regulations:
a/ They shall discount negotiable instruments and other valuable papers in the foreign currency written thereon for clients that are licensed to collect and use foreign currencies in the Vietnamese territory according to regulations on foreign exchange management or for clients using the discounts for conducting payment transactions the currency used for which must be a foreign currency as prescribed by law.
b/ They shall discount negotiable instruments and other valuable papers in Vietnam dong for clients that are not licensed to collect and use foreign currencies in the Vietnamese territory according to regulations on foreign exchange management or for clients that wish to have negotiable instruments and other valuable papers discounted in Vietnam dong.
Article 9. Currency used for redemption for a definite term negotiable instruments and other valuable papers upon the expiration of the discount duration
1. For negotiable instruments and other valuable papers discounted in Vietnam dong, the currency used for redemption is Vietnam dong.
2. For negotiable instruments and other valuable papers discounted in a foreign currency, the currency used for redemption is that foreign currency or Vietnam dong. The redemption in foreign currency must comply with current regulations on foreign exchange management and relevant laws.
Article 10. Methods of discount
Credit institutions or foreign bank branches and clients shall agree and choose the following methods of discount:
1. Buying for a definite term negotiable instruments and other valuable papers, which means that a credit institution or a foreign bank branch buys, and accepts the transfer of the ownership of, immature negotiable instruments and other valuable papers from a client and, at the same time, the client commits to redeem such negotiable instruments and other valuable papers after a period of time specified in the discount contract.
2. Buying, with reservation of recourse, negotiable instruments and other valuable papers, which means that a credit institution or a foreign bank branch buys, and receives the ownership of, immature negotiable instruments and other valuable papers from a client, and the client shall refund the discount, discount interest and other discount-related lawful expenses in case the credit institution or foreign bank branch receives an insufficient amount from a person responsible for paying for negotiable instruments or issuing other valuable papers.
Article 11. Discount price, duration and interest rate and related expenses
1. The discount price shall be agreed by credit institutions or foreign bank branches and clients on the basis of payment value upon maturity, risk level of negotiable instruments, value of other valuable papers, discount interest rate, remaining term of negotiable instruments or other valuable papers, and other factors.
2. The discount duration shall be agreed by credit institutions or foreign bank branches and clients which, however, must not exceed the remaining payment term of negotiable instruments or other valuable papers; for other valuable papers issued by other credit institutions and bank branches, the maximum discount duration is under 1 year.
3. The discount interest rate and other lawful expenses related to the discount of negotiable instruments and other valuable papers shall be agreed by credit institutions or foreign bank branches and clients in accordance with current law.
4. The interest rate applicable to an overdue discount shall be specified by credit institutions and foreign bank branches and agreed with clients in the discount contract, which must not exceed 150% of the discount interest rate applied in the discount duration.
Article 12. Discount contracts
A discount contract has the following principal contents: Name and address of the credit institution or foreign bank branch conducting discount; name and address of the client; serial number of the identity card/passport/tax identification number of the client; principal information on the discounted negotiable instruments and other valuable papers; discount price; use purpose of the discount; currency used in discount; discount duration; discount interest rate and related expenses; rights and obligations of the involved parties; cases of ahead-of-schedule termination of the discount contract; handling of contractual breaches; and other contents as agreed by the parties in accordance with law.
Article 13. Maximum discount for a client and related persons
Credit institutions and foreign bank branches shall consider and stipulate the maximum discount for a client and related persons in accordance with current law.
Article 14. Procedures for discounting negotiable instruments and other valuable papers
1. When receiving a client’s request for discount of negotiable instruments or other valuable papers, a credit institution or a foreign bank branch shall appraise and assess the purpose of use of the discount and financial capacity of the client and solvency of negotiable instruments or other valuable papers before deciding whether to approve the discount. The credit institution and foreign bank branch may request the client to prove that negotiable instruments or other valuable papers fully satisfy the discount conditions prescribed in this Circular.
2. When a credit institution or a foreign bank branch approves the discount of negotiable instruments or other valuable papers for a client, the client shall immediately hand them over and carry out procedures for the negotiation of negotiable instruments or transfer of the ownership of other valuable papers to the credit institution or foreign bank branch in accordance with law.
3. In case of discount of negotiable instruments or other valuable papers by buying them for a definite term, when a client fulfills the commitment to redeem negotiable instruments or other valuable papers, a credit institution or a foreign bank branch shall immediately hand them over and carry out procedures for the negotiation of negotiable instruments or transfer of the ownership of other valuable papers to the client in accordance with law.
4. The order and procedures for discounting negotiable instruments and other valuable papers must be specified in credit institutions’ and foreign bank branches’ internal regulations on discount operations.
Article 15. Rights and obligations of clients
1. Rights:
a/ To choose credit institutions and foreign bank branches to request discount of negotiable instruments and other valuable papers.
b/ To reject requests of credit institutions and foreign bank branches which are against the agreements under discount contracts and the law.
c/ To receive back negotiable instruments and other valuable papers from credit institutions and foreign bank branches as agreed under discount contracts.
d/ To redeem negotiable instruments and other valuable papers before the end of the discount duration if so accepted by credit institutions and foreign bank branches.
dd/ To have other rights prescribed by law.
2. Obligations:
a/ To strictly fulfill the contents agreed under discount contracts.
b/ To provide sufficient papers evidencing that negotiable instruments and other valuable papers fully satisfy the discount conditions prescribed in this Circular.
c/ To make a written commitment to lawfully using discounts, and prove their financial capacity to redeem negotiable instruments and other valuable papers as agreed under discount contracts.
d/ To take responsibility before law for the lawfulness of negotiable instruments and other valuable papers discounted at credit institutions and foreign bank branches.
Article 16. Rights and obligations of credit institutions and foreign bank branches
1. Rights:
a/ To request clients to provide sufficient papers proving that negotiable instruments and other valuable papers fully satisfy the discount conditions prescribed in this Circular.
b/ To request clients to make a written commitment to lawfully use discounts and prove their financial capacity to redeem negotiable instruments and other valuable papers as agreed under discount contracts.
c/ To refuse clients’ requests for discount if finding that negotiable instruments and other valuable papers fail to fully satisfy the discount conditions or that the use of discounts is illegal or when their funds are insufficient for discount.
d/ To terminate the discount and withdraw the discounts before the end of the discount duration if detecting that clients provide untruthful information or breach discount contracts.
dd/ To inspect and supervise clients in using the discounts in accordance with law.
e/ To have other rights prescribed by law.
2. Obligations:
a/ To strictly fulfill the contents agreed under discount contracts.
b/ To carry out procedures for the negotiation of negotiable instruments and transfer of the ownership of other valuable papers to clients in accordance with the Law on Negotiable Instruments and current relevant laws when the clients fully pay the discounts, discount interests and other related expenses.
c/ To preserve and use negotiable instruments and other valuable papers in accordance with law.
d/ To have other obligations prescribed in relevant laws.
Article 17. Classification of credit assets, levels and methods of setting up risk provisions, and use of provisions for handling risks
When discounting negotiable instruments and other valuable papers, credit institutions and foreign bank branches shall classify credit assets, stipulate the levels and methods of setting up risk provisions and the use of provisions for handling risks related to the discounts in accordance with the State Bank of Vietnam’s regulations on classification of credit assets, levels and methods of setting up risk provisions, and use of provisions for handling risks in the operations of credit institutions and foreign bank branches.
Article 18. Accounting, making statistics of and reporting on the discount of negotiable instruments and other valuable papers of credit institutions and foreign bank branches
Credit institutions and foreign bank branches shall account, report and make statistics on the discount of negotiable instruments and other valuable papers according to current regulations on accounting, reporting and statistics.
Article 19. Organization of implementation
1. This Circular takes effect on May 1, 2013. The following documents cease to be effective:
a/ The Regulation on discount and rediscount of valuable papers by credit institutions for clients, promulgated together with Decision No. 1325/2004/QD-NHNN of October 15, 2004;
b/ Decision No. 17/2006/QD-NHNN of April 20, 2006, amending and supplementing Articles 10 and 12 of the Regulation on discount and rediscount of valuable papers by credit institutions for clients, promulgated together with Decision No. 1325/2004/QD-NHNN;
c/ The Regulation on discount and rediscount of negotiable instruments by credit institutions for clients, promulgated together with Decision No. 63/2006/QD-NHNN of December 29, 2006.
2. For discount contracts signed before the effective date of this Circular, clients and credit institutions or foreign bank branches may continue to implement the contents of the signed contracts according to the laws effective at the time of contract signing or the agreements on modification or supplementation of the discount contracts in accordance with this Circular.
3. The chief of the Office, the director of the Monetary Policy Department and heads of units under the State Bank of Vietnam, directors of provincial-level branches of the State Bank of Vietnam, chairpersons of the boards of directors, chairpersons of the Members’ Councils and general directors (directors) of credit institutions and foreign bank branches, other institutions and related persons shall implement this Circular.-
For the State Bank Governor
Deputy Governor
NGUYEN DONG TIEN
Vietnamese
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