FOREIGN CURRENCY TRANSACTIONS ON FOREIGN CURRENCY MARKET BY CREDIT INSTITUTION PERMITTED TO MAKE FOREIGN CURRENCY TRANSACTIONS

1. This Circular provides guidelines for foreign currency transaction on domestic foreign currency market among credit institution permitted to make foreign currency transactions (hereinafter referred to as permitted credit institutions) with each other and between permitted credit institutions and their clients.

2. Separated regulations of the State bank shall apply to foreign currency transaction between permitted credit institutions with the State bank of Vietnam (hereinafter referred to as the State bank.

In this Circular, the terms below are construed as follows:

1. Permitted credit institutions are banks, credit institutions, and branches of foreign banks permitted to trade in foreign currencies and provide foreign currency services.

2. Clients include:

a) Residents being business organizations (including credit institutions other than permitted credit institutions), other organizations, and individuals;

b) Non-residents being organizations and individuals.

3. Business organizations are organizations established and operated under Vietnam’s law, including enterprises, cooperatives, associations of cooperatives, and other organizations making investments other than permitted credit institutions.

4. Other organizations are organizations established and operated under Vietnam’s law other than those mentioned in Clause 1 and Clause 3 of this Article.

5. Foreign currency transaction includes foreign exchange spot transaction, foreign exchange forward, currency swap, call option and put option transactions.

6. A foreign exchange spot transaction (FX spot) means an exchange of an amount of a foreign currency for VND or another foreign currency at the spot exchange rate on the transaction date.

7. A foreign exchange forward (FX forward) means an exchange of an amount of a foreign currency for VND or another foreign currency at forward rate on the transaction date. Term of an FX forward is specified in Article 6 of this Circular.

8. Currency swap means a transaction between two parties which involves buying and selling of an amount of foreign currency and VND or another foreign currency on different days at different exchange rates on each day.

Currency swap includes two FX spots or two FX forwards or one FX spot and one FX forward. A currency swap between VND and a foreign currency must includes at least one FX forward.

9. Call option or put option transaction (hereinafter referred to as FX option transaction) means a transaction between two parties in which the buyer pays the seller a price for the FX option but the buyer does not have the obligation to buy or sell an amount of foreign currency on the spot (FX spot) within a period of time agreed by both parties at the exchange rate determined on the transaction date. If the buyer opts to exercise their call option or put option, the seller has the obligation to sell or buy the amount of foreign currency at the agreed exchange rate.

10. The price of the FX option is the amount of money payable by the option buyer to the option seller for the call option or put option. This price will be agreed by the parties thereto.

11. Transaction date means the day on which both parties the transaction as prescribed in Article 7 of this Circular.

1. Foreign currency transactions must be made in accordance with this Circular, the scope of each credit institution, branches of foreign banks permitted by the State bank according to their licenses for establishment and operation or Decisions on amendments to the license as prescribed by law. With regard to the foreign currency transactions that credit institutions and branches of foreign banks are not permitted to make by the State bank , credit institutions and branches of foreign banks may make foreign currency transactions that credit institutions are permitted to make as if business organizations in accordance with this Circular.

2. The parties to the foreign currency transaction must make the foreign currency in a transparent, truthful manner and are totally responsible for their decision to participate in the transaction.

3. Each permitted credit institution may directly or authorize one of its branches to make foreign currency transactions with another permitted credit institution.

1. Permitted credit institutions may make FX spots, FX forwards, currency swaps, FX option transactions with other permitted credit institutions.

2. Permitted credit institutions may make FX spots, FX forwards, currency swaps, FX option transactions (except for buying FX options) with business organizations.

3. Permitted credit institutions may make FX spots, FX forwards, FX option transactions (except for buying FX options) with residents being other organizations and individuals.

4. Permitted credit institutions may make FX spots with non-residents being organizations and individuals.

1. Each permitted credit institutions shall decide on the currencies to be traded.

2. The spot exchange rate between VND and USD of a FX spot or FX spot within a currency swap shall be determined according to the average exchange rate on the inter-bank foreign exchange market announced by the State bank and within the margin decided by the State bank.

3. The forward rate between VND and USD in a FX forward, a FX forward within a currency swap shall be agreed upon by the parties thereto but not exceeding the exchange rate determined according to:

a) The spot exchange rate on the transaction date;

b) The difference between two currency interest rates which are the refinancing interest rate announced by the State bank and Federal Funds Target Rate;

c) Term of the transaction.

4. Exchange rates between VND and other currencies other than USD and between the foreign currencies in the foreign currency transactions as agreed by the parties thereto.

5. Permitted credit institutions must publish the types of foreign currencies to be traded, exchange rates between VND and other foreign currencies when making transactions with clients.

1. Except for the case in Clause 2 of this Article, the term of a foreign currency transaction shall be agreed upon by the parties thereto.

2. The term of a FX spot or FX forward between VND and a foreign currency is from 3 working days to 365 days from the transaction date.

1. A written agreement on foreign currency transaction which contain the following information must be made:

a) Names of the parties;

b) Date of transaction;

c) Type of the transaction;

d) Currencies of the transaction;

dd) Quantity of foreign currencies;

e) Exchange rates;

g) Payment dates;

h) Price for FX option.

2. Apart from the pieces of information mentioned in Clause 1 of this Article, the transaction agreement between permitted credit institutions must have the following information:

a) Representatives to make the transaction;

b) Payment instructions;

c) Means of transaction;

d) Method for confirming the transaction; the person competent to confirm the transaction (if the transaction is made by electronic devices).

3. Apart from the pieces of information mentioned in Clause 1 and Clause 2 of this Article, the parties may agree upon other contents as long as they are conformable with this Circular and other regulations of law:

4. The agreement mentioned in Clause 1, Clause 2, and Clause 3 of this Article shall be made in the form or a framework agreement and/or a detailed agreement.

5. The foreign currency transaction agreement shall not be changed unless both parties reach an agreement on changing or canceling the transaction.

1. The foreign currency transaction agreement may be made by electronic devices as agreed by the parties; the parties are responsible for their decision. In case a foreign currency transaction is made by electronic devices, they must be able to store information for later use.

2. Foreign currency transactions that are made electronically must comply with the Law on Electronic transaction and relevant regulations of law.

1. If a foreign currency transaction is made electronically, the parties thereto must make and send confirmations to each other.

2. The confirmation must contain the following information:

a) Names of the parties;

b) Date of transaction;

c) Type of the transaction;

d) Currencies of the transaction;

dd) Quantity of foreign currencies;

e) Exchange rates;

g) Payment dates;

h) Price for FX option;

i) Signatures of the persons competent to confirm the transaction.

3. The confirmation must be made in writing. If the confirmation is faxed, within 05 working days from the transaction date, both parties must send the original (paper) confirmation bearing the signatures of the competent persons.

4. The confirmation must be made within the transaction date.

5. Confirmations of transactions must be retained as prescribed by law; confirmations of electronic transactions must be accessible.

1. The payment date of a FX spot or a FX spot within a currency swap shall be agreed upon by the parties thereto within 02 working days from the transaction date.

2. The payment date of a FX forward or a FX forward within a currency swap is the last day of the transaction term.

3. In case the payment date is weekend or public holiday, it will be delayed to the next working day.

Permitted credit institutions must not charge fees for foreign currency transactions.

1. When a permitted credit institution makes a foreign currency transaction with another permitted credit institution, documents proving the purpose of foreign currencies are not required.

2. Clients must present documents that contain information about purposes, quantity, type of foreign currency, deadline for payment or wire transfer according to applicable regulations on foreign currency management when making the following foreign currency transactions with permitted credit institutions:

a) Buying foreign currencies in a FX spot, FX forward, or currency swap;

b) Buying call option.

3. When making foreign currency transactions with their clients, permitted credit institutions must examine and retain documents to ensure that foreign currency transactions serve the right purpose and conform to regulations of law.

1. Except for the case in Article 9 of the Government's Decree No. 70/2014/ND-CP dated July 17, 2014 on guidelines for the Ordinance on Foreign Currencies and Ordinance No. 06/2013/PL-UBTVQH13 on amendments to Ordinance on Foreign Currencies, credit institutions may only sell foreign currencies under FX forward contracts to clients who buy foreign currencies at least 03 working days before the payment date under the documents prescribed in Clause 2 Article 12 of this Circular.

2. The last day of the term of the FX forward mentioned in Clause 1 of this Article must not come 2 days before the payment date according to the client’s documents.

1. Promulgate internal regulations on procedures for making foreign currency transactions that conform to this Circular and relevant regulations of law. To be specific:

a) Specify responsibilities and entitlements of relevant individuals and departments when making foreign currency transactions. Impose and control limits on foreign currency transactions to minimize risks;

b) Separate tasks and functions of transaction and support departments;

c) Impose internal regulations on risk management process which includes at least: possible risks, management process, and measures for controlling such risks.

2. Comply with regulations of the State bank on limits and safety ratios for branches of foreign banks and credit institutions, regulations on status of foreign currencies, and relevant regulations of law.

3. Notify, instruct clients to follow regulations of this Circular and relevant regulations on foreign exchange management when making foreign currency transactions.

4. Comply with the State bank’s regulations on statistics and reports applied to branches of foreign banks and credit institutions.

1. Financial Policy Department is in charge of settling issues related to foreign currency transactions that arise during the implementation of this Circular.

2. Bank Supervision and Inspection Agency, provincial branches of the State bank have the responsibility to:

a) Carry out inspection and supervision of the implementation of this Circular and impose penalties for violations as prescribed by law;

b) Notify the Financial Policy Department of issuance of Establishment and Operation Licenses, decisions on revisions of Establishment and Operation Licenses, written permissions for foreign currency transactions, and other documents about foreign currency transactions issued by the State bank to branches of foreign banks and credit institutions.

3. Finance – Accounting Department has the responsibility to instruct permitted credit institutions to account for foreign currency transactions.

4. Affiliates of the State bank, within the ambit of their functions and duties, have the responsibility to offer their opinions about settlement of issues related to implementation of this Circular at the request of the Financial Policy Department.

1. This Circular comes into force from October 5, 2015.

2. The following documents are annulled:

a) Decision No. 1452/2004/QD-NHNN dated November 10, 2004 of the Governor of the State bank on foreign currency transactions by credit institutions permitted to make foreign currency transactions;

b) Decision No. 101/1999/QD-NHNN13 dated March 26, 1999 of the Governor of the State bank on organization and operation of inter-bank foreign exchange market;

c) Decision No. 401/1999/QD-NHNN10 dated November 12, 1999 of the Governor of the State bank on amendments to Circular No. 07/TT-NH1 dated December 27, 1996 and Decision No. 101/1999/QD-NHNN13 dated March 26, 1999 of the Governor of the State bank;

d) Decision No. 206/2000/QD-NHNN13 dated July 11, 2000 of the Governor of the State bank;

dd) Decision No. 648/2004/QD-NHNN dated May 28, 2004 on amendments to some Articles of Decision No. 679/2002/QD-NHNN dated July 01, 2002 on foreign currency transactions of credit institutions permitted to trade in foreign currencies.

Credit institutions, branches of foreign banks, and their clients may keep making the transactions under the foreign currency transaction agreements that are concluded and have come into force before the effective date of this Circular. Any revisions to the aforesaid agreements made after the effective date of this Circular are only permitted if they are conformable with this Circular.

Chief of office, the Director of the Financial policy department, heads of affiliates of the State bank, Directors of provincial branches of foreign banks, the Chairpersons of the Executive Board, the Chairpersons of the Board of members, General Directors/Directors of branches of foreign banks and credit institutions are responsible for organizing the implementation of this Circular.