Decree No. 50/2014/ND-CP dated May 20, 2014 of the Government on the management of State foreign exchange reserves

DECREE

On the management of state foreign exchange reserves[1]

Pursuant to the December 25, 2001 Law on Organization of the Government;

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

Pursuant to the December 13, 2005 Ordinance on Foreign Exchange, and the March 18, 2013 Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

At the proposal of the Governor of the State Bank of Vietnam,

The Government promulgates the Decree on the management of state foreign exchange reserves.

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Decree provides state foreign exchange reserves, management of state foreign exchange reserves, accounting, reporting and disclosure of information on state foreign exchange reserves.

Article 2.Agency managing state foreign exchange reserves

The State Bank of Vietnam (below referred to as the State Bank) is the agency managing state foreign exchange reserves under this Decree and other relevant laws.

Article 3.Interpretation of terms

In this Decree, the terms and expressions below are construed as follows:

1. State foreign exchange reserves are foreign exchange assets indicated in the currency balance sheet of the State Bank, including:

a/ Official state foreign exchange reserves (below referred to as official foreign exchange reserves) which means foreign exchange assets under the state ownership and assigned by the Government to the State Bank for direct management;

b/ Foreign-currency and gold deposits of credit institutions and foreign bank branches (below collectively referred to as credit institutions) and the State Treasury at the State Bank;

c/ Other foreign-currency sources.

2. Official foreign exchange reserves include the foreign exchange reserve fund and the exchange rate stabilization and gold market management fund.

3. Preservation of state foreign exchange reserves means assurance of safety for state foreign exchange reserves by observing the approved structure, standards and limits of investment in state foreign exchange reserves.

4. Liquidity of state foreign exchange reserves means the ability to be ready to supply foreign currencies and gold to serve the implementation of the national monetary policy and exchange rate and gold policy and intervene in the foreign exchange market with a view to ensuring the international payment capability and meeting unexpected and urgent foreign exchange demands of the State.

5. Profitability means the positive difference between the total income and investment in the official foreign exchange reserves in a fiscal year.

6. Investment in state foreign exchange reserves means the deposit, purchase and sale of foreign currencies and gold by the State Bank; purchase and sale of securities and other valuable papers in foreign currencies; entrusted investment and implementation of other forms of investment on the international market under regulations of the Governor of the State Bank in each period.

7. Structure of investment in the official exchange rate reserves covers proportions of foreign currencies and amounts of gold; ratios of short-, medium- and long-term investments; proportions of foreign-currency deposits, securities, valuable papers and other forms of investment in the official foreign exchange reserves and the maximum foreign currency level of the exchange rate stabilization and gold market management fund for purchase of gold on the international market under regulations of the Governor of the State Bank in each period.

8. Standards on investment in state foreign exchange reserves include credit ratings of partners permitted to invest in state foreign exchange reserves, types of securities and valuable papers permitted for investment in state foreign exchange reserves under regulations of the Governor of the State Bank in each period.

9. Limit of investment in state foreign exchange reserves means the maximum foreign exchange level permitted for investment by partner and investment form under regulations of the Governor of the State Bank in each period.

10. Intervention in the local market means the purchase, sale and swap of foreign currencies and gold and implementation of other forms of intervention in the local market by the State Bank.

Article 4.Components of state foreign exchange reserves

1. Foreign currencies in cash and overseas foreign-currency deposits.

2. Securities and other valuable papers denominated in foreign currency issued by the Government, foreign organizations or international organizations.

3. Special drawing rights and reserves at the International Monetary Fund.

4. Gold managed by the State Bank.

5. Other types of foreign exchange of the State.

Article 5.Sources of state foreign exchange reserves

1. Foreign exchange purchased from the state budget and foreign exchange market.

2. Foreign exchange from loans of banks and international financial institutions.

3. Foreign exchange from foreign-currency deposits of the State Treasury and credit institutions.

4. Foreign exchange purchased from profits from the investment of state foreign exchange reserves.

5. Foreign exchange from other sources.

Article 6.Structure, standards and limit of investment in state foreign exchange reserves

1. The State Bank shall prescribe the structure, standards and limit of investment in state foreign exchange reserves, including:

a/ Investment standards and limit applicable to state foreign exchange reserves;

b/ Investment structure applicable to the official foreign exchange reserves, including investment structure of the foreign exchange reserve fund and investment structure of the exchange rate stabilization and gold market management fund.

2. Grounds for formulation of the investment structure of the foreign exchange reserve fund:

a/ Fluctuation trends of exchange rates, interest rates and gold prices on the international market;

b/ Investments in foreign currencies and gold in international reserves of countries around the world according to statistics of the International Monetary Fund.

3. Grounds for formulation of the investment structure of the exchange rate stabilization and gold market management fund:

a/ Objectives of the monetary policy and exchange rate and gold price policy;

b/ Fluctuation of exchange rates and gold prices on the domestic and international foreign exchange markets;

c/ Practical use of foreign currencies in the payment for the import and export of goods sand services and payment of foreign debts of Vietnam;

d/ Foreign exchange limit of the exchange rate stabilization and gold market management fund approved by the Prime Minister in each period.

4. Grounds for formulation of standards and investment limit:

a/ Size of state foreign exchange reserves;

b/ Forecast developments of the international financial market and domestic foreign exchange market;

c/ Rating system of prestigious credit rating agencies in the world.

5. On a biannual basis and when necessary, the Governor of the State Bank shall decide to approve the structure, standards and limit of investment in state foreign exchange reserves and report them to the Prime Minister and concurrently notify them to the Ministry of Finance for coordination.

Article 7.Foreign currencies permitted for investment in state foreign exchange reserves

Foreign currencies permitted for investment in state foreign exchange reserves are freely convertible ones and others committed in bilateral and multilateral monetary swap agreements concluded by the State Bank with foreign central banks and international financial institutions.

Article 8.Inspection of the management of state foreign exchange reserves

Annually, the Ministry of Finance shall inspect the management of state foreign exchange reserves by the State Bank under this Decree.

Chapter II

MANAGEMENT OF STATE FOREIGN EXCHANGE RESERVES

Section 1

GENERAL PROVISIONS

Article 9.Principles of management of the official foreign exchange reserves

The management of the official foreign exchange reserves must adhere to the following principles:

1. Preservation of reserves.

2. Liquidity.

3. Profitability.

Article 10.Operations of management of the official foreign exchange reserves

The State Bank shall manage the official foreign exchange reserves through the following operations:

1. Investment on the international market.

2. Intervention in the local market.

3. Performance of derivative foreign exchange operations.

4. Implementation of bilateral and multilateral monetary swap agreements with foreign central banks and international financial institutions.

5. Other operations of management of the official foreign exchange reserves decided by the Governor of the State Bank in each period.

Article 11.Purchase and sale of foreign currencies between the official foreign exchange reserves and the state budget

1. The Ministry of Finance shall deposit the whole foreign-currency amount of the State Treasury at the State Bank.

2. Annually, the Ministry of Finance shall submit to the Prime Minister for approval the foreign currency limit permitted to be retained for regular foreign-currency spending of the state budget. Based on such foreign-currency limit, the Ministry of Finance shall sell the whole remaining foreign-currency amount for supplementing the official foreign exchange reserves.

3. By March 31 every year at the latest, the Ministry of Finance shall notify in writing the State Bank of the annual plan on sale of foreign currencies with detailed quarterly figures to supplement the official foreign exchange reserves.

4. In case the state budget is likely to be unable to supply foreign currencies for payment of foreign debts of the Government and other foreign-currency spending needs, the Ministry of Finance shall coordinate with the State Bank in working out plans on supply of foreign currencies to be sold to the state budget.

Article 12.Import, export and conversion of gold

1. Based on the structure, standards and limit of investment in state foreign exchange reserves and demand for intervention in the local gold market in each period, the Governor of the State Bank shall decide on the import and export of international-standard gold and other types of gold belonging to the state foreign exchange reserves and conversion of international-standard gold belonging to the state foreign exchange reserves into other types of gold andvice versa.

2. Criteria for selection of partners for import, export and conversion of gold should be decided by the Governor of the State Bank in each period.

Section 2

MANAGEMENT OF THE FOREIGN EXCHANGE RESERVE FUND

Article 13.Scope of use of the foreign exchange reserve fund

The foreign exchange reserve fund shall be used for:

1. Investment on the international market.

2. Performance of derivative foreign exchange operations.

3. Implementation of bilateral and multilateral monetary swap agreements with foreign central banks and international financial institutions.

4. Transfer and swap of foreign exchange with the exchange rate stabilization and gold market management fund.

5. Satisfaction of unexpected and urgent foreign exchange demands of the State.

Article 14.Swap of foreign exchange between the foreign exchange reserve fund and the exchange rate stabilization and gold market management fund

The Governor of the State Bank shall decide on the swap of foreign exchange between the foreign exchange reserve fund and the exchange rate stabilization and gold market management fund for the purpose of ensuring the observance of the approved investment structures of these funds without changing the credit balance of these funds converted into US dollars at the time of swap.

Article 15.Use of the foreign exchange reserve fund for unexpected and urgent demands of the State

1. The Ministry of Finance shall assume the prime responsibility for, and coordinate with the State Bank in, submitting to the Prime Minister for decision the use of foreign exchange from the foreign exchange reserve fund for unexpected and urgent demands of the State. In case of use of foreign exchange for advance payment and provision of loans, the Ministry of Finance shall recover and refund amounts advanced or provided as loans under decisions of the Prime Minister and in accordance with law.

Where the use of foreign exchange from the foreign exchange reserve fund leads to a change in the state budget estimate, the Law on the State Budget must be complied with.

2. Based on decisions of the Prime Minister and requests of the Ministry of Finance, the Governor of the State Bank shall issue decisions on use of foreign exchange from the foreign exchange reserve fund.

Section 3

MANAGEMENT OF THE EXCHANGE RATE STABILIZATION AND GOLD MARKET MANAGEMENT FUND

Article 16.Scope of use of the exchange rate stabilization and gold market management fund

The exchange rate stabilization and gold market management fund shall be used for:

1. Intervention in the local foreign currency and gold markets.

2. Investment on the international market, excluding entrusted investment.

3. Performance of derivative foreign exchange operations.

4. Transfer and swap of foreign exchange with the foreign exchange reserve fund.

5. Sale or advance of foreign currencies for foreign exchange demands arising from professional and managerial operations of the State Bank.

6. Sale of foreign currencies to the state budget according to approved foreign currency balance plans.

Article 17.Foreign exchange limit of the exchange rate stabilization and gold market management fund and transfer of foreign exchange between the exchange rate stabilization and gold market management fund and the foreign exchange reserve fund

1. The foreign exchange limit of the exchange rate stabilization and gold market management fund shall be decided by the Prime Minister in each period.

2. Based on the foreign exchange limit of the exchange rate stabilization and gold market management fund decided by the Prime Minister and the situation of the local foreign currency and gold markets, the Governor of the State Bank shall decide on the maximum foreign-currency level of the exchange rate stabilization and gold market management fund for purchase of gold on the international market in each period.

3. The Governor of the State Bank shall decide on transfer of foreign exchange from the exchange rate stabilization and gold market management fund to the foreign exchange reserve fund when the balance of the exchange rate stabilization and gold market management fund exceeds the limit decided by the Prime Minister.

4. Where the foreign exchange balance of the exchange rate stabilization and gold market management fund cannot meet the demand for intervention in the local market, the Governor of the State Bank shall propose the Prime Minister to permit the transfer of foreign exchange from the foreign exchange reserve fund to the exchange rate stabilization and gold market management fund.

Article 18.Intervention in the local market

1. Based on the objectives of the national monetary policy and the fluctuation of the exchange rate and gold prices on the local market, the State Bank shall create a mechanism for intervention in the local market in each period.

2. The Governor of the State Bank shall decide on specific intervention plans, specifying:

a/ Time of intervention;

b/ Type of foreign currency, amounts of foreign currency and amount of gold to be used for intervention;

c/ Exchange rate and gold price subject to intervention;

d/ Forms of intervention, including purchase, sale and swap of foreign currencies and gold;

dd/ Partners to perform the intervention;

e/ Conversion of international-standard gold into other types of gold andvice versawhen necessary;

g/ Other related contents.

3. The Governor of the State Bank shall submit to the Prime Minister for approval other forms of intervention other than those prescribed at Point d, Clause 2 of this Article.

Article 19.Purchase and sale of gold on the international market to serve intervention in the local market

1. Based on the investment structure, standards and limit of the exchange rate stabilization and gold market management fund, gold demand for market intervention in each period, gold amount used for intervention, and national security requirements, the Governor of the State Bank shall decide on the purchase and sale of gold on the international market to serve intervention in the local market.

2. Criteria for selection of partners for purchase and sale of gold on the international market to serve intervention in the local market shall be decided by the Governor of the State Bank in each period.

Chapter III

MANAGEMENT OF FOREIGN-CURRENCY AND GOLD DEPOSITS OF THE STATE TREASURY AND CREDIT INSTITUTIONS AND OTHER FOREIGN EXCHANGE SOURCES

Article 20.Principles of management of foreign-currency and gold deposits of the State Treasury and credit institutions and other foreign exchange sources

The State Bank shall manage foreign-currency and gold deposits of the State Treasury and credit institutions at the State Bank and other foreign exchange sources on the following principles:

1. Assuring safety through compliance with the standards and limit of investment in state foreign exchange reserves.

2. Promptly meeting the foreign exchange demands of the State Treasury and credit institutions when necessary.

3. Assuring liquidity.

Article 21.Operations of management of foreign-currency and gold deposits of the State Treasury and credit institutions and other foreign exchange sources

The State Bank shall manage foreign-currency and gold deposits of the State Treasury and credit institutions at the State Bank and other foreign exchange sources through the following operations:

1. Investment on the international market.

2. Cash in the fund and storage.

3. Other management operations decided by the Governor of the State Bank in each period.

Chapter IV

ACCOUNTING, REPORTING AND INFORMATION DISCLOSURE

Article 22.Accounting

1. The state foreign exchange reserves shall be accounted in original currencies and Vietnam dong in accordance with law.

The State Bank shall revaluate state foreign exchange reserves on its balance sheet for monitoring the increase or decrease of the value of the state foreign exchange reserves in Vietnam dong in order to reflect the fluctuation of exchange rates and gold prices on the local and international markets.

2. Incomes and expenses arising in the course of management of state foreign exchange reserves shall be accounted as those of banking operations of the State Bank in accordance with law. Incomes from and expenses for the purchase and sale of gold on the international market to serve intervention in the local market; import, export and conversion of gold and other activities of intervention in the local foreign exchange market are those from/for the implementation of the monetary policy and exchange rate and gold price policy.

Article 23.Reporting regime

1. Once every six months, the State Bank shall report to the Prime Minister and the Ministry of Finance on the size and use of state foreign exchange reserves.

2. On the annual basis and when necessary, the State Bank shall report to the Prime Minister and the Ministry of Finance on the management of state foreign exchange reserves and estimated level of state foreign exchange reserves, and limit the exchange rate stabilization and gold market management fund for the subsequent year.

Article 24.Disclosure of information on state foreign exchange reserves

1. The State Bank shall disclose information on state foreign exchange reserves in accordance with law.

2. State foreign exchange reserves shall be converted into US dollars to serve the making of statistics, management information and data disclosure. The State Bank shall determine exchange rates and gold prices for conversion of foreign currencies and gold in the state foreign exchange reserves into US dollars.

Chapter V

IMPLEMENTATION PROVISIONS

Article 25.Effect

1. This Decree takes effect on July 15, 2014.

2. This Decree replaces the Government’s Decree No. 86/1999/ND-CP of August 30, 1999, on the management of state foreign exchange reserves.

Article 26.Implementation responsibility

1. The State Bank shall guide and organize the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees and related organizations and individuals shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG