Circular No. 15/2015/TT-NHNN dated October 02, 2015 of the State Bank of Vietnam guiding on foreign exchange transactions of Credit Institutions that are permitted to engage in foreign exchange transactions

THE STATE BANK OF VIETNAM

Circular No. 15/2015/TT-NHNN dated October 02, 2015 of the State Bank of Vietnam guiding on foreign exchange transactions of Credit Institutions that are permitted to engage in foreign exchange transactions

Pursuant to the Law on the State Bank No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law on Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Ordinance No. 28/2005/PL-UBTVQH11 dated December 13, 2005 and the Ordinance on amending, supplementing a number of Articles of the Ordinance No. 06/2013/PL-UBTVQH13 dated March 18, 2013;

Pursuant to the Decree No. 70/2014/ND-CP dated July 17, 2014 of the Government on detailing a number of articles of the Ordinance on foreign exchange and the Ordinance amending, supplementing a number of Articles of the Ordinance on foreign exchange;

Pursuant to the Decree No. 156/2013/ND-CP dated November 11, 2013 of the Government 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 State Bank Governor stipulates the Circular guiding on foreign exchange transactions of Credit Institutions that are permitted to engage in foreign exchange transactions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application and subjects of application

1. This Circular guides on domestic foreign exchange transactions between credit institutions that are permitted and customers.

2. Foreign exchange transactions between credit institutions that are permitted and the Vietnam State Bank (hereinafter referred to as the State Bank) shall be implemented according to specific regulations of the State Bank.

Article 2. Interpretation of terms

Under this Circular, the following terms are interpreted as follows:

1. Credit Institution authorized to engage in foreign exchange transactions are banks, non-bank institutions and foreign banks’ branches authorized to engage in foreign exchange business and supply of foreign exchange services (hereinafter referred to as permitted credit institutions).

2. Customers include:

a) Residents being economic institutions (including credit institutions are not permitted credit institutions), other organizations and individuals;

b) Non-residents being organizations, individuals;

3. Economic institutions are organizations established and operated according to the Vietnamese law, including enterprises, co-operatives, cooperative alliances and other organizations engaging in investment business excluding permitted institutions.

4. Other organizations that are established and operated according to the Vietnamese law excluding organizations as stipulated under Clause 1 and Clause 3 of this Article.

5. Foreign exchange transactions include spot foreign exchange transactions; forward foreign exchange transactions; swap foreign exchange transactions; currency option transactions;

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

6. Spot foreign exchange transactions (hereinafter referred to as spot transactions) is a transaction where two parties carry out the purchase, sale of a volume of foreign currency in Vietnam dong or in another foreign currency at a spot rate effective at the transaction time.

7. Forward foreign exchange transactions (hereinafter referred to as forward transactions) is a transaction where two parties commit to carry out the purchase, sale with each other of a foreign currency volume in Vietnam dong or in another foreign currency at a determined forward rate at the transaction day. Transaction term shall be implemented according to Article 6 of this Circular.

8. Swap foreign exchange transactions (hereinafter referred to as swap transactions) is a transaction between two parties including the purchase and sale of the same volume of foreign currency in Vietnam dong or in another foreign currency, of which the payment date of two transactions is different and the exchange rate of two transactions is determined at the transaction day;

Swap transactions include two spot transactions or two forward transactions or one spot transaction and one forward transaction. It must be at least one transaction being forward transaction in swap transactions of Vietnam dong and another foreign currency;

9. Currency option transaction (hereinafter referred to as option transactions) is a transaction between two parties where the option purchasing party pays for the option selling party the price of purchasing rights but not obligations to purchase or spot a volume of foreign currency with another foreign currency within a pre-agreed period of time at a determined exchange rate on the transaction day. If the option purchasing party performs its rights, the selling party shall be obliged to sell or purchase that foreign currency volume stated at the exchange rate, which has previously been agreed;

10. Price of purchasing option rights is the amount of money that the purchasing option party shall pay for the selling option party to purchase purchasing rights or selling rights a foreign currency volume in the option transaction; the price must be agreed by parties.

11. Transaction day is the day that parties participating in the transaction complete agreements on transactions as stipulated under Article 7 of this Circular;

Article 3. Principles of transactions

1. The transactions must be performed in accordance with regulations as stipulated under this Circular, scope of foreign currency of each credit institution, foreign bank’s branches must be approved by the State Bank in the establishment and operation license or the Decision on amending, supplementing the License according to current regulations. For foreign currency transactions that credit institutions, foreign bank’s branches are not permitted by the State Bank, these credit institutions, foreign bank’s branches shall implement foreign currency transactions that credit institutions are permitted as economic organizations as stipulated under this Circular;

2. Parties participating in foreign currency transactions must be honest and be responsible for its decision on participating in transactions;

3. Credit institutions are permitted directly or authorize a branch to perform foreign currency transaction with other permitted credit institutions.

Chapter II

SPECIFIC PROVISIONS

Article 4. Scope of foreign exchange transactions

1. Permitted credit institutions shall be entitled to carry out the spot transaction, forward transaction, swap transaction, option transaction with another permitted credit institution;

2. Permitted credit institutions shall be entitled to perform the spot transaction, forward transaction, swap transaction, option transaction (excluding transaction on purchasing option rights) with economic organizations;

3. Permitted credit institutions shall be entitled to perform the spot transaction, forward transaction, option transaction (excluding transaction on purchasing options rights) with residents being other organizations and individuals;

4. Permitted credit institutions shall be entitled to perform the spot transaction with non-residents being organizations and individuals;

Article 5. Currency used in transaction and transaction exchange rate

1. Permitted credit institutions shall be entitled to stipulate foreign currencies used at credit institutions;

2. Spot rate between Vietnam dong and USD of spot transaction, spot transaction in swap transaction shall be determined according to average rate in foreign currency market published by the State Bank and in the scope of margin decided by the State Bank;

3. Forward rate of Vietnam dong and USD 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 transaction day;

b) Differences among 2 current interest rates that are refinancing rate published by the State Bank and of the federal funds target rate;

c) Transaction term;

4. The foreign exchange rate of Vietnam dong and other foreign currencies excluding USD and among foreign currencies shall be agreed by parties.

5. Permitted credit institutions shall publish the type of foreign currency used in the transaction, rate of Vietnam dong and other foreign currencies with customers;

Article 6. Term of transactions

1. Excluding cases as stipulated under Clause 2 of this Article, term of foreign currency transaction shall be agreed by parties;

2. Term of swap, forward transactions between VND and foreign currencies shall be from 3 (three) to 365 (three hundred and sixty five) days since the transaction day;

Article 7. Transaction agreements

1. Agreements in the transaction shall be made in writing and it must contain the following information:

a) Name of parties participating in the transaction;

b) Date of transaction;

c) Type of transaction;

d) Currency used in the transaction;

dd) Volume of foreign currency;

e) Foreign exchange rate;

g) Date of payment;

h) Price of purchasing option rights (for option transactions);

2. In addition to contents as stipulated under Clause 1 of this Article, agreements among permitted credit institutions must contain the following information:

a) Representatives to perform the transaction;

b) Payment guidelines;

c) Means of transactions;

d) Form of confirming the transaction, competent persons to confirm the transaction for foreign currency transactions through the electronic means, telephone;

3. In addition to contents as stipulated under Clause 1 and 2 of this Article, parties may also agree on other contents in accordance with regulations under this Circular and other regulations;

4. Agreements as stipulated under Clause 1, 2 and 3 of this Article shall be made in the form of frame agreements and/or specific agreements;

5. Agreements on foreign currency transaction committed by parties shall be commitment that can’t be changed, except when 2 parties reach agreements in writing amending or canceling the transaction;

Article 8. Transaction means

1. The parties participating in the foreign exchange transactions may perform transactions through telephone, electronic means and shall be responsible to perform. If transactions are made through electronic means, telephone, these means must have the function of saving information to be used when necessary;

2. Foreign currency transaction that is made through electronic means must be complied with the law on electronic transactions and other related regulations;

Article 9. Confirmation of the transaction

1. For foreign currency transaction that is made through electronic means, telephone, parties must set up and send the transaction confirmation notification to each other.

2. Transaction confirmation notification must contain the following information:

a) Name of participants;

b) Date of transaction;

c) Type of transaction;

d) Currency used in the transaction;

dd) Volume of foreign currency;

e) Foreign exchange rate;

g) Date of payment;

h) Price of purchasing option rights (for option transactions;

i) Signature of competent persons confirming the transaction;

3. Confirmation notification must be made in writing. If the notification is sent through fax, within 5 working days since the transaction is performed, two parties must send the original documents (written) signed by competent persons to each other;

Article 10. Payment of the transaction

1. Parties shall decide on payment of transaction for spot transaction, spot transaction on swap transaction but it must not exceed two working days since the transaction is performed;

2. Payment of transaction forward transaction, forward transaction on swap transaction is the last day of the transaction term;

3. If the date of payment is on the weekend or holidays, it shall be the following day;

Article 11. Transaction fees

Permitted credit institutions shall not be entitled to charge transaction fees on foreign exchange transactions;

Article 12. Documents in transactions

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

2. Customers shall present documents providing information on purposes, volume, type of foreign currency, term of payment, money transfer according to current regulations on foreign exchange management when performing foreign exchange transactions with permitted credit institutions:

a) Purchasing foreign currencies in the spot transaction, forward transaction, swap transaction;

b) Purchasing rights of purchasing foreign currency;

3. Permitted credit institutions when performing foreign currency transactions with customers shall consider, supervise, save documents used in the transactions to ensure that foreign currency transactions are performed in accordance with purposes and the law;

Article 13. Purchase, sale of foreign currency for transactions that are not due

1. In addition to cases as stipulated under Article 9 of the Decree No. 70/2014/ND-CP dated July 17, 2014 of the Government detailing a number of articles of the Ordinance on foreign exchange and the Ordinance amending, supplementing a number of Articles of the Ordinance on foreign exchange, customers’ proposals of using Vietnam dong to purchase foreign currency before due date shall follow documents as stipulated under Clause 2 Article 12 of this Circular from 3 working days or more, permitted credit institutions shall only sell forward foreign currencies;

2. The last day of the forward transaction term as stipulated under Clause 1 of this Article shall not be preceded the due date of payment according to documents of customers 2 working days.

Chapter III

RESPONSIBILITIES OF PERMITTED CREDIT INSTITUTIONS AND UNITS OF THE STATE BANK

Article 14. Responsibilities of permitted credit institutions

1. To promulgate the internal regulations on procedures of performing foreign currency transactions in accordance with regulations under this Circular and other regulations, of which it must contain the following information:

a) Regulations on responsibilities and competence of individuals, departments when performing the transaction. Regulations and control of the limit in the foreign currency transaction to restrict the risks;

b To distribute responsibilities, regulate the independent function among transaction department and profession supporting departments;

c) Internal regulations on risk management including contents: possible risks, management procedures and measurements;

2. To comply with regulated stipulated by the State Bank on limits, prudential ratios of credit institutions, foreign bank’s branches; regulations on the state of foreign currency and other regulations;

3. To notify and guide the customers in implementing contents as stipulated under this Circular and regulations on foreign exchange management;

4. To implement the report regime in accordance with regulations of the State Bank applied for credit institutions, foreign bank’s branches;

Article 15. Responsibilities of units of the State Bank

1. The Department of Monetary Policy Department shall act as a focal point to deal with all arising problems related to foreign currency transactions in the course of implementing this Circular;

2. Banking Inspection and Supervision Department, branches of the State Bank in provinces, cities under the Central management shall:

a) Inspect, supervise the implementation of this Circular and handle with violations as stipulated by the law;

b) Inform the Monetary Policy Department on granting the establishment and operation license, Decision on amending, supplementing the establishment and operation license, and documents approving foreign exchange transactions or other documents related to foreign exchange transactions granted for credit institutions, foreign banks’ branches by the State Bank;

3. Department of Finance and Accounting shall guide the accounting record for foreign currency transactions of permitted credit institutions;

4. Based on functions, assigned tasks, units of the State Bank shall propose opinions on handling with problems related to the implementation of this Circular at the proposal of the Monetary Policy Department.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 16. Effect

1. This Circular takes effect on October 05, 2015.

2. The following documents shall be ceased to be effective:

a) Decision No. 1452/2004/QD-NHNN dated November 10, 2004 of the State Bank Governor on stipulating foreign exchange transactions of Credit Institutions that are permitted to engage in foreign exchange transactions.

b) Decision No. 101/1999/QD-NHNN13 dated March 26, 1999 of the State Bank Governor on Regulations on organization and operation of inter-bank foreign exchange market;

c) Decision No. 401/1999/QD-NHNN dated November 12, 1999 of the State Bank Governor on amending, supplementing a number of articles of the Circular No. 07/TT-NH1 dated December 27, 1996 and the Decision No. 101/1999/QD-NHNN13 dated March 26, 1999 of the State Bank Governor;

d) Decision No. 206/2000/QD-NHNN13 dated July 11, 2000 of the State Bank Governor on amending Clause 2 Article 9 “"Regulation on the organization and operation of the foreign currency inter-bank market" issued in conjunction with Decision No. 101/1999/QD-NHNN13 dated 26 March, 1999 of the Governor of the State Bank;

dd) Decision No. 648/2004/QD-NHNN dated May 28, 2004 of the State Bank Governor amending  and supplementing a number of articles of the State Bank Governor’s Decision No. 679/2002/QD-NHNN promulgating a number of provisions relating to foreign currency transactions of credit institutions licensed to deal in foreign currencies;

Article 17. Forwarding provisions

For agreements on foreign currency transactions that are signed and take effect before the effective day of this Circular, credit institutions, foreign banks’ branches and customers shall continue to implement according to agreement signed. Amending and supplementing the above agreement after the effective day of this Circular shall be only done if contents of amendment, supplements are in accordance with regulations under this Circular.

Article 18. Organization of implementation

The Chief of Office, Director of the Monetary Policy Department and heads of units of the State Bank, Directors of the State Bank’s branches in provinces, cities under the central management, Chairman of the Management Board, Chairman of the Board of Members, General Directors (Directors) of credit institutions, foreign banks’ branches shall implement this Circular.

For The Governor

Deputy Governor

Nguyen Thi Hong