Circular 16/2019/TT-NHNN the issuance of the State Bank bills

CIRCULAR

On the issuance of the State Bank bills

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

Pursuant to the Law on Credit Institutions dated June 16, 2010 and the Law on amendments and supplements a number of Articles of the Law on Credit Institutions dated November 20, 2017;

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 General of Monetary Policy Department;     

The Governor of the State Bank of Vietnam hereby promulgates the Circular on regulating the issuance of the State Bank bills.

Chapter I

 GENERAL PROVISIONS

Article 1. Scope of adjustment

This Circular regulates the issuance of bills of the State Bank of Vietnam (herein referred to as the State Bank) for the implementation of the national monetary policy.

Article 2. Subjects of application

1. The State Bank.

2. Commercial banks, foreign bank branches, financial companies, cooperative banks, policy banks (hereinafter referred to as credit institutions).

3. Deposit Insurance of Vietnam.

Article 3. Interpretation of terms

1. The State Bank bills are short-term valuable papers issued by the State Bank for the implementation of the national monetary policy.

2. The date of payment of the State Bank bills is the date that the credit institutions have to transfer money for purchasing the State Bank bills.

3. The issuing date of the State Bank's bills is the date of payment of the State Bank bills and the bases for determining the payment due date of the State Bank bills.

4. The duration of the State Bank bills is the period of time starting from the following date of the issuing dated of the State Bank bills to the payment due date of the State Bank bills.

Chapter II

 SPECIFIC PROVISIONS

Article 4. Conditions and basic terms

1. Subjects: The State Bank bills shall be issued to credit institutions having Vietnam dong payment accounts at the State Bank.

2. Currency: The State Bank bills shall be issued, accounted and purchased in Vietnam dong (VND).

3. Duration: The duration of the State Bank bills shall be decided by the State Bank and must not exceed 364 days.

4. Face values: Face value of the State Bank bills is VND 100,000 or multiples of VND 100,000.

5. Form: The State Bank bills shall be issued in the form of book entry.

6. Interest rate: The interest rate of State Bank's bills shall be decided by the State Bank in accordance with the evolution of the monetary market and the objective of administration of the monetary policy in each period.

7. The State Bank bills shall be issued with the selling prices which are lower than their face values and shall be paid once with the face values of the State Bank bills when they come to due.

Article 5. Sale prices of State Bank bills

1. The selling price shall be determined according to the following formula:

In which:

G:      The selling price of one (01) State Bank bill;

Mg:   Face value of State Bank bills;

L:      The interest rate of the State Bank (%/year)

t:       The duration of the State Bank bills (the number of days).

2. The proceeds from the selling the State Bank shall be determined in the following formula:

GG = G x N

In which:

GG:  The proceeds from selling the State Bank bills;

G:     The selling price of one (01) State Bank bill;

N:     The quantity of bills issued by the State Bank.

Article 6. Modes of issuance of State Bank bills

1. The State Bank bills shall be issued in the form of bidding or compulsory.

2. Distribution by bidding mode:

The issuance of State Bank bills by bidding mode shall comply with the State Bank's regulations on bidding through the open market operations.

3. Distribution by compulsory mode:

a) Based on the monetary policy objectives in each period and actual situation, the State Bank shall decide on the issuance of State Bank bills by the compulsory mode to credit institutions. The credit institutions shall have to buy the State Bank bills that are issued by the compulsory mode in accordance with decisions of the Governor of the State Bank;

b) In case of necessity, the State Bank may consider to buy back the State Bank bills before the maturity date. The Governor of the State Bank shall decide on the buy-back of State Bank bills that are issued by the compulsory mode.

Article 7. Payment

1. The credit institutions shall make the payment for the purchase of State Bank bills issued by the mode of bidding according to the regulations of the State Bank on the open market operations.

2. The credit institution shall make payment for the purchase of State Bank bills issued in the form of compulsory as follows: The credit institution shall transfer the purchase money to the account designated by the State Bank within the day of payment of the State Bank bills. The credit institution must ensure full information on the money transfer order at the request of the State Bank.

3. By the maturity date of the State Bank bills, the State Bank shall make the payment with the amount equivalent to the face value of the State Bank bills for the credit institutions. In case the maturity date is the weekend-end or holiday, the payment of the State Bank's bills shall be made on the following day of that day-off.

Article 8. Costs of issuance and interest of bills

The expense for the issuance and payment of interest on credit bills shall be accounted into the operational cost of the State Bank by the State Bank.

Article 9. Use of State Bank bills in the State Bank's transactions

The State Bank bills shall be used for transactions of the State Bank according to the State Bank Governor's decisions in each period.

Article 10. Purchase and pledge of State Bank bills

1. Credit institutions are allowed to purchase and pledge of State Bank among them bills in accordance with laws provisions.

2. Deposit Insurance of Vietnam is allowed to buy the State Bank bills from credit institutions on the basis of agreement between Deposit Insurance of Vietnam and the credit institution.

Article 11. Depository

The State Bank bills shall be deposited at the State Bank as regulated by the State Bank on depository and using of value papers the State Bank.

Article 12. Handling in case credit institution do not make payment or not paying sufficient amount for buying the State Bank bills

1. Handling the credit institutions which do not make payment or not paying sufficient amount for buying the State Bank bills in the mode of bidding according to the regulations of the State Bank on the open market operations.

2. Handling the credit institutions which do not make payment or not paying sufficient amount for buying the State Bank bills shall be implemented as follow:

a) At the final day of purchasing the State Bank bills, the State Bank (the State Bank operations department, provincial level branches) shall make automatic deduction from the payment account of the credit institution opened at the State Bank until fulfill the purchase of State Bank bills and notice the credit institution by written document.

b) In case the payment account of the credit institution is not sufficient for the payment, the credit institution shall have to bear the penalty for late payment and the interest rate shall be calculated as interest rate for overnight loan of interbank electronic payment. Amount of daily penalty for late payment shall be determined in the following formula:

In which:

P:   Daily amount of penalty for late payment;

G:  The lack amount calculated at the end of the day:

L_p: Interest rate for overnight loan of interbank electronic payment as regulated in the Decision of the Governor of The State Bank at the counting date of the penalty for late payment.

c) Within 15 workings day from the payment day, the State Bank (the State Bank operations department, provincial level branches) shall daily and automatically deduct from the payment account of the credit institution opened at the State Bank until fulfill the lack amount of bills purchase and penalty for late payment remain; the former amount shall be deducted in advance, the later amount shall be deducted later;

d) In case the due date of payment prescribed at point c this Article expired:

(i) The credit institutions fails to make full payment for the purchase of bills of the State Bank shall be administratively sanctioned according to provisions on sanctioning of administrative violations in the field of currency and banking;

(ii) The State Bank (the State Bank operations department, provincial level branches) shall: Terminate the unpaid State Bank bills calculated in face value which allowed to be rounded up to the multiple of the State Bank bills face value; stop calculate the penalty for late payment and simultaneously, continue to deduct from the payment account or other resource of the credit institution (if any) until fulfill the penalty for late payment.

dd) The State Bank (the State Bank operations department, provincial level branches) determines the lack amount and penalty amount at the end of the working day and make the automatic deduction from payment account of the credit institution to revoke such amount at the following working day and notice the credit institution by written document.

Chapter II

IMPLEMENTATION

Article 13. Responsibilities of the units affiliated to the State Bank

1. The Monetary Policy Department:

 Take the prime responsibility and cooperate with concern units to submit to the Governor of the State Bank for decision on a number of content related to the State Bank bills issuance: The volume, expected interest, term, payment date, method of issuance and other contents; re-buy the bills in advance at compulsory mode:

2. The State Bank Operation Department

a) To conduct the responsibilities as current regulations on auction of State Bank bills via open market operation.

b) For compulsory issuance of State Bank bill:

(i) To notice on compulsory issuance of State Bank bills for credit institutions as regulated in the Governor’s Decision.

(ii) To issue, collect the payment, determine the penalty for late payment, pay the bills at the due date for the credit institutions, implement accounting activities as regulated;

(iii) To handle in case credit institution do not make payment or not paying sufficient amount for buying the State Bank bills in compulsory mode as regulated in Clause 2Article 12 this Circular; to submit to the Banks Inspectorate authority, the Banks supervisor authority the list of credit institutions fail on making sufficient payment for compulsory issued State Bank bills after the due date;

(iv) To be the lead in handling problems and difficulties arising in the issuing the State Bank bills in compulsory mode;

c) To make depository and procedures on transferring ownership of State Bank bills; to be the lead on advising the Governor of the State Bank to his Decision to allow Deposit Insurance of Vietnam open bills depository account at the State Bank; 

d) To synthesize and report to the Governor and the Monetary Policy Department the result of issuing State Bank bills after each session.

3. State Bank branches in provinces, centrally run cities:

a) To make announcement on compulsory issuance of State Bank bills for credit institutions as regulated in the Governor’s Decision.

b) To issue, collect the payment, determine the penalty for late payment, pay the bills at the due date for the credit institutions, implement accounting activities as regulated;

c) To handle in case credit institution do not make payment or not paying sufficient amount for buying the State Bank bills in compulsory mode as regulated in Clause 2Article 12 this Circular; to submit to the Banks Inspectorate authority, the Banks supervisor authority the list of credit institutions fail on making sufficient payment for compulsory issued State Bank bills after the due date;

d) To prepare report on issuance and payment of State Bank bills in compulsory mode and send to the Bank Operation Department right after issuance session;

dd) To be the lead in handling problems and difficulties arising in the issuing the State Bank bills in compulsory mode;

4. Department of Financial and Accounting

To guide the accounting activities for State Bank bills transactions.

Article 14. Implementation

1. This Circular takes effect on December 09, 2019.

2. This Decision replace the Decision No. 362/1999/QD-NHNN1 dated October 08, 1999 of the Governor of the State Bank on the issuance of the Regulation on the issuing the State Bank Bills.

3. To annul the regulation in Clause 2 Article 13 Circular No. 24/2014/TT-NHNN on guiding a number of regulation on deposit insurance.

Article 15. Organisation of implementation

The Chef Office, the Director of the Monetary Policy Department and heads of related units affiliated to the State Bank, Director of the provincial level State Bank branches, Chairperson of the Management Board, Chairperson of the Member Council and General Director (Director) of credit institutions, Chairperson of the Management Board and the General Director of Deposit Insurance of Vietnam shall implement this Circular./.

For the Governor

The Deputy Governor

Doan Thai Son