Quyết định 111/2004/QD-NHNN

DECISION

ON THE ISSUANCE OF THE REGULATION ON THE AUCTION OF THE GOVERNMENT'S FOREIGN CURRENCY BONDS AT THE STATE BANK

THE GOVERNOR OF THE STATE BANK

- Pursuant to the Law on the State Bank of Vietnam No. 01/2997/QH10 dated 12 December, 1997 and the Law on Credit Institutions No. 02/1997/QH10 dated 12 December, 1997;
- Pursuant to the Law on the amendment, supplement of several Articles of the Law on the State Bank of Vietnam No. 10/2003/QH11 dated 17 June, 2003;
- Pursuant to the Decree No. 86/2002/ND-CP dated 05 November, 2002 of the Government providing for the function, assignment, authority and organizational structure of the ministries and ministerial level agencies;
- Pursuant to the Decree No. 141/2003/ND-CP dated 20 November, 2003 of the Government on the issuance of Government Bonds, Bonds guaranteed by the Government and Bonds of local Government;
- Pursuant to the Decision No. 182/2003/QD-TTg dated 5 September, 2003 of the Prime Minister on the issuance of Government Bonds for investing in several national important traffic, irrigation works
- In agreement with the Ministry of Finance and upon the proposal of the Director of Credit Department;

DECIDES:

Article 1. To issue in conjunction with this Decision the Regulation on the auction of Government's foreign currency Bonds at the State Bank.

Article 2. This Decision shall be effective after 15 days since the date of its publication in the Official Gazette.

Article 3. Director of Administrative Department, Director of Credit Department, Director of the Banking Operation Department, Heads of units of the State Bank, General Managers of the State Bank branches in provinces, cities under the central Governments management, Chairperson of the Board of Directors, General Directors (Directors) of credit institutions shall be responsible for the implementation of this Decision.

REGULATION

ON THE AUCTION OF GOVERNMENT'S FOREIGN CURRENCY BONDS AT THE STATE BANK
(Issued in conjunction with the Decision No. 111/2004/QD-NHNN dated 2 February, 2004 of the Governor of the State Bank)

Chapter I.

GENERAL PROVISIONS

Article 1. Governing scope

This Regulation provides for the auction of Government's foreign currency Bonds at the State Bank.

Article 2. Interpretation.

In this Regulation, following terms shall be construed as follows:

1. Auction of Government's foreign currency Bonds at the State Bank shall mean that the State Bank acts as an agent of the Finance Ministry to issue and make payment of Government's foreign currency Bonds, under the wholesale method, with other members in the primary market through the auction.

2. Competitive interest rate auction shall be a form of interest auction between members in order to determine the winning interest rate and winning volume of the members participating in the auction session.

3. Uncompetitive interest rate auction shall be a form of volume auction between members in order to determine the winning volume in the auction session. The interest rate applicable to uncompetitive interest rate auction shall be the winning interest rate in the competitive interest rate auction.

4. Government's foreign currency Bonds that are issued in at par form shall be Bonds that are sold at the price equivalent to their face value and the payment of their principal is made one time at the maturity; their interest is paid periodically on an annual basis on the issue date of the Government Bonds.

Article 3. Auction principles

1. Publicity and equality in respect of the rights and obligations of members;

2. Secrecy of the tendered information of members and the ceiling interest rate (if any).

Article 4. Auction form

The State Bank of Vietnam shall apply one of following auction forms in an auction session:

1. Competitive interest rate auction;

2. A combination between the competitive interest rate and the uncompetitive interest rate.

The form of auction in each session shall be specifically decided upon by the Ministry of Finance.

Article 5. Conditions for participating in the auction of Government's foreign currency Bonds

Credit Institutions, which are set up and operating in accordance with the Law on Credit Institutions, shall be permitted to take part in the auction of Government's foreign currency Bonds upon their satisfaction of following conditions:

1. They are permitted to engage in foreign exchange activity;

2. They maintain their foreign currency accounts at the Banking Operation Department.

Article 6. Responsibilities of the Treasury Bills auction committee

The inter-ministerial Treasury Bills auction committee of the State Bank and Ministry of Finance shall be responsible for the organization, supervision of the auction operation of Government's foreign currency Bonds at the State Banks.

Chapter II.

SPECIFIC PROVISIONS

Article 7. Member recognition

1. The State Bank shall consider for granting a written membership recognition to Credit Institutions, which have fully satisfied conditions as stipulated in Article 5 of this Regulation and submitted a written request for participating in the auction of Government's foreign currency Bonds and the list of persons authorized to sign documents relating to the participation in the auction of Government's foreign currency Bonds at the State Bank in accordance with the sample form No. 01/TPCP attached hereto.

2. The State Bank shall revoke the membership recognition in following cases:

a. Credit Institutions can no longer satisfy conditions as provided for in Article 5 of this Regulation;

b. Credit Institutions are placed in the special control status.

Article 8. Auction method

1. Direct auction: Members shall directly bid at the State Bank of Vietnam.

2. Online Auction: The State Bank shall grant a number code, key code and signature code to persons authorized by members for their performance of on-line transactions.

Article 9. Auction information

1. The State Bank shall, based on the request for the issuance of Government's foreign currency Bonds by the Ministry of Finance, give notice of the auction to members at least 2 working days prior to the date of auction.

2. The State Bank (Banking Operation Department) shall send the notice of auction in following forms:

a. Through the computer network to members, which are directly connected to the State Bank's network;

b. Via fax to members, which are not directly connected to the State Bank's network and the designated branches of the State Bank. In case of members, which are not directly connected to the State Bank's network and do not register their participation in 5 consecutive auction sessions, the direct notice via fax by the State Bank to these members shall be terminated in following auction sessions and only resumed when these members register their participation in the auction.

c. Announcement in several mass media.

3. The content of the notice of Government's foreign currency Bonds auction of the State Bank shall comply with the Form No. 02/TPCP attached.

Article 10. Auction registration

1. On the auction date, members shall carry out the auction registration in accordance with the Form No. 03/TbPCP attached.

2. Contents stated in the written registration by members for auction shall be provided for as follows:

a. Forms of auction:

- The Registration Form No. 03/TPCP shall be applicable to the form of competitive interest rate auction and the combination of competitive interest rate auction and uncompetitive interest rate auction. Auction participants shall fill in suitable part depending on the form of auction participation.

- In the sessions of auction where the combination auction between competitive interest rate auction and uncompetitive interest rate auction is carried out, members can register either competitive interest rate auction or uncompetitive interest rate auction or both.

b. Bidding volume

- Participating members shall not be subject to the minimum bidding volume, but it must be rounded to the currency unit of the Bonds. In case of a combination auction, the maximum bidding volume of each participating member in the uncompetitive interest rate auction shall be equal to 30% of the expected issue;

- The volume registered at each level of interest rate in the competitive interest rate auction and the total volume shall be stated both in words and in number. The auction registration forms shall be rejected in case where the volume in words and in number are different.

c. Interest rate

- Each registration form shall be permitted to register 5 levels of bidding interest rate for the case of competitive interest rate auction. Interest rate at each auction level shall be calculated as the percentage per year (%/year) and up to 2 decimal digits;

- In case of an uncompetitive interest rate auction, the registration form shall register only the bidding volume, not register levels of interest rate.

3. The auction registration form (the original) sent to the State Bank must be signed by the legal representative of the member, who has registered his signature with the State Bank, and be put in a sealed envelope. In case where the registration form is transmitted through the computer network connected to the State Bank, provisions on information security of the State Bank shall be complied with.

4. It is not required for auction participants to deposit at the State Bank.

Article 11. The way to send the registration form

1. Auction participants shall be entitled to send a registration form for each term of the bonds in each auction session.

Within the time allowed for the submission of the registration forms, members may change any content of the registration form by submitting a new form and canceling the old one through the computer network. In case where the bid offer is dropped directly in the box at the State Bank (Banking Operation Department or the designed branch of the State Bank), the latest offer shall be appraised

2. The registration forms shall be dropped directly in the box at the State Bank or transmitted through the computer network to the Banking Operation Department in compliance with provisions on the information security of the State Bank.

3. The box shall be locked by 2 locks, keys of which shall be kept by 2 competent officers, each person keeps one key. In case where the auction registration is made through the computer network, the key code shall be kept by a competent person to ensure the confidentiality of the registration forms before the auction opening.

Article 12. Auction opening

1. Auction participants shall submit registration forms to the State Bank prior to 13 o'clock of the auction opening date. The time for auction opening shall begin from 13.30 o'clock of the auction date in the witness of the Committee for Treasury Bills auction.

2. The settlement unit of the State Bank (Banking Operation Department or the designated branch of the State Bank) shall verify the validity of auction registration forms (by two checking officers, who sign separately for confirmation on the auction registration forms, the head of the settlement unit shall sign for confirmation). Auction registration forms and the auction registration levels that do not comply with applicable provisions shall be rejected.

After the rejection of invalid auction registration forms and invalid auction registration levels, the designated branch of the State Bank shall transmit through the network and send via fax (according to the security regime) the consolidated list of offers by form of competitive and uncompetitive interest rate and the registration forms of participants to the Banking Operation Department to carry out the centralized offer appraisal.

The Banking Operation Department shall inform participants of the rejection of their registration forms or registration level and state clearly the reason thereof.

Article 13. Offer appraisal

1. In case of competitive interest rate auction:

Volume of winning Bonds shall be considered and selected in accordance with the bidding interest rates from low to high up to the ceiling interest rate; If the volume of bonds tendered at the highest winning interest rate exceeds that expected to issue in the competitive form, the volume of winning bonds shall be allocated to each bidder proportionately to the volume of bonds tendered at that interest rate.

The highest winning interest rate shall be the issue interest rate applicable generally to every auction-winning subject.

2. In case of the combination of competitive interest rate with uncompetitive interest rate in an auction session

a. Determination of the volume of competitive interest rate auction and uncompetitive interest rate auction:

- In case where the volume offered for the uncompetitive interest rate auction by participants in an auction session is lower than or equal to 30% of the volume of Government Bonds expected to issue, the volume of the uncompetitive interest rate auction shall be equal to the volume offered for the uncompetitive interest rate auction by participants. The volume of the competitive interest rate auction shall be equal to the difference between the volume of Bonds expected to issue and the volume of the uncompetitive interest rate auction.

- In case where the volume of the uncompetitive interest rate auction of participants in an auction session is higher than 30% of the volume of Government Bonds expected to issue, the volume of the uncompetitive interest rate auction shall be equal to 30% and the volume of the competitive interest rate auction shall be 70% of the volume of Government Bonds expected to issue.

b. Determination of the winning interest rate and winning volume of participants

- The determination of the winning interest rate and winning Bonds volume of participants to the competitive interest rate auction shall be performed in accordance with provisions in paragraph 1 of this Article. The winning interest rate in the competitive interest rate auction shall be applicable to the interest calculation for the entire winning volume of the uncompetitive interest rate auction.

- In case where the volume offered for the uncompetitive interest rate auction is higher than 30% of the volume expected to issue, the State Bank shall allocate the winning volume to participants proportionately to the volume offered by each participant.

- If the winning interest rate of the competitive interest rate auction cannot be determined in a session, that auction session shall be considered as not having the winning result.

c. The auction result should be signed for confirmation by legal representatives of the Ministry of Finance and the State Bank in the Treasury Bills auction committee.

Article 14. Determination of payable annual interest of the Government's foreign currency Bonds

The formula for determining the payable annual interest of the Government's foreign currency Bonds (to be paid on the annual issue date) shall be as follows:

L = MG x Ls

L: is the interests to be paid annually,

MG: is Face value of the Government's foreign currency Bonds, and

Ls: is the winning interest rate of Government Bonds (as a percentage per annum).

Article 15. Notice and report of the auction result

After the auction result is determined by the Treasury Bill auction committee, the Banking Operation Department shall submit a report of the auction result (in writing) to the Minister of Finance, the State Bank's Governor, the State Treasury and related departments of the State Bank, and send, at the same time, by fax or transmit through computer network (if any) the auction result to participants in accordance with Form No. 04/TPCP attached and announce it in several mass media.

Article 16. Payment of the Bonds purchase and accounting of Government's foreign currency Bonds.

1. Based on the auction result notice of the State Bank, winning participants shall make full payment of the Bonds purchase to the State Bank (the Banking Operation Department) on the issue date.

2. The issue date of Bonds shall be the second working day from the auction date. The State Bank shall credit the account "Government Bonds" of participants who have won the auction and credit the account "foreign currency deposit" of the State Treasury maintained at the Banking Operation Department the amount received from the sale of Bonds on the issue date.

3. In case the State Bank does not receive the amount to be payable by winning participants on the issue date of Bonds, it shall automatically deduct the account "foreign currency deposit" of winning participants at the State Bank of the respective value and transfer it to the State Treasury. If the account "foreign currency deposit" is still not enough to cover this payment, the unpaid winning volume shall be canceled. A fine equivalent to 5% of the unpaid winning volume, which is canceled, shall be deducted by the State Bank to transfer to the State Treasury. In case where the account "foreign currency deposit" of participants does not have any balance or the balance is not sufficient to cover this 5% fine, the State Bank shall make this deduction whenever there is any balance on this deposit account until the stipulated fine is sufficiently collected.

Article 17. Payment of the principal and interest of Bonds at the due date

1. The annual payment of interest, the payment of the principal, interests in the year, where the Government Bonds become due (the amount of the principal, interests of Government Bonds shall be rounded to 2 decimal digits of the denominated currency unit).

One working day prior to the date of annual interest payment, the date of payment of the principal, interests in the year, where the Government Bonds become due, the Ministry of Finance (the State Treasury) shall transfer the payable amount of Bonds to the State Bank (the Banking Operation Department) in the payable foreign currency. If the State Bank fails to receive the transfer document from the State Treasury by the payment date, it shall automatically deduct from the account "foreign currency deposit" of the State Treasury to make payment to Bond owners (if the foreign currency required for payment is not available in the account "foreign currency deposit" of the State Treasury, the State Bank shall convert the account's foreign currency to the required one at the foreign currency selling rate of the State Bank applicable at the time of the transaction).

2. The State Bank shall pay the annual interests, the principals and interests of the year, where the Government Bonds become due, to the owners of Government's foreign currency Bonds at the payment date of the Bonds. In case where the due date of the payment of annual interests, principals and interests of the year, where the Government Bonds become due, falls on the weekend, holidays, the payment shall be made on the following working day.

3. In case where the foreign currency account of the State Treasury does not have any balance or the balance is not sufficient to cover the payment to the Bonds owners, the State Bank shall deduct from the account "local currency deposit" of the State Treasury to buy foreign currency, which is sold by the State Bank at the rate of the inter-bank foreign currency market applicable at the transaction time.

Chapter III.

ORGANIZATION OF THE IMPLEMENTATION

Article 18. Responsibilities of units of the State Bank

1. The Banking Operation Department shall be responsible

a. to consider for issuance and revocation of membership recognition to subjects participating in the auction market of Government's foreign currency Bonds;

b. to grant number code, key code to members who carry out transactions through computer network and signature code to the representative person, who is authorized by the member to participate in transactions;

c. to implement the direction of the Treasury Bills auction Committee on the notification of Government's foreign currency Bonds auction, the receipt of auction registration forms, organization of the offer appraisal and notification of auction result to participants and the designated branches of the State Bank in accordance with applicable provisions of this Regulation;

d. to prepare the report on the auction results and submit it to the Governor of the State Bank and the Minister of Finance, and send, at the same time, to the State Treasury, Credit Department, Monetary and Policy Department, Finance- Accounting Department;

dd. to receive the Bonds payment from winning participants and make payment of annual interest, interests and the principals in the year, where the bonds become due to the owners of Bonds. To carry out the Bonds deposit of participants;

e. to make accounting for the operation of Government's foreign currency Bonds auction in accordance with applicable provisions;

g. to issue the Procedure of auction operation of the Government's foreign currency Bonds on the basis of provisions of this Regulation (Director of the Banking Operation Department).

2. Finance- Accounting Department shall be responsible for the provision of guidance on the accounting regime of auction operation of the Government's foreign currency Bonds.

3. Banking Information Technology Department shall be responsible for the design of a software program for the auction of the Government's foreign currency Bonds for the program installation and network connection in order to ensure the safety and confidentiality of the operation.

4. Designated branches of the State Bank shall be responsible

a. To verify local members' competency, to give notice to the Banking Operation Department for its consideration, revoke the membership recognition of local members who do not fully satisfy conditions for participating in the auction market of the Government's foreign currency Bonds.

b. To receive the auction registration form from local auction participants.

c. To open the auction session and consolidate auction offers of local auction participants (after the rejection of invalid auction offer and auction level) and transmit them through the computer network to the Banking Operation Department for offer appraisal. To state the confidential code in the Consolidated List, registration forms and send them by fax to the Banking Operation Department to keep in record.

Article 19. Amendment, supplement

The amendment, supplement of this Regulation shall be decided upon by the Governor of the State Bank.