Circular 30/2019/TT-NHNN required reserves of credit institutions and foreign bank branches

CIRCULAR

Prescribing required reserves of credit institutions and
foreign bank branches^[1]

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

Pursuant to June 16, 2010 Law on Credit Institutions, and the November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

Pursuant to the Government’s Decree No. 16/2017/ND-CP of 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 Monetary Policy Department;

The Governor of the State Bank of Vietnam promulgates the Circular prescribing required reserves of credit institutions and foreign bank branches.

Article 1. Scope of regulation

This Circular prescribes the determination, maintenance and setting aside of required reserves by credit institutions and foreign bank branches for implementation of national monetary policies.

Article 2. Subjects of application

Credit institutions and foreign bank branches (below collectively referred to as credit institutions) established and operating in accordance with the Law on Credit Institutions, except those specified in Article 3 of this Circular.

Article 3. Credit institutions not required to set aside required reserves

1. For a credit institution placed under special control: The period of exemption from required reserves shall be counted from the month following the month the credit institution is placed under special control under a decision of the State Bank of Vietnam (below referred to as the State Bank) through the month such special control is terminated under another decision of the State Bank.

2. For a credit institution not yet having commenced operation: The period of exemption from required reserves lasts through the month the credit institution commences its operation. Within 3 working days after commencing its operation, the credit institution shall notify in writing the State Bank (the Operations Center) of the date of operation commencement.

3. For a credit institution allowed to be dissolved or subject to a competent agency’s decision on opening of bankruptcy procedures or decision on license revocation: The period of exemption from required reserves shall be counted from the month following the month the credit institution is allowed to be dissolved or such decision takes effect. Within 3 working days after receiving a decision on opening of bankruptcy procedures, the credit institution shall send it to the State Bank (the Operations Center).

Article 4. Required reserves

Required reserves mean a money amount a credit institution is required to deposit at the State Bank, which shall be determined under Article 5 and maintained under Article 9 of, and guided in the Appendix to, this Circular.

Article 5. Determination of required reserves

1. The State Bank shall determine required reserves in a period of maintenance of required reserves for every credit institution by multiplying the required reserve ratio prescribed for a credit institution by type of deposits in the period of maintenance of required reserves by the average balance of deposits subject to calculation of required reserves at such credit institution in the corresponding period of determination of required reserves by type of deposits.

Formula for calculating required reserves:

Of which:

RR is the money amount to be set aside as required reserves in a period of maintenance of required reserves by a credit institution;

Ratio of RR_i is the required reserve ratio prescribed for a credit institution corresponding to the amount of deposits of type i subject to calculation of required reserves to be applied in a period of maintenance of required reserves;

BoD_i is the average balance of deposits of type i subject to calculation of required reserves at a credit institution in a period of determination of required reserves.

2. The average balance of deposits subject to calculation of required reserves at a credit institution in a period of determination of required reserves shall be calculated by adding up day-end balance amounts of deposits subject to calculation of required reserves in the entire system of such credit institution (including its head office, domestic branches and domestic attached units practicing dependent cost-accounting or offices of foreign bank branches) in the period then dividing them by the total number of days in the period of determination of required reserves.

Formula for calculating the average balance of deposits subject to calculation of required reserves for each type of deposits:

3. The period of maintenance of required reserves is a period of time of the current month counting from the first day through the last day of that month, including weekends and public holidays.

4. The period of determination of required reserves is a period of time of the preceding month counting from the first day through the last day of that month, including weekends and public holidays.

Article 6. Required reserve ratios, interest rates for required reserves deposits and deposits in excess of required reserves

1. Required reserve ratios for credit institutions

a/ The State Bank Governor shall decide on the ratio of required reserves to be applied to each type of credit institutions and each type of deposits in conformity with the objectives of the national monetary policies in each period, except the ratio of required reserves for Vietnam dong deposits for the credit institutions specified at Point b of this Clause;

b/ For credit institutions that provide loans for agricultural and rural development and receive support through required reserves instruments, the required reserve ratio for Vietnam dong deposits must comply with the State Bank’s regulations guiding the application of measures to regulate monetary policy instruments to assist credit institutions in providing loans for agricultural and rural development.

2. Interest rates for required reserves deposits and deposits in excess of required reserves for each type of credit institutions and each type of deposits shall be decided by the State Bank Governor in conformity with objectives of national monetary policies in each period.

Article 7. Reduction of required reserve ratios

Support-providing credit institutions defined in Clause 40, Article 4 of the Law on Credit Institutions (revised in 2017) are entitled to 50%-reduction of the required reserve ratio prescribed in Clause 1, Article 6 of this Circular for all types of deposits subject to calculation of required reserves under an approved remediation plan specified in Clause 7, Article 148dd of the Law on Credit Institutions (revised in 2017).

Article 8. Deposits subject to calculation of required reserves

Deposits subject to calculation of required reserves include:

1. Deposits of institutions (excluding other credit institutions established and operating in Vietnam) and individuals at credit institutions in the forms of demand deposits, term deposits, savings deposits, and specialized deposits.

2. Money amounts generated by credit institutions through issuance of deposit certificates, promissory notes, treasury bills, and bonds.

3. Other deposits at credit institutions on the principle that deposit principals and interests are fully refunded to depositors as agreed upon, excluding cash collaterals and deposits of other credit institutions established and operating in Vietnam.

Article 9. Maintenance of required reserves

1. Credit institutions shall maintain required reserves on their payment accounts opened at the State Bank.

2. A credit institution shall fully maintain required reserves at the State Bank during the period of maintenance of required reserves on the following principles:

a/ The average balance of payment accounts of the credit institution at the State Bank, including the Operations Center and provincial-level branches, during the period of maintenance of required reserves (below referred to as actual reserves) must not be lower than required reserves during such period.

Formula for calculating required reserves:

b/ The every-day balance of payment accounts of the credit institution at the State Bank during the period of maintenance of required reserves may be lower or higher than required reserves during such period.

3. Determination of excessive or deficient amount of required reserves for credit institutions

a/ Excessive amount of required reserves is an excessive amount of actual reserves against the required reserves during the period of maintenance of required reserves;

b/ Deficient amount of required reserves is a deficient amount of actual reserves against the required reserves during the period of maintenance of required reserves.

4. Credit institutions with a deficient amount of required reserves shall be administratively sanctioned in accordance with the current regulations on sanctioning of administrative violations in monetary and banking activities.

Article 10. Required reserves for foreign currency deposits

1. Foreign currency deposits at credit institutions that are used for calculation of required reserves are deposits in foreign currencies at such credit institutions and shall be converted into USD with required reserves maintained in USD.

2. In case a credit institution has an average balance of deposits subject to calculation of required reserves in EUR, JPY, GBP or CHF accounting for over 50% of total foreign currency deposits subject to calculation of required reserves, deposits subject to calculation of required reserves in foreign currencies may be converted into one of the above currencies with required reserves maintained in such currency.

3. The conversion of foreign currencies into USD for implementation of Clause 1 of this Article or into a foreign currency specified in Clause 2 of this Article shall be made via Vietnam dong at the exchange rate applied by a credit institution for making balance sheets under the State Bank’s current regulations on the system of bookkeeping accounts of credit institutions in the month of the corresponding period of determination of required reserves.

Article 11. Reporting on average balance of deposits subject to calculation of required reserves

1. Within the first 3 working days of a month, a credit institution shall make a report on average balance of deposits subject to calculation of required reserves in the period of determination of required reserves according to Form DTBB001 provided in the Appendix to this Circular as a basis for calculating required reserves of the period of maintenance of required reserves, and send it directly or by post or online via the information system for management of required reserves or by another method to the State Bank (the Operations Center) as guided by the latter. The credit institution shall take responsibility before law for accuracy, lawfulness and validity of the reported data.

2. Credit institutions eligible for the application of the required reserve ratio of 0% for all types of deposits subject to calculation of required reserves are not required to send reports under Clause 1 of this Article for the period of maintenance of required reserves during which such ratio is applied.

Article 12. Responsibilities of the State Bank’s provincial-level branches

1. To promptly and accurately update information about credit institutions’ payment accounts opened at the State Bank’s provincial-level branches (below referred to as State Bank branches) in the information system for management of required reserves as guided by the Information Technology Department.

2. To act as focal points and coordinate with the Information Technology Department in ensuring the accuracy and promptness of data on balance of credit institutions’ payment accounts opened at State Bank branches in the information system for management of required reserves.

3. To send to the State Bank’s Operations Center documents and decisions on special control, termination of special control, dissolution or revocation of licenses of credit institutions within 3 working days after issuing them.

4. Based on the content on reduction of the required reserve ratio (if any) for a support-providing credit institution under the remediation plan approved by directors of State Bank branches under regulations, to send to the State Bank’s Operations Center a document on reduction of the required reserve ratio for such support-providing credit institution, which must state the name of the support-providing credit institution, the month when the reduction starts to be applied, and period of reduction.

5. Within 30 working days after receiving a list of credit institutions with a deficient amount of required reserves from the State Bank’s Operations Center, to handle such credit institutions according to their competence or propose to the State Bank Governor measures to handle such credit institutions under current regulations, send decisions on handling of credit institutions with a deficient amount of required reserves to the State Bank Governor and concurrently to the Monetary Policy Department, Banking Supervision Agency, and Operations Center.

6. To carry out supervision and inspection, and handle according to their competence violations committed by credit institutions in the course of implementing this Circular.

Article 13. Responsibilities of the State Bank’s Operations Center

1. To perform responsibilities of the unit managing required reserves of credit institutions as follows:

a/ To act as a focal point and coordinate with the Information Technology Department and related units in guiding credit institutions in sending reports on average balance of deposits subject to calculation of required reserves and receive notices of required reserves via the information system for management of required reserves;

b/ Within the first 5 working days of a month, based on credit institutions’ reports on average balance of deposits subject to calculation of required reserves in the period of determination of required reserves, to determine and notify amount to be set aside as required reserves in the period of maintenance of required reserves and send to credit institutions notices of implementation of required reserves during the previous month’s period of maintenance of required reserves, made according to Form DTBB002 in the Appendix to this Circular;

c/ Within the first 7 working days of a month, to pay interests on required reserves deposits and deposits in excess of required reserves during the previous month’s period of maintenance of required reserves to credit institutions;

d/ Within the first 10 working days of a month, to summarize information about credit institutions’ observance of required reserves during the previous month’s period of maintenance of required reserves, send a report to the State Bank Governor and concurrently to the Banking Supervision Agency and Monetary Policy Department, made according to Form DTBB003 provided in the Appendix to this Circular, and to State Bank branches lists of credit institutions with a deficient amount of required reserves (stating amount to be set aside as required reserves, actual  reserves amount, and deficient amount of required reserves of each credit institution) whose head offices (or offices, for foreign bank branches) are based in localities.

2. To promptly and accurately update information about credit institutions’ payment accounts opened at the State Bank’s Operations Center in the information system for management of required reserves as guided by the Information Technology Department.

3. To act as a focal point and coordinate with the Information Technology Department in ensuring the accuracy and promptness of data on balance of credit institutions’ payment accounts opened at the State Bank’s Operations Center in the information system for management of required reserves.

4. Based on the document issued by the Banking Supervision Agency or a State Bank branch regarding reduction of the required reserve ratio for support-providing credit institutions, the State Bank’s Operations Center shall determine and notify the amount to be set aside as required reserves and perform other jobs specified in Clause 1 of this Article for such credit institutions.

Article 14. Responsibilities of the Information Technology Department

1. To build, install, and guide the operation of, the information system for management of required reserves (hardware, software and databases) for the State Bank’s Operations Center, State Bank branches, credit institutions and related units to make reports, calculate required reserves, determine actual reserves, and excessive amount and deficient amount of required reserves, and pay interests on required reserves deposits and deposits in excess of required reserves of credit institutions.

2. To coordinate with the State Bank’s Operations Center in guiding credit institutions in sending reports on average balance of deposits subject to calculation of required reserves and receive notices of required reserves via the information system for management of required reserves.

3. To guide the grant and revocation of access passcodes and digital signature passcodes for members of the information system for management of required reserves.

Article 15. Responsibilities of the Monetary Policy Department

1. Based on objectives of monetary policies, to submit to the State Bank Governor for consideration and decision:

a/ Required reserve ratio for each type of credit institutions and each type of deposits in each period;

b/ Interest rates for required reserves deposits and deposits in excess of required reserves for each type of credit institutions and each type of deposits in each period.

2. To act as a focal point for addressing problems arising in the course of implementation of this Circular.

Article 16. Responsibilities of the Banking Supervision Agency

1. Based on the content on reduction of the required reserve ratio (if any) for a support-providing credit institution in the approved remediation plan (except the remediation plan approved by the director of the State Bank branch under regulations), to send to the State Bank’s Operations Center a document on reduction of the required reserve ratio (if any) for such support-providing credit institution, which must state the name of the support-providing credit institution, the month when the reduction starts to be applied, and period of reduction.

2. To send to the State Bank’s Operations Center the State Bank’s documents or decisions on special control, termination of special control, dissolution, or revocation of licenses of credit institutions within 3 working days after the State Bank issues these documents or decisions, except those issued by State Bank branches.

3. Within 30 working days after receiving a report from the State Bank’s Operations Center on credit institutions’ observance of required reserves, to handle according to its competence or propose to the State Bank Governor measures to handle credit institutions with a deficient amount of required reserves under current regulations, then send to the State Bank Governor and concurrently to the Monetary Policy Department and Operations Center decisions on handling of credit institutions with a deficient amount of required reserves.

4. To carry out supervision and inspection, and handle according to its competence violations committed by credit institutions in the course of implementing this Circular.

Article 17. Effect

1. This Circular takes effect on March 1, 2020.

2. From the effective date of this Circular, the following documents cease to be effective:

a/ The State Bank Governor’s Decision No. 581/QD-NHNN of June 9, 2003, promulgating the Regulation on required reserves of credit institutions;

b/ The State Bank’s Circular No. 27/2011/TT-NHNN of August 31, 2011, amending and supplementing a number of articles of the Regulation on required reserves of credit institutions, promulgated together with the State Bank Governor’s Decision No. 581/QD-NHNN of June 9, 2003;

c/ The State Bank Governor’s Circular No. 23/2015/TT-NHNN of December 4, 2015, amending and supplementing a number of articles of the Regulation on required reserves of credit institutions, promulgated together with the State Bank Governor’s Decision No. 581/QD-NHNN of June 9, 2003.

3. For credit institutions placed under special control before the effective date of this Circular and not subject to required reserves under the State Bank’s documents, the time they start to enjoy exemption from required reserves must comply with such documents.

4. For credit institutions that are allowed to be dissolved or subject to a competent agency decision on opening of bankruptcy procedures or decision on license revocation before the effective date of this Circular and that are setting aside required reserves under current regulations, the time they start to enjoy exemption from required reserves is the month following the month this Circular takes effect.

5. Before the effective date of this Circular, for the period of maintenance of required reserves during which the State Bank’s Operations Center or a State Bank branch notifies required reserves to a credit institution under its management, the State Bank’s Operations Center or State Bank branch shall continue to pay interests on required reserves deposits and deposits in excess of required reserves for such credit institution for this period under the Regulation on required reserves for credit institutions, promulgated together with the State Bank Governor’s Decision No. 581/QD-NHNN of June 9, 2003, which was amended and supplemented under State Bank’s Circular No. 27/2011/TT-NHNN of August 31, 2011, and Circular No. 23/2015/TT-NHNN of December 4, 2015.

Article 18. Organization of implementation

The Chief of the Office, Director of the Monetary Policy Department, and heads of units of the State Bank, directors of State Bank branches, Chairpersons of Boards of Directors or Chairpersons of Members’ Councils, and Directors General (Directors) of credit institutions and foreign bank branches shall implement this Circular.-

For the State Bank Governor
Deputy Governor
NGUYEN THI HONG

* The Appendix to this Circular is not translated.