DECISION

ON "THE REGULATION ON RESERVE REQUIREMENT OF CREDIT INSTITUTIONS"

THE GOVERNOR OF THE STATE BANK

Pursuant to the Law on the State Bank of Vietnam No.01/1997/QH10 dated 12 December, 1997, the Law on the Credit Institutions No. 12/1997/QH10 dated 12 December, 1997;
Pursuant to the Decree No. 15 CP dated 2 March, 1993 of the Government on the assignment, authorization and responsibility for State management of ministries, ministry-level agencies;
Upon the proposal of the Director of the Monetary Policy Department,

DECIDES

Article 1. To issue in conjunction with this Decision "the Regulation on reserve requirement of credit institutions".

Article 2. This Decision shall replace the Decision No. 396/1997/QD-NHNN1 dated 1 December, 1997 of the Governor of the State Bank on the issuance of "the Regulation on reserve requirement of banks and credit institutions" and be effective as from 1 March, 1999.

Article 3. The Head of the Administrative office, the Chief Inspector of the State Bank, Heads of Departments of the State Bank, General Managers of State Bank branches in the provinces and cities, (General) Directors of credit institutions shall be responsible for the implementation of this Decision.

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FOR THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR




Duong Thu Huong

REGULATION

ON THE RESERVE REQUIREMENT OF THE CREDIT CONSTITUTIONS
(issued in conjunction with the Decision No. 51/1999/QD-NHNN1 dated 10 February, 1999 of the Governor of the State Bank )

Chapter 1

GENERAL PROVISION

Article 1. Required reserve is the balance amount which credit institutions operating in Vietnam shall have to maintain on their demand deposit with the State Bank for the implementation of the objectives of the monetary policy.

Article 2. Interpretations

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1. Period of determination of required reserve is the number of days of each period for calculation of the reserve required to maintain for each period of reserve maintenance;

2. Period of reserve maintenance is the number of days in each period in which the required reserve is to be maintained.

Article 3. Credit institutions which have been established and operating under the Law on Credit Institutions shall be governed by the Regulation on Reserve Requirement.

Article 4. The required reserve shall be calculated on the basis of the average balance amount of the mobilized deposits of the credit institutions in the respective period multiplied by the ratio of the reserve requirement which is subject to the stipulation of the Governor from time to time.

Article 5. The required reserve to be maintained with the State Bank shall be in VND and foreign currency.

Article 6. The Banking Operations Department and State Bank branches in provinces and cities where credit institutions maintain their head-offices shall calculate and give notice to credit institutions on their required reserve.

Article 7. The reserve requirement for each type of credit institution and each type of deposit shall be determined by the Governor of the State Bank, subject to the objective and the need of the monetary policy for each period.

Article 8. The payment of interest on the required reserve for each type of credit institution and each type of deposit for each period shall be in accordance with the stipulation of the Government.

Article 9. In case a credit institution is put under special control, the Governor of the State Bank shall consider the reduction of the ratio of the reserve requirement for the credit institution concerned to the minimum level of 0%.

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DETAILED PROVISIONS

Article 10. Credit institutions shall maintain sufficiently the required reserve with the State Bank in the "period of reserve maintenance" under the following principles:

1. The average balance amount of the deposit with the State Bank in the "period of reserve maintenance "shall be not less than the required reserve of "the period of reserve maintenance".

2. The daily balance amount of the deposit with the State Bank during a day in "the period of reserve maintenance" may be less the required reserve of "the period of reserve maintenance".

Article 11. The reserve requirement shall be calculated on the basis of the following deposits:

1. For the VND deposit (for the operation of the head-office and branches):

- Deposits of customers:

+ Demand deposits

+ Time deposits which are subject to reserve requirement

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- Deposits of foreign organisations and foreigners:

+ Demand deposits

+ Time deposits which are subject to reserve requirement

- Savings deposits:

+ Demand deposits

+ Time deposits which are subject to reserve requirement

- Other savings deposits

- Funds mobilized from the issue of fixed term valuable paper which are subject to reserve requirement

- Funds administered for customers and receivables

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2. For foreign currency deposits (for the operation of the head-office and branches)

- Deposit in foreign currency of customers

+ Demand deposits

+ Time deposit

- Deposits for specific purposes in foreign currency

- Deposits of foreign organisations and foreigners in foreign currency:

+ Demand deposits

+ Time deposits which are subject to reserve requirement

- Savings deposits:

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+ Time deposits which are subject to reserve requirement

- Funds mobilized from the issue of fixed term valuable paper which are subject to reserve requirement

- Deposits of the State Treasury

Deposits in foreign currency used as a basis to calculate the required reserve shall be freely convertible currency which shall be converted to US$ to maintain the required reserve in US$ with the Banking Operations Department of the State Bank. The conversion rates for calculating the required reserve shall be the average actual buying/selling rates of the foreign currency inter-bank market which are announced by the State Bank on the date of the calculation of the required reserve. In case the foreign currency inter bank market is not operative on that date, credit institutions shall apply the average actual buying/selling rates of the foreign currency inter bank market which are announced by the State Bank on the previous day.

For some foreign currencies including the Deusche Mark, Japanese Yen, British Pounds, French Francs and the Euro, if the deposits denominated in one of these currencies account for more than 50% of the total mobilized funds in foreign currency, the required reserve shall be maintained in the relevant currency with the Banking Operations Department of the State Bank.

(Pls. see the Schedule 1 which provides guidance on the code of accounts referred to under Article 11)

Article 12. Method of calculating the required reserve for "the period of reserve maintenance" (applicable to deposits in VND and foreign currency)

1. "The period for determining the required reserve" is the period from the 1st day to the end of the last day of the previous month.

2. "The period of reserve maintenance" is the period from the 1th day to the end of the last day of the current month.

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4. To calculate the average balance of deposits, the balance at the end of each business day in the respective period shall be added up and the total balance shall be divided by the number of days of the period (pls. see Schedule 2 which provides guidance on the calculation of the required reserve and the average balance of deposits attached to this Regulation).

5. The required reserve shall be the average balance of deposits in the "period for determining required reserve" multiplied by the ratio of reserve requirement which is provided for each credit institution.

Article 13. Determination of excess and deficient reserve

On the basis of the report (Form No. 1 attached to this Regulation) of credit institutions, the Banking Operations Department and State Bank branches in provinces and cities where credit institutions maintain their head-office shall reconcile the two following aggregates (A) and (B) to determine the excess and deficient reserves:

A: the average balance the credit institutions' deposit with the State Bank where the head-office is located in "the period of reserve maintenance" (as guided by Schedule 2);

B: the required reserve in "the period of reserve maintenance"

There is an excess reserve in case A is greater than B (A > B).

There is a deficient reserve in case A is less than B (A < B).

Article 14. Dealing with the excess and deficient reserve

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- On the first occasion where there is a reserve deficiency in any period of reserve maintenance in the year, a credit institution shall be subject to a warning;

- On the second and subsequent occasions where there is a reserve deficiency in any period of reserve maintenance in the year, the State Bank shall impose a fine in respect of the deficient reserve at an amount provided for by the Governor from time to time.

2. For the excess reserve: the State Bank shall pay interest on the excess reserve with the State Bank at rates provided for from time to time.

Article 15. The responsibility of credit institutions, departments of the State Bank of Vietnam and State Bank branches in provinces and cities shall be as follows:

1. Credit institutions shall be responsible to submit reports (Form No. 1 attached to this Regulation) on the average balance of the mobilized deposits in "the period for determining the reserve" as a basis for calculating the required reserve in "the period of reserve maintenance" to the State Bank branches in provinces and cities or the Banking Operations Department where credit institutions maintain the head-offices on the 3rd day of each month.

2. The Banking Operations Department shall

- On the basis of the reports on average balance of mobilized deposits in "the period for determining the reserve" submitted by credit institutions which have to report to the Banking Operations Department, verify, calculate and give notice (Form No. 3 attached to this Regulation) on the required reserve in " the period of reserve maintenance" for each credit institution on the 5th day of the month;

- Consolidate and prepare the report (Form No.2 attached to this Regulation) on the compliance with the reserve requirement of those credit institutions which have to report to the Banking Operations Department and send to the State Bank of Vietnam (the Banks and Non-bank credit Institutions Department) on the 6th day of each month;

- Deal with the surplus and deficiency of required reserves in accordance with Article 14 of the Regulation.

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- On the basis of reports on average balance of mobilized deposits in "the period for determining reserve" submitted by credit institutions which have to report to respective State Bank branch, verify, calculate and give notice (Form No. 3 attached to this Regulation) on the required reserve of " the period of reserve maintenance" for each credit institution on the 5th day of the month;

- Consolidate and prepare the report (Form No.2 attached to this Regulation) on the compliance with the reserve requirement of those credit institutions which have to report to respective State Bank branch and send to the State Bank of Vietnam (the Banks and Non-banking Institutions Department) on the 6th day of each month;

- Deal with the surplus and deficiency of required reserves in accordance with Article 14 of the Regulation.

4. The Banks and Non-Bank credit Institutions Department shall consolidate reports on the compliance with the reserve requirement of all credit institutions sent to it by the Banking Operations Department, State Bank branches in provinces and cities and submit the consolidated report to the Governor of the State Bank of Vietnam and send the same to the Monetary Policy Department and the Inspection Department on the 8th day of the month.

5. The Monetary Policy Department shall, taking into consideration the economic developments and objectives of the monetary policy, recommend to the Governor the adjustment of the ratio of reserve requirement for each type of credit institution, each type of deposit, the penalty rate on the deficient reserve, the interest rate on the excess reserve and the proposal to the Government on the payment of interest on the required reserve .

6. The Finance and Accounting Department shall give guidance on accounting method in the current accounts relating to the required reserve and the accounting method for the payment of interest on the excess and deficient reserve in accordance with the Regulation.

7. The Inspection Department shall supervise the implementation of the provision on reserve requirement by the credit institutions; report to the Governor of the State Bank on the results and recommend measures to be taken under its authority in case of violations of the provisions on reserve requirement by credit institutions.

In case the dates mentioned in this Regulation coincide with the holidays (Sundays, holidays, New Year holidays) the reporting date shall be the next working day.

Article 16. Any difficulty or obstacle arising in the course of the implementation of this Regulation shall be reported to the State Bank (the Monetary Policy Department). Within 15 days from the receipt of the recommendation of credit institutions on the reserve requirement, the State Bank shall give its written response to the concerned credit institutions. Pending this response credit institutions shall be obliged to comply with the Regulation on reserve requirement of the State Bank.

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1. Violations of the information and reporting requirement shall be dealt with in accordance with the provisions on this area.

2. The sanction on the deficient reserve shall be made in accordance with Article 14 of this Regulation.

Chapter III

IMPLEMENTING PROVISION

Article 18. Any adjustment of and supplement to provisions of this Regulation shall be decided upon by the Governor of the State Bank.

SCHEDULE I

CODE OF ACCOUNTS FOR DEPOSITS SUBJECT TO RESERVE REQUIREMENT

Code of accounts

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- Deposits of customers:

+ Demand deposits (4311)

+ Time deposits which are subject to reserve requirement (4312)

- Deposits for specific purposes (4314)

- Deposits of foreign organisations and foreigners:

+ Demand deposits (4351)

+ Time deposits which are subject to reserve requirement (4352)

- Savings deposits:

+ Demand deposits (4331)

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+ Other savings deposits ( 4338)

- Funds mobilised from the issue of fixed term valuable paper which are subject to reserve requirement (441)

- Funds administered for customers and receivables (462)

- Deposits of the State Treasury (401)

2. For foreign currency deposits

- Deposit in foreign currency of customers

+ Demand deposits (4321)

+ Time deposit (4322)

- Deposits for specific purposes in foreign currency (4324)

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+ Demand deposits (4361)

+ Time deposits which are subject to reserve requirement (4362)

- Savings deposits:

+ Demand deposits in foreign currency (4341)

+ Time deposits which are subject to reserve requirement (4342)

- Funds mobilised from the issue of fixed term valuable paper which are subject to reserve requirement (441)

- Deposits of the State Treasury (402)

SCHEDULE II

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Example: For the period of reserve maintenance of January, 1999, the calculation is as follows:

- The Formula for calculating the required reserve in the period of reserve maintenance:

Required reserve in the period of reserve maintenance of January, 1999

=

Daily average balance of deposits from 1 Dec. to 31 Dec. 1998 (the period of required reserve)

x

Ratio of required reserve in %

- Calculation of average balance of deposits in the period of determining required reserve:

Daily average balance

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Total deposits from 1.12 to 31.12.1998

31

- The formula for calculating the average balance of deposits in the period of reserve maintenance of January, 1999 placed with the State Bank:

Average balance of deposits in the period of reserve maintenance

=

Total deposits from 1.Jan 1999 to 31 Jan 1999

31

Example 1. Assuming that the Governor of the State Bank decides the ratio of reserve requirement to be 7% on the total average balance of deposit with term of under 12 months, 0% on the average balance of deposits with term of more than 12 months and the total average balance deposits of the credit institution X which is subject to reserve requirement in VND for the period of determining the reserve requirement of December 1998 is VND 12,000 bil. (of which VND 10,000 bil. are deposits with term less than 12 months, VND 2,000 bil. are deposits with term of more than 12 months); the actual average balance deposits with the State Bank in the period of reserve maintenance of January 1999 is VND 720 bil. The determination and notice to be given on the required reserve in the period of reserve maintenance of January 1999 and the determination of the actual reserve surplus and deficiency for January 1999 of the credit institution X are as follows:

* From the 3rd day to the 5th day of January, 1999, the Banking Operations Department and the State Bank branches would calculate and give notice on the required reserve for the period of reserve maintenance of January 1999:

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=

VND 10,000 billions x 7% + VND 2,000 billions x 0%

=

VND 700 billions

The credit institution X has, thus, to maintain the average balance of VND 700 Bil. on the deposit with the State Bank in the period of reserve maintenance.

* From the 3rd day to the 5th day of February 1999, the Banking Operations Department and the State Bank branches shall determine the reserve surplus and deficiency in the period of reserve maintenance of January 1999.

If the credit institution X maintains the average balance of VND 720 bil. on the deposit with the State Bank, in accordance with the respective provision, credit institution X has a reserve surplus of VND 20 bil. and is entitled to interest on this surplus to be paid by the State Bank of Vietnam during this period of reserve maintenance.

Assuming the Governor of the State Bank provides the interest to be paid on the reserve surplus in VND at 0.1%/month, the credit institution X would earn an interest amount in the period of reserve maintenance of January 1999 as follows:

Total interest earning = VND 20,000,000,000 x 0.1% = VND 20,000,000

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Example 2:. Assuming the Governor of the State Bank decides the ratio of reserve requirement to be 7% on the total average balance of deposit with term of under 12 months, 0% on the average balance of deposits with term of more than 12 months and the total average balance deposits of the credit institution Y which is subject to reserve requirement in VND in the period for determining reserve requirement of December 1998 is VND 12,000 billions (of which VND 10,000 billions are deposits with term less than 12 months, VND 2,000 billions are deposits with term of more than 12 months); the actual average balance deposits with the State Bank in the period of reserve maintenance of January 1999 is VND 670 billions. The determination and notice to be given on the required reserve in the period of reserve maintenance of January 1999 and the determination of the actual reserve surplus and deficiency for January 1999 of the credit institution Y are as follows:

* From the 3rd day to the 5th day of January 1999, the Banking Operations Department and the State Bank branches would calculate and give notice on the required reserve for the period of reserve maintenance of January 1999:

Required reserve in the period of reserve maintenance of January 99

=

VND 10,000 billions x 7% + VND 2,000 billions x 0%

=

VND 700 billions

The credit institution Y has, thus, to maintain the average balance of VND 700 billions on the deposit with the State Bank in the period of reserve maintenance.

* From the 3rd day to the 5th day of February 1999, the Banking Operations Department and the State Bank branches shall determine the reserve surplus and deficiency in the period of reserve maintenance of January, 1999.

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Dealing with the reserve deficiency of credit institution Y:

Assuming the Governor of the State Bank provides the penalty rate to be charged on the reserve deficiency in VND at 150% of the refinancing rate (the current refinancing rate is 1.1%/month), the credit institution Y would be subject to a penalty for the reserve deficiency in the period of reserve maintenance of January 1999 as follows:

The penalty (fine) = VND 30,000,000,000 x 150% x 1.1% = VND 495,000,000

The credit institution Y would have to pay a penalty of VND 495 millions for the reserve deficiency in the period of reserve maintenance of January 1999.

STATE BANK OF VIETNAM
STATE BANK BRANCH IN PROVINCE, CITY .. Banking Operation Center

SOCIALIST REPUBLIC OF VIETNAM
Independence-freedom-happiness

No. /TB-TH

Date: . . . . . . 199

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NOTICE
ON REQUIRED RESERVE IN THE PERIOD OF RESERVE MAINTENANCE
of . . month . . . year . . .applied to credit institutions. . .

- Pursuant to the Regulation on reserve requirement of credit institutions issued in conjunction with the Decision No...1999/QD-NHNN1 dated . . . . . . of the Governor of the State Bank,

- Based on the result calculated from the report of the credit institutions . . .

The Director of the Banking Operation Center (the Branch) of State Bank in . . . hereby provide notice on required reserve in the period of reserve maintainanced of . . . month . . . year . . applied to the credit institution . . . as follows:

The total average required reserves to be maintained in the period of reserve maintenance of . . . .month . . . year are: . . . . . . . . . (a + b + c)

a. The total average required reserves to be maintained in the period of reserve maintenance of . . . month . . . year 199 . . . in Vietnam Dong are: . . .

b. The total average required reserves to be maintained in the period of reserve maintenance of . . . month . . . year 199 . ..in foreign currency are: . . .

c. The total average required reserves to be maintained in the period of reserve maintenance of . . . month . . . year 199 . . . in other foreign currencies (DEM, JPY, GBP, FRF, EURO) are . . .

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Distribution
- Credit institution (for implementation)
- Accountants of the State Bank for supervision
- Inspection of the State Bank
- File at TH

DIRECTOR