Decision No. 1452/2004/QD-NHNN dated November 10, 2004 of the State Bank on foreign exchange transactions of credit institutions that are permitted to engage in foreign exchange activities

decision

ON FOREIGN EXCHANGE TRANSACTIONS OF CREDIT INSTITUTIONS THAT ARE PERMITTED TO ENGAGE IN FOREIGN EXCHANGE ACTIVITIES

THE GOVERNOR OF THE STATE BANK

- Pursuant to the Law on the State Bank of Vietnam No. 01/1997/QH10 dated 12 December 1997 and the Law on the amendment, supplement of several Articles of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated 17 June 2003;

- Pursuant to the Law on the Credit Institutions No. 02/1997/QH10 dated 12 December 1997 and the Law on the amendment, supplement of several Articles of the Credit Institutions No. 20/2004/QH11 dated 15 June 2004;

- Pursuant to the Decree No. 86/2002/ND-CP dated 5 November 2002 of the Government providing for the function, assignment, authority and organizational structure of the ministries, ministerial-level agencies;

- Upon the proposal of the Director of the Foreign Exchange Control Department,

DECIDES:

Article 1. Governing scope

This Decision shall govern foreign exchange transactions of Credit Institutions that are permitted to engage in foreign exchange transactions within the territory of Vietnam.

Article 2. Interpretation

1. Foreign currency is the currency of another country or the common currency of several countries;

2. Credit Institutions authorized to engage in foreign exchange transactions (hereinafter referred to as authorized CIs) is a credit institution that the State Bank permits to engage in foreign exchange activities, which include the foreign currency purchase and sale;

3. Spot foreign exchange transactions (hereinafter referred to as spot transactions) is a transaction where both two parties carry out the purchase, sale of a volume of foreign currency at a spot rate effective at the transaction time and complete the payment within 2 (two) following working days;

4. Forward foreign exchange transactions (hereinafter referred to as forward transactions) is a transaction where the two parties commit to carry out the purchase, sale with each other of a foreign currency volume at a determined rate and the payment will be made at a determined point of time in the future;

5. Swap foreign exchange transactions (hereinafter referred to as swap transactions) is a transaction where the purchase and sale of the same volume of foreign currency (only two types of currency are used in the transaction) are simultaneously made and the payment term of the two transactions is different and the exchange rate of two transactions is determined at the time the contract is signed;

6. Currency option transactions (hereinafter referred to as option transactions) is a transaction between the option purchasing party and the option selling party where the option purchasing party has rights but not obligations to purchase or sell a determined volume of foreign currency at a determined exchange rate within a pre-agreed period of time. If the option purchasing party performs its rights, the selling party shall be obliged to sell or purchase the foreign currency volume stated in the contract at the exchange rate, which has previously been agreed;

In this Decision, the option transactions only consist of transactions among foreign currencies (not related to VND).

7. Other foreign exchange transactions are foreign exchange transactions permitted by the Governor of the State Bank to be performed from time to time in line with the development of the foreign exchange market.

Article 3. Types of foreign exchange transactions

1. Spot transactions

2. Forward transactions

3. Swap transactions

4. Option transactions

5. Other foreign exchange transactions in accordance with provisions of the Governor of the State Bank from time to time.

Article 4. Subjects participating in foreign exchange transactions

1. Authorized CIs;

2. Economic organizations;

3. Other organizations and individuals;

4. The State Bank of Vietnam.

Article 5. Scope of foreign exchange transactions

1. Authorized CIs shall be entitled to carry out the foreign exchange transactions as stipulated in Article 3 of this Decision;

2. Within the scope of permitted transactions, authorized CIs shall be entitled to:

2.1. perform the foreign exchange transactions as provided for in Article 3 of this Decision with economic organizations;

2.2. perform the option, forward, spot transactions with other organizations and individuals;

3. Authorized CIs shall not be entitled to purchase the options from economic organizations, other organizations and individuals;

4. Authorized CIs shall be entitled to perform the foreign exchange transactions with other authorized CIs and the State Bank in the inter-bank foreign currency market in accordance with the Regulations on the organization and operation of the inter-bank foreign currency market.

Article 6. Currency used in transaction and transaction exchange rate

General Directors (Directors) of authorized CIs shall be entitled to stipulate foreign currencies their units can use in transactions and exchange rates for foreign currencies in line with current provisions of the State Bank.

Article 7. Term of option, swap, forward transactions

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

2. Term of option, swap, forward transactions among foreign currencies shall be agreed upon by authorized CI and customers;

3. The parties shall determine and clearly state the date of the transfer payment in the transaction contract.

Article 8. Transaction mode and transaction contract

1. The parties participating in the foreign exchange transactions may perform transactions through telephone, via telex, fax or other forms in accordance with provisions of authorized CIs, in line with common rule of the foreign currency market and related provisions of current laws;

2. Forms of transaction confirmation shall be stipulated by authorized CIs in accordance with current laws and must ensure the legal basis for the interests and obligations of the parties to the transactions as well as for the accounting and disputes between the parties (if any);

3. Contents of the foreign exchange contract shall be agreed upon by the parties to the contract in accordance with current provisions of applicable laws.

Article 9. Documents in the foreign exchange transactions

1. Economic organizations, other organizations and individuals that use VND to purchase foreign currencies from the authorized CIs through spot or forward transactions must present documents that provide full information of the purpose, volume and type of foreign currency needed for payment, the payment time in accordance with current provisions on foreign exchange control;

2. Apart from transactions stated in Paragraph 1 of this Article, for other foreign exchange transactions, no document is required to prove the purpose of foreign currency use;

3. The authorized CIs shall be responsible for the verification of customers documents in accordance with current provisions on foreign exchange control.

Article 10. Transaction fees

1. Authorized CIs shall not be entitled to charge transaction fees on forward, swap, spot foreign exchange transactions;

2. Authorized CIs and customers shall agree on and clearly state in the contract the level of transaction fees and the mode of fee payment for the option transaction.

Article 11. Compliance with foreign currency position

1. Authorized CIs shall comply with the foreign currency position in accordance with current provisions of the State Bank;

2. Authorized CIs shall be entitled to maintain the total value of option contracts without counter transactions equivalent to 10% of their own capital at the maximum.

Article 12. Dealing with violation

Organizations, individuals that violate provisions of this Decision shall, depending on the nature, seriousness of violation, be subject to the administrative punishment in monetary area and banking activity or prosecuted for criminal liability.

Article 13. Organization of the implementation and responsibilities for the implementation

1. The Director of the Foreign Exchange Control Department and Heads of units of the State Bank shall be responsible for the implementation of this Decision;

2. The Director of the Finance- Accounting Department shall be responsible for providing guidance on the accounts for the accounting of foreign exchange transactions;

3. The Chief Inspector of the State Bank, General Managers of the State Banks branches in provinces, cities under the central Governments management shall be responsible for examination, supervision of the implementation of this Decision by authorized CIs according to their delegated authority;

4. General Directors (Directors) of authorized CIs shall be responsible before the Governor of the State Bank for the organization of the implementation of this Decision in their units.

Article 14. Effectiveness for implementation

This Decision shall be effective after 15 days from the date of its publication in the Official Gazette and replace the Decision No. 17/1998/QD-NHNN7 dated 10 January 1998 of the Governor of the State Bank on the issuance of the Regulations on the foreign exchange transactions.