Circular 26/2021/TT-NHNN guiding foreign currency transactions between the State Bank and credit institutions licensed to engage in foreign exchange transactions

CIRCULAR

Guiding foreign currency transactions between the State Bank of Vietnam and credit institutions licensed to engage in foreign exchange transactions

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions 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 Transaction Bureau;

The Governor of the State Bank of Vietnam hereby promulgates the Circular guiding foreign currency transactions between the State Bank of Vietnam and credit institutions licensed to engage in foreign exchange transactions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

This Circular provides guidance on foreign currency transactions between the State Bank of Vietnam (hereinafter referred to as the State Bank) and institutions licensed to engage in foreign exchange transactions.

Article 2. Operation of the State Bank in the domestic foreign currency market

The State Bank shall carry out foreign currency transactions on the domestic foreign currency market with institutions licensed to engage in foreign exchange transactions according to the intervention plans decided by the State Bank in each period.

Article 3. Interpretation of terms

In this Circular, the following terms shall be construed as follows:

1. Credit institutions licensed to engage in foreign exchange transactions mean institutions and foreign bank branches licensed to engage in foreign exchange business and exchange service provision (hereinafter referred to as licensed credit institutions).

2. Spot foreign currency transaction (hereinafter referred to as the spot transaction) means a transaction in which two parties buy and sell an amount of foreign currency at the spot rate at the trading time and make payment within 02 (two) working days following the transaction date.

3. Forward foreign currency transaction (hereinafter referred to as the forward transaction) means a transaction where the two parties commit to buy or sell an amount of foreign currency at a rate determined at the trading time and make payment within 03 (three) working days following the transaction date.

4. Foreign currency swap transaction (hereinafter referred to as the swap transaction) means a transaction between two parties, including the purchase and sale of the same volume of a 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.

5. Foreign currency option transaction (hereinafter referred to as the option transaction) means a transaction between two parties where the buyer pays for the seller a premium to own the rights but is not obligated to purchase or sell a volume of a foreign currency with another foreign currency within an agreed period at a rate determined at the trading time and make the payment in the future. If the buyer chooses to perform rights, the seller must execute obligations as committed. In the option transaction, the put option of this currency concurrently is the call option of another currency.

6. Premium means an amount of money that the buyer shall pay for the seller for long call option or long put option of currencies in the option transaction.

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

8. Transaction date means the date on which the State Bank and licensed credit institutions enter into a transaction agreement as prescribed in this Circular.

9. Payment date means the date the State Bank and licensed credit institutions transfer the amount of currency purchased and sold according to the transaction agreement established on the transaction date.

10. Internal regulations on the process of performing foreign currency transactions with the State Bank mean documents issued by licensed credit institutions, including specific regulations on the responsibilities and competence of individuals, relevant departments and guiding the implementation of foreign currency transactions with the State Bank.

11. Standard payment instructions mean payment instructions registered by licensed credit institutions with the State Bank, clearly identifying the payment accounts used in foreign currency transactions with the State Bank.

Article 4. Registration for establishment of foreign currency relationship

1. Licensed credit institutions wishing to establish a foreign currency transaction relationship with the State Bank shall submit directly or via postal service to the State Bank 01 (one) set of dossiers of registration for establishment of foreign currency transactions as prescribed in Article 5 of this Circular.

2. The State Bank shall certify the establishment of foreign currency transaction relations with licensed credit institutions on the basis of checking the completeness and accuracy of the dossier.

3. For each licensed credit institution, the State Bank shall only establish a foreign currency transaction relationship with 01 (one) representative being head office or 01 (one) branch of the licensed credit institution registered by such licensed institution with the State Bank.

Article 5. Dossiers for registration of establishment of foreign currency transaction relationship

Dossiers for registration of establishment of foreign currency transaction relationship includes:

1. An application for establishment of foreign currency transaction relationship with the State Bank according to Appendix 1 attached to this Circular.

2. Internal regulations on the process of implementing foreign currency transactions with the State Bank.

3. Standard payment instructions for foreign currency transactions with the State Bank according to Appendix 2 attached to this Circular.

4. An explanation of the means of foreign currency transaction of the licensed credit institution to ensure the ability to conduct transactions with the State Bank according to the transaction methods specified in Clause 1, Article 10 of this Circular.

Article 6. Receipt and settlement of registration dossiers for establishment of foreign currency relationship

Within 07 (seven) working days from the date of receiving a complete dossier for registration of establishment of foreign currency transaction relationship, the State Bank shall notify in writing to the licensed credit institution of its agreement or disagreement to establish a foreign currency transaction relationship (in case of disagreement, the State Bank shall clearly state the reason).

In case the dossier needs to be amended or supplemented, the State Bank shall notify in writing to the licensed credit institution within 04 (four) working days from the date receiving the dossier. The credit institution shall amend and supplement their dossier and send them to the State Bank within 10 (ten) working days from the date of receiving the notice.

Chapter II

SPECIFIC PROVISIONS

Article 7. Currencies for exchange, buying and selling rates and premium

1. The State Bank shall buy and sell Vietnam Dongs and US Dollars with licensed credit institutions that have foreign currency transaction relationships with the State Bank. In case of buying and selling Vietnam Dongs and other foreign currencies, the State Bank shall notify the licensed credit institutions having foreign currency transaction relationships.

2. The buying and selling rates of each type of transaction, the premium of call options, and the premium of foreign put options shall be decided by the State Bank and notified to the licensed credit institutions having foreign currency transaction relationship.

Article 8. Type of transaction

The State Bank shall deal in foreign currencies with licensed credit institutions having foreign currency transaction relationship by the following types of transactions:

1. Spot transaction.

2. Forward transaction.

3. Swap transaction.

4. Option transaction.

5. Other types of transactions as decided by the State Bank in each period.

Article 9. Term of transactions

Term of a forward transaction, forward transaction in swap transaction or option transaction shall be subject to the State Bank's notice in the foreign currency intervention plan specified in Clause 1 Article 12 of this Circular.

Article 10. Means and languages of transaction

1. The State Bank shall conduct transactions with licensed credit institutions through the electronic transaction system of Refinitiv or Bloomberg, through telephone or other means of transaction as decided by the State Bank in each period.

2. Foreign currency transactions that have been confirmed on the transaction means specified in Clause 1 of this Article shall be considered unchanged commitments. Any change or cancellation must be agreed upon by both parties.

3. In case foreign currency transactions are carried out by telephone, the licensed credit institution needs to ensure that the telephone has the function of recording, storing and retrieving the contents of transaction agreements. After reaching the agreement over the telephone, within the same transaction date, the State Bank and licensed credit institutions are allowed to re-certify in writing (paper or electronic documents) that is signed and approved by competent authorities. 

4. The language used in transactions through transaction means shall be Vietnamese or English.

Article 11. Transaction time

1. The official time of foreign currency transaction of the State Bank with licensed credit institutions shall be subject to the working time of the State Bank on weekdays.

2. In case a foreign currency transaction occurs outside the transaction time specified in Clause 1 of this Article, the licensed credit institution shall organize and conduct transactions in a smooth and safe manner, ensuring risk management.

Article 12. Transaction procedures

1. The State Bank shall notify the foreign currency intervention with licensed credit institutions having foreign currency transaction relationship through one of the following means:

a) E-portal of the State Bank;

b) Means of transaction specified in Clause 1, Article 10 of this Circular.

2. Licensed credit institutions wishing to conduct foreign currency transactions shall send an application to the State Bank through the transaction means specified in Clause 1, Article 10 of this Circular, and at the same time send a written request for foreign currency transactions according to Appendix 3 attached to this Circular to the State Bank (Transaction Bureau) within 16 hours of the transaction date (unless otherwise notified by the State Bank). The original written request for foreign currency transaction of the licensed credit institution or its scanned copy shall be sent to the State Bank (by email for the scanned copy). In case the licensed credit institution sends a scanned copy by email, the original written request for foreign currency transactions must be sent to the State Bank within 05 (five) working days from the transaction date.  

The written request for foreign currency transactions of licensed credit institution must be signed and approved by a competent person as stated on the list sent to the State Bank according to Appendix 1 attached to this Circular.

3. Based on the request for foreign currency transactions of the licensed credit institution and the intervention plan of the State Bank, the State Bank shall consider, agree and establish the transaction with the licensed credit institution through one of transaction means specified in Clause 1, Article 10 of this Circular.

4. After the transaction is established between the two parties through one of transaction means specified in Clause 1, Article 10 of this Circular, transaction confirmation shall be sent via SWIFT (Society for Worldwide Interbank and Financial Telecommunication) system or other means decided by the State Bank.

Article 13. Payment for transactions

1. Payment for foreign currency transactions shall be made according to standard payment instructions registered by licensed credit institutions with the State Bank as prescribed in Clause 3, Article 5 of this Circular.

2. If the payment date falls on a holiday or weekend of Vietnam’s foreign currency market and/or the payment processing market of the foreign currency used in the transaction, then, it shall be on the next working day.

3. If the payment is made later than the time as agreed between the State Bank and the licensed credit institution, the party that makes late payment shall be subject to a fine as follows:

a) For foreign currency, the maximum fine shall be equal to 150% of the overnight interest rate  the payment correspondent bank of the party who receives the late payment on the standard payment account receiving foreign currencies at the arising date calculating based on the amount and days of late payment;

b) For Vietnamese Dong, the maximum fine shall be equal to 150% of the refinancing loan interest rate of the State Bank at the time of arising late payment calculated according to the amount and days of late payment.

Article 14. Suspension of transactions, cancellation of transaction relationship

1. The State Bank shall suspend foreign currency transactions with licensed credit institutions for 03 (three) months in the following cases:

a) Failing to send reports or failing to send reports within the prescribed period or failing to send reports with contents prescribed in Clause 1, Article 15 of this Circular from 03 (three) or more times in 01 (one) quarter (except for the case specified in Clause 3, Article 15 of this Circular);

b) Failing to comply with the provisions of Clause 2, Article 15 of this Circular.

2. The State Bank shall suspend foreign currency transactions with licensed credit institutions while the institutions are:

a) Subject to special control;

b) Suspended from foreign exchange operations.

3. The State Bank shall cancel the foreign currency transaction relationship with the licensed credit institution in case the licensed credit institution has its license revoked in accordance with the Law on Credit Institutions.

4. The State Bank shall notify in writing to the licensed credit institution, clearly stating the reason for the suspension or cancellation of the transaction relationship.  

Article 15. Information reporting regime

1. Licensed credit institutions having foreign currency transaction relationship with the State Bank shall report to the State Bank (Transaction Bureau) according to the following provisions:

a) In case of not using transaction system of Refinitiv, report on foreign currency transactions with other credit institutions in accordance with current reporting regulations of the State Bank;

b) In case of using transaction system of Refinitiv, make a report according to the instructions provided by the State Bank on the process of reporting foreign currency transactions through transaction system of Refinitiv.

From the time of completing a foreign currency transaction through transaction system of Refinitiv, the parties involved in the transaction must report on the transaction made on transaction system of Refinitiv within 15 minutes. In case of not using transaction system of Refinitiv, the parties shall report the transaction on transaction system of Refinitiv within 45 minutes.

2. The licensed credit institutions shall notify in writing to the State Bank (Transaction Bureau) of changes in information registered with the State Bank in Appendix 1 and Appendix 2 attached to this Circular.

3. Licensed credit institutions shall be exempted from responsibility for complying with the reporting time specified at Point b, Clause 1, Article 15 of this Circular in the following force majeure cases:

a) Error in the transmission line connection from the server system containing the reporting data of the licensed credit institution to the State Bank caused by the transmission service provider;

b) The transaction system of Refinitiv has a technical problem caused by a service provider of Refinitiv;

c) Cases of power failure due to objective reasons or electricity providers;

d) The reporting server system of the State Bank has technical problems;

dd) Other cases due to objective reasons.

4. Immediately after the problems mentioned in Clause 3 of this Article are rectified, the licensed credit institution shall report the completed transactions to the State Bank (Transaction Bureau). The steps to report these transactions shall comply with the State Bank’s instructions on the process of reporting foreign currency transactions through transaction system of Refinitiv.

Chapter III

RESPONSIBILITIES OF LICENSED CREDIT INSTITUTIONS AND UNITS AFFILIATED TO THE STATE BANK

Article 16. Licensed credit institutions

1. The licensed credit institutions shall be responsible for:

a) The transactions performed by the licensed credit institution's tellers through the transaction means registered with the State Bank; The authenticity for competence of the related individuals in the foreign currency transactions with the State Bank;

b) The sufficiency, accuracy, validity and compliance with the time required for documents, dossiers and reports sent to the State Bank.

2. The licensed credit institutions shall be responsible for complying with current provisions on operation in foreign exchanges and ensuring:

a) To have strict procedures and system of risk management and internal control for foreign currency transactions with the State Bank;

b) To comply with regulations on the foreign currency position and other regulations on prudence in foreign exchange business in accordance with the State Bank's regulations.

Article 17. Transaction Bureau

1. To process dossiers, review and confirm with the licensed credit institutions on their registration for establishment of foreign currency transaction relationship.

2. To notify foreign currency intervention and conduct foreign currency transactions with licensed credit institutions having foreign currency transaction relationship with the State Bank; notify the reference exchange rate in accordance with regulations of the State Bank in each period.

3. To determine the penalty interest rate and handle the late payment specified in Clause 3, Article 13 of this Circular based on the impact assessment of each late payment case by licensed credit institutions.

4. To suspend transactions and cancel transaction relationships with licensed credit institutions as prescribed in Article 14 of this Circular.

5. To notify the Banking Supervision Agency on the list of licensed credit institutions approved by the State Bank to establish foreign currency transaction relationships, suspend and cancel foreign currency transaction relationships.

6. To act as a focal point to solve arising problems related to foreign currency transactions of the State Bank with licensed credit institutions.

Article 18. Monetary Policy Department

1. To notify the approved intervention plan of the State Bank to the Transaction Bureau.

2. To coordinate with the Transaction Bureau in solving arising problems related to foreign currency transactions of the State Bank with licensed credit institutions.

Article 19. Banking Supervision Agency

1. To provide copies (certified copies or copies of certified copies) of the establishment and operation license of the credit institutions or the license for the establishment of the Vietnam-based foreign bank branches and documents proving that the credit institutions are licensed to engage in foreign exchange transactions on the domestic market granted by the State Bank within 02 (two) working days after receiving the written request from the Transaction Bureau.

2. To promptly notify the Transaction Bureau when the licensed credit institution having a foreign currency transaction relationship with the State Bank is put under special control; suspended from foreign exchange operations; or violates the provisions of this Circular.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 20. Effect

1. This Circular takes effect on February 15, 2022.

2. To repeal the following Circulars:

a) Circular No. 02/2012/TT-NHNN dated February 27, 2012 of the Governor of the State Bank of Vietnam, guiding the foreign exchange transaction between the State Bank of Vietnam and credit institutions, foreign bank branches;

b) Circular No. 27/2013/TT-NHNN dated December 05, 2013 of the Governor of the State Bank of Vietnam, amending and supplementing a number of articles of the Circular No. 02/2012/TT-NHNN dated February 27, 2012, guiding the foreign exchange transaction between the State Bank of Vietnam and credit institutions, foreign bank branches;

b) Circular No. 45/2014/TT-NHNN dated December 29, 2014 of the Governor of the State Bank of Vietnam, amending and supplementing a number of articles of the Circular No. 02/2012/TT-NHNN dated February 27, 2012, guiding the foreign exchange transaction between the State Bank of Vietnam and credit institutions, foreign bank branches.

Article 21. Transitional provisions

Licensed credit institutions which have already established foreign exchange transaction relationships with the State Bank before the effective date of this Circular shall continue to conduct foreign currency transactions with the State Bank in accordance with this Circular without carrying out procedures for re-registering with the State Bank.

Article 22. Organization of implementation

The Chief of Office, Director of the Transaction Bureau, Heads of units affiliated to the State Bank; credit institutions and foreign bank branches licensed to engage in foreign exchange operations shall implement this Circular./.

* All Appendices are not translated herein.