Circular 18/2016/TT-NHNN amending Circular 21/2012/TT-NHNN regulating lending activities; borrow; purchase and sale of valuable papers with term between credit institutions, foreign bank branches issued by the Governor of the State Bank of Vietnam

CIRCULAR

ON AMENDMENTS TO CERTAIN ARTICLES OF THE CIRCULAR NO. 21/2012/TT-NHNN DATED 18 JUNE 2012 BY THE GOVERNOR OF THE STATE BANK ON THE LENDING, BORROWING, sale and repurchase OF FINANCIAL INSTRUMENTS BY CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

Pursuant to the Law of Vietnam State Bank No. 46/2010/QH12 dated June 16, 2010;

Pursuant to the Law of Credit Institutions No. 47/2010/QH12 dated June 16, 2010;

Pursuant to the Government’s Decree No. 156/2013/ND-CP dated November 11, 2013 on the functions, missions, authority and organizational structure of Vietnam State Bank;

At the requests of the Head of the Monetary Policy Bureau;

Governor of the State Bank promulgates the Circular on amendments to certain articles of the Circular No. 21/2012/TT-NHNN dated June 18, 2012 by the Governor of the State Bank on the lending, borrowing, sale and repurchase of financial instruments by credit institutions and branches of foreign banks (hereinafter referred to as the Circular No. 21/2012/TT-NHNN).

Article 1. The articles of the Circular No. 21/2012/TT-NHNN are amended as follows:

1. Article 2 is amended as follows:

“Article 2. Regulated entities

1. Permitted lenders and borrowers: credit institutions, e.g. commercial banks, financial enterprises, financial leasing enterprises, banks for state policies, cooperative banks, people's credit funds, microfinance institutions, foreign banks’ branches, operating in Vietnam as per the Law of credit institutions.

2. Entities permitted to sale and repurchase of financial instruments: credit institutions, e.g. commercial banks, financial enterprises, financial leasing enterprises, banks for state policies, cooperative banks, foreign banks’ branches, operating in Vietnam as per the Law of credit institutions.”

2. Article 4 is amended as follows:

“Article 4. General principles for lending, borrowing, sale and repurchase of financial instruments (referred to as transactions)

1. Credit institutions or foreign banks' branches shall perform the transactions on these conditions:

a) They comply with this Circular and regulations on the organization and operation of credit institutions or foreign banks’ branches;

b) They apply internal regulations on professional processes and risk management procedure with regard to lending, borrowing (e.g. customer credit rating, loan limit determination, transaction-based processes of lending and borrowing) and sale and repurchase of financial instruments between credit institutions or foreign banks’ branches in conformity to this Circular;

c) They are not restrained, barred or suspended by the State Bank from lending, borrowing and sale and repurchase of financial instruments with credit institutions or foreign banks' branches upon transactions.

2. Apart from the principles in section 1 of this Article, credit institutions or foreign banks’ branches, as borrowers, must not incur debts overdue 10 days or more to other credit institutions or foreign banks’ branches, except:

a) Credit institutions under special control, which are permitted to perform the transactions according to the approved plan for consolidating their organization and activities;

b) Credit institutions under restructuring, which are permitted to perform the transactions according to the plan for restructuring their organization and operation as approved by the State Bank (if applicable)."

3. Section 1 of Article 8 is amended as follows:

“1. Abide by the principles defined in Article 4 of this Circular."

4. Section 1 and Section 3 of Article 11 are amended as follows:

“1. Lending interest rate shall be subject to negotiation of credit institutions or foreign banks' branches."

“3. The rate of interest on overdue principal balance shall be subject to negotiation of credit institutions or foreign banks' branches in the loan agreement; however, the rate cannot exceed 150% of the interest rate on the loan prior to its maturity. Furthermore, the rate of late payment interest shall be subject to negotiation of credit institutions or foreign banks' branches in the loan agreement; however, the rate shall not exceed 10% per annum.”

5. Point d, Section 2 of Article 16 is amended as follows:

“d) Report in writing immediately to the State Bank (i.e. Operations Center, Agency for Inspection and Supervision of banks) about a debtor’s failure to fulfill its agreed duties upon debt maturity.”

6. Section 1 of Article 18 is amended as follows:

“1. Abide by the principles defined in Article 4 of this Circular."

7. Section 1 of Article 19 is amended as follows:

“1. Commercial banks, financial enterprises, banks for state policies, cooperative banks and foreign banks’ branches are permitted to sale and repurchase the following financial instruments:

a) Treasury bills of the State Bank;

b) Government bonds;

c) State-guaranteed bonds;

d) Local government bonds;

dd) Financial instruments released by credit institutions or foreign banks' branches (including own financial instruments issued by credit institutions or foreign banks' branches) as per regulations of the State Bank;

e) Other bills, promissory notes and bonds that other organizations issue."

8. Section 2 of Article 23 is amended as follows:

“2. Credit institutions or foreign banks’ branches shall price each transaction of sale and repurchase on basis of the agreed repo rate, length of reverse repurchase time, remaining duration of financial instruments and other relevant information.

The price of buyback is determined as follows:

Buyback price = Purchase price x (1 + Repo rate x Length of reverse repurchase time/ Number of actual days in the year that the purchase occurs).”

9. Article 27 is amended as follows:

“Article 27. Implementation

1. Responsibilities of the Monetary Policy Bureau:

Handle difficulties in implementing this Circular.

2. Responsibilities of the Operations Center:

Monitor and summarize activities of depositing money and receiving deposits; lending and borrowing; sale and repurchase of financial instruments by credit institutions or financial foreign banks’ branches as per this Circular and the State Bank’s regulations on reporting and summarization. It shall be responsible for announcing transaction information in conformity to regulations on the disclosure of State Bank's information.

3. Responsibilities of the Agency for Inspection and Supervision of banks:

a) Provide guidelines to credit institutions and foreign banks’ branches for classifying debts and establishing risk provisions and ratios that secure the activities of credit institutions and foreign banks’ branches with regard to lending, sale and repurchase of financial instruments;

b) Inspect, and supervise the implementation of this Circular and cope with violations intra vires;

c) Provide the Monetary Policy Bureau, Operations Center and relevant units with the following information upon written request by the State Bank:

(i) Credit institutions and foreign banks’ branches that are restrained, barred or suspended by the State Bank from lending, borrowing, sale and repurchase of financial instruments with other credit institutions and foreign banks' branches;

(ii) Credit institutions that are subjected to special control but are permitted to perform the transactions according to the approved plan for consolidating their organization and activities;

(iii) Credit institutions that undergo restructuring but are permitted to perform the transactions according to the plan for restructuring their organization and operation as approved by the State Bank (if applicable).

4. Responsibilities of the Finance - Accounting Bureau:

Provide guidelines for recording and bookkeeping activities related to lending, borrowing or sale and repurchase of financial instruments between credit institutions or foreign banks' branches in conformity to this Circular.

5. Responsibilities of provincial branches of the State Bank:

Inspect, and supervise the implementation of this Circular and cope with violations intra vires.

6. Responsibilities of credit institutions and foreign banks' branches upon transactions:

Execute the reporting and summarizing scheme as defined by the State Bank for credit institutions and foreign banks’ branches.”

10. Point b, Section 3 of Article 28 is amended as follows:

“b) Upon deposit intake transactions, credit institutions and foreign banks’ branches must not incur debts overdue 10 days or more to other credit institutions or foreign banks’ branches, except:

(i) Credit institutions under special control, which are permitted to perform the transactions according to the approved plan for consolidating their organization and activities;

(ii) Credit institutions under restructuring, which are permitted to perform the transactions according to the plan for restructuring the organization and operation of credit institutions or foreign banks’ branches, as approved by the State Bank (if applicable)."

Article 2. Effect

1. This Circular comes into force as of August 22, 2016.

2. Section 3, Article 1 and the phrase “b) Upon deposit intake transactions, credit institutions and foreign banks’ branches must not incur debts overdue 10 days or more to other credit institutions or foreign banks’ branches, unless otherwise authorized by the Governor of the State Bank to take in deposits" in point b, section 13, Article 1 of the Circular No. 01/2013/TT-NHNN dated January 07, 2013 on amendments to certain articles of the Circular No. 21/2012/TT-NHNN.

3. Credit institutions and foreign banks’ branches shall abide by their signed agreements that govern transactions processed prior to the effective date of this Circular with regard to their lending, borrowing, sale and repurchase of financial instruments and depositing of money. Amendments to such agreements must conform to this Circular.

4. Office Managers, Head of the Monetary Policy Bureau, Heads of relevant units of Vietnam State Bank, Directors of State Bank’s provincial branches, Chairpersons of Boards of Directors, Chairpersons of Member Councils, General Directors (Directors) of credit institutions and foreign banks’ branches shall be responsible for implementing this Circular./.

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