Circular No. 17/2011/TT-NHNN dated August 18, 2011 of the State Bank of Vietnam providing for the lending secured by the mortgage of valuable papers by the State Bank of Vietnam to credit institutions

THE STATE BANK OF VIETNAM

Circular No. 17/2011/TT-NHNN of August 18, 2011, stipulating the grant of loans by the State Bank of Vietnam to credit institutions with pledge of valuable papers as security

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 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;

The State Bank of Vietnam stipulates the grant of loans by the State Bank of Vietnam to credit institutions with pledge of valuable papers as security as follows: 

Chapter I

General provisions

Article 1. Scope of regulation

This Circular stipulates the grant of short-term loans in Vietnam dong (VND) by the State Bank of Vietnam to credit institutions with pledge of valuable papers as security in order to supply short-term capital and instruments of payment for credit institutions.

Article 2. Interpretation of terms

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

1. Grant of loans with pledge of valuable papers as security (below referred to grant of pledge loan) is the form of grant of loans by the State Bank of Vietnam (the State Bank) to credit institutions on the basis of pledge of valuable papers owned by credit institutions to secure their repayment obligation.

2. Pledge of valuable papers means that the State Bank holds the original valuable papers or requests credit institutions to transfer valuable papers into an account of the State Bank at the Vietnam Securities Depository to secure the obligation of credit institutions to repay one or many pledge loans to the State Bank.

3. Pledge loan interest rate is the refinancing interest rate applied and announced for each period by the State Bank to pledge loans it grants to credit institutions.

4. Remaining term of valuable papers is the period from the date the State Bank disburses a pledge loan to a credit institution to the maturity date of the valuable papers concerned.

Article 3. Subjects eligible for pledge loans of the State Bank

Credit institutions established and operating under the Law on Credit Institutions, including banks, non-bank credit institutions, the Central People’s Credit Fund and foreign bank branches (below collectively referred to as credit institutions).

Article 4. Purposes of pledge loans

The State Bank shall grant pledge loans to credit institutions to supply them with short-term capital and instruments of payment.

Article 5. Principles of grant of pledge loans

The grant of pledge loans by the State Bank to credit institutions abides by the following principles:

1. Loans are secured with valuable papers fully satisfying the criteria specified in Article 8 of this Circular.

2.  Credit institutions shall use pledge loans for proper purposes and fully and timely repay loan principal and interest to the State Bank.

Article 6. Modes of grant of pledge loans

1. Direct method: Credit institutions directly transact with the State Bank.

2. Indirect method: Credit institutions transact via the network of monetary market transactions under the guidance of the State Bank.

Article 7. Grant of passwords, codes and ciphers of digital signatures

The State Bank shall grant passwords, codes and ciphers of digital signatures to representatives of credit institutions for making pledge loan transactions via the network of monetary market transactions of the State Bank to ensure safety and confidentiality.

Article 8. Valuable papers allowed to be pledged

1. Criteria of valuable papers allowed to be pledged:

a/ Being transferable;

b/ Being lawfully owned by the credit institution applying for loan;

c/ Having a remaining term at least equal to the loan term;

d/ Being other than valuable papers issued by the credit institution applying for loan.

2. The list and priority order of valuable papers used for pledge and the proportion between the value of valuable papers and the pledge loan amount of the State Bank shall be stipulated by the State Bank Governor for each period.

Article 9. Value of valuable papers used as security for pledge loans

1. The value of valuable papers as security for pledge loans is the total value of issuance of valuable papers calculated based on their par value.

2. The security rate of the value of valuable papers compared to the pledge loan amount shall be stipulated by the State Bank Governor for each period.

Chapter I

SPECIFIC PROVISIONS

Article 10. Conditions on grant of pledge loans

On the basis of the monetary policy administration orientation and the supplied volume of money for each period, the State Bank shall decide to provide pledge loans to credit institutions which fully satisfy the following conditions:

1. Being those specified in Article 3 of this Circular and not placed under a special control.

2. Having valuable papers fully meeting the criteria and on the list of those allowed to be pledged for loans at the State Bank specified in Article 8 of this Circular.

3. Having a loan purpose conformable with the monetary policy administration objective of the State Bank for each period.

4. Having a dossier of application for pledge loan of the State Bank as required in Article 15 of this Circular.

5. Owing no overdue debts to the State Bank at the time of application for pledge loan.

6. Having a commitment to using pledge loans for a proper purpose and paying on schedule loan principal and interest to the State Bank.

Article 11. Pledge loan term

1. The term of pledge loan is under 12 months and must not exceed the remaining term of pledged valuable papers. It includes also holidays. In case the loan repayment date falls on a holiday, the term is allowed to be extended to the subsequent working day.

2. Based on the loan purpose stated by the applying credit institution, the State Bank shall decide on the loan term and repayment time on a case-by-case basis.

3. In special cases, the State Bank may consider rescheduling the pledge loan term on the basis of the request of the borrowing credit institution and reason for rescheduling in conformity with the State Bank’s monetary policy administration orientation.

When wishing to reschedule the term of a pledge loan borrowed from the State Bank, a credit institution shall send a written request (stating the reason for rescheduling) directly or by post to the State Bank. Within 2 working days after receiving such request, the State Bank shall notify in writing the credit institution of its approval or disapproval of the rescheduling and send its notice to related units.

Article 12. Pledge loan interest rate

1. The pledge loan interest rate applicable to credit institutions is the refinancing interest rate applied by the State Bank to pledge loans granted to credit institutions at the time of disbursement of the loans and shall be kept unchanged throughout the loan term.

2. In case its outstanding pledge loan is converted into overdue debt, the credit institution shall bear an overdue debt interest rate equal to 150% of the loan interest rate written in the credit contract.

Article 13. Levels of pledge loan

1. Based on the monetary policy objective in each period, loan needs and the value of valuable papers used for pledge and other outstanding debts of credit institutions at the State Bank, the State Bank shall decide on specific levels of pledge loans granted to credit institutions.

2. The maximum level of pledge loan is equal to the value of valuable papers used for pledge converted according to regulations of the State Bank.

Article 14. Competence to participate in pledge loan operations

1. Persons competent to sign on behalf of credit institutions documents in the pledge loan operation at the State Bank are either of the following:

a/ Chairpersons of Boards of Directors or Members’ Councils of credit institutions;

b/ Directors general (directors) of credit institutions.

2. Competent persons defined in Clause 1 of this Article may authorize deputy directors general (deputy directors) or branch directors to sign documents in the pledge loan operation at the State Bank in accordance with law and take responsibility for such authorization. Further authorization to third parties is not allowed.

Article 15. Dossiers of application for pledge loan

When wishing to get pledge loans from the State Bank, a credit institution shall send one set of dossier directly or by post to the State Bank, comprising:

1. An application for loan with pledge of valuable papers as security (according to a set form);

2. A statement of valuable papers to be pledged at the State Bank, certified by the issuer, issuance agent or custody institution (according to a set form);

3. Some data on capital sources and use of loans in VND, filled in a set form;  the situation of transactions of the credit institution with the State Bank, presented in a set form; the table of calculation of the need for loans in VND from the State Bank, made according to a set form;

4. The latest original accounting balance sheet of the credit institution.

Article 16. Approval and rejection of credit institutions’ applications for pledge loan

1. Based on the credit institution’s dossier of application for pledge loan, the State Bank shall consider the application and within 2 working days after receiving a valid dossier according to Article 15 of this Circular notify in writing (according to a set form) the applying credit institution of its approval (according to a set form) or rejection of the application and send its notice to related units.

2. The State Bank shall not consider pledge loan applications of credit institutions which fail to meet all the conditions specified in Article 10 of this Circular.

Article 17. Delivery, receipt and return of valuable papers used for pledge

1. After receiving the State Bank’s notice of its approval of the pledge loan, the applying credit institution shall proceed with delivering valuable papers for pledge at the State Bank.

2. The State Bank shall receive pledged valuable papers based on the approved list of valuable papers.

3. During the loan term, if the credit institution needs to substitute valuable papers pledged at the State Bank with others on the list of those allowed to be pledged at the State Bank, it shall send one set of dossier directly or by post to the State Bank, comprising:

a/ A document stating the reason for the substitution of valuable papers;

b/ A statement of substitute valuable papers for pledge at the State Bank, certified by the issuer, issuance agent or custody institution (according to a set form);

Within 2 working days after receiving a credit institution’s complete dossier of request for substitution of valuable papers currently pledged at the State Bank, the State Bank shall notify in writing the credit institution of its approval or rejection of the substitution and send its notice to related units.

4. After the credit institution fully repays its loan principal and interest, the State Bank shall return all pledged valuable papers to the credit institution.

Article 18. Grant of pledge loans

1. Pledge loans shall be granted to credit institutions at the State Bank Transaction Center.

The State Bank Transaction Center shall base itself on the dossiers of pledge loan approved by the State Bank Governor to carry out procedures for receiving pledged property and signing credit contracts with credit institutions, and transfer the loans to deposit accounts of credit institutions at the State Bank.

2. In case of necessity, the State Bank Governor may authorize directors of provincial-level State Bank branches to grant pledge loans to credit institutions headquartered in their localities. The process of granting pledge loans at provincial-level State Bank branches is like that at the State Bank Transaction Center.

Article 19. Repayment of pledge loans

1. Upon the time of repayment, credit institutions shall repay pledge loan principal and interest to the State Bank and receive back their valuable papers.

2. Upon the time of repayment, if credit institutions fail to repay pledge loan principal and interest and the State Bank refuses to reschedule the loans, the State Bank shall take measures to retrieve loan principal and interest as follows:

a/ Make deductions from deposit accounts of credit institutions at the State Bank;

b/ Collect money from other sources (if any) of the credit institutions.

3. After making deductions from deposit accounts and collect money from other sources of credit institutions, if these amounts are insufficient to retrieve all debts, the State Bank shall convert the remaining debts into overdue debts subject to overdue debt interest rates. It shall continue to make deductions from deposit accounts of credit institutions for debt retrieval or sell or receive payments from issuers for pledged valuable papers on the monetary market in order to retrieve overdue loan principal and interest of credit institutions.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 20. Responsibilities of credit institutions applying for pledge loan

1. To provide adequate dossiers and documents in time as required in this Circular and take responsibility before law for the accuracy and lawfulness of data and documents provided to the State Bank.

2. To strictly implement commitments to the State Bank when getting pledge loans regarding use of loan money for proper purposes and full repayment of loan principal and interest on schedule.

3. To fully transfer valuable papers for pledge and receive them back after fully repaying loans to the State Bank.

4. To submit to inspection and control, when necessary, by the State Bank of the use of pledge loans during their term.

Article 21. Responsibilities of units of the State Bank

1. The Monetary Policy Department:

a/ To assume the prime responsibility for, and coordinate with related units in, determining the quarterly and annual volumes of money to be supplied for refinancing purposes, including refinancing with pledge of valuable papers, and submit them to the State Bank Governor for approval and notification to related units.

b/ To give advice to the State Bank Governor on determining and announcing refinancing interest rates for application to the pledge of valuable papers.

c/ To coordinate with related units in settling difficulties and problems arising in the grant of pledge loans.

2.  The Credit Department:

a/ To receive and appraise credit institutions’ dossiers of application for pledge loan;

b/ To submit to the State Bank Governor for approval credit institutions’ applications for loans with pledge of valuable papers and authorize provincial-level State Bank branches to grant pledge loans (if any) and notify applying credit institutions of the approval or disapproval of the grant of pledge loans;

c/ To transfer dossiers already approved by the State Bank Governor to the State Bank Transaction Center for granting pledge loans;

d/ To assume the prime responsibility for, and coordinate with related units in, settling difficulties and problems arising in the grant of pledge loans;

e/ To submit to the State Bank Governor for consideration and decisions requests of credit institutions for substitution of valuable papers currently pledged at the State Bank;

f/ To review on a monthly, quarterly and annual basis the grant of pledge loans at the State Bank Transaction Center and provincial-level State Bank branches for reporting to the State Bank Governor;

g/ To submit to the State Bank Governor for approval the list and priority order of valuable papers allowed to be used for pledge loans and the ratio of the value of valuable papers and to pledge loan amounts for each period.

3. The State Bank Transaction Center:

a/ On the basis of the State Bank Governor-approved dossiers, to approve pledge loans, grant pledge loans, keep pledged valuable papers, and retrieve loan principal and interest under this Circular;

b/ To organize the delivery, storage and preservation of pledged property, dossiers and documents and return of valuable papers and accounting of pledge loans according to regulations;

c/ To coordinate with related units in settling difficulties and problems arising in the grant of pledge loans;

d/ To summarize on a monthly, quarterly and annual basis data on the grant of pledge loans at the Center and detect in time difficulties and problems in the course of implementation and send them to the Credit Department for summarization and reporting to the State Bank Governor;

e/ To deposit valuable papers used for pledge at the State Bank according to regulations, certify the deposit of valuable papers of credit institutions applying for loans in case they currently have valuable papers deposited at the State Bank;

f/ To guide the process of grant of pledge loans by the State Bank to credit institutions.

4. The Finance- Accounting Department: To guide the process of accounting related to the pledge loan operation.

5. The Informatics Technology Department:

a/ To install software programs and assure stable, safe and confidential communication infrastructure facilities for the grant of pledge loans;

b/ To set passwords, codes and ciphers of digital signatures for pledge loan operation  participants of the State Bank and credit institutions.

6. The Bank Inspection and Supervision Agency:

a/ To inspect, examine and supervise the use of pledge loans by credit institutions during their terms; to handle according to its competence and propose the State Bank Governor to handle violations of this Circular and relevant regulations;

b/ To coordinate with related units in settling difficulties and problems arising in the grant of pledge loans.

7. Provincial-level State Bank branches:

a/ To grant pledge loans to credit institutions headquartered in their localities as authorized by the State Bank Governor;

b/ To organize the delivery, storage and preservation of pledged property, dossiers and documents and return of valuable papers and accounting of pledge loans according to regulations;

c/ To summarize on a monthly, quarterly and annual basis information and data on the grant of pledge loans at their branches, and detect in time difficulties and problems in the course of implementation and send them to the Credit Department for summarization and reporting to the State Bank Governor.

Article 22. Effect

1. This Circular takes effect on October 1, 2011, and replaces the State Bank Governor’s Circular No. 03/2009/TT-NHNN of March 2, 2009, stipulating the grant of loans with pledge of valuable papers as security by the State Bank to banks, and Circular No. 11/2009/TT-NHNN of May 27, 2009, amending Clause 1, Article 7 of Circular No. 03/2009/TT-NHNN.

2. Pledge loans which remain outstanding by the effective date of this Circular continue to comply with signed credit contracts till the State Bank fully retrieves their principal and interest.

3. The chief of the Office, the director of the Credit Department and heads of units of the State Bank, the directors of provincial-level State Bank branches; the chairpersons of the Boards of Directors or Member’s Councils, the directors general (directors) of credit institutions, the Central People’s Credit Fund, and foreign bank branches shall implement this Circular.-

For the State Bank Governor
Deputy Governor
NGUYEN DONG TIEN