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THE
STATE BANK OF VIETNAM
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SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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No.
1133/2003/QD-NHNN
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Hanoi,
September 30, 2003
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DECISION
ON
THE ISSUANCE OF THE REGULATION ON THE IMPLEMENTATION OF INTEREST SWAP
TRANSACTION
THE GOVERNOR OF THE STATE BANK
- Pursuant to the Law on the
State Bank of Vietnam dated 12 December, 1997 and the Law on the amendment,
supplement of several Articles of the Law on the State Bank of Vietnam dated 17
June, 2003;
- Pursuant to the Law on Credit Institutions dated 12 December, 1997;
- Pursuant to the Decree No. 86/2002/ND-CP dated 5 November, 2002 of the
Government providing for the function, assignment, authority and organizational
structure of Ministries and ministerial level agencies;
- Pursuant to Paragraph 3, Article 2 of the Decree No. 90/1998/ND-CP dated 7
November, 1998 of the Government on the issuance of the regulation on the management
of the foreign borrowings and repayments;
- Upon the proposal of the Director of the Monetary and Policy Department,
DECIDES:
Article 1. To issue in
conjunction with this Decision the Regulation on the implementation of interest
swap transaction.
Article 2. This Decision
shall be effective as from 1 November, 2003.
Article 3. In respect of
contracts of interest swap entered prior to the effectiveness of this Decision
according to a written approval of the State Bank of Vietnam, parties concerned
shall continue to comply with signed clauses until the liquidation of
respective contracts or they shall agree on the amendment, supplement of their
interest swap in accordance with provisions of the Regulation issued in
conjunction with this Decision.
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FOR
THE GOVERNOR OF THE STATE BANK
DEPUTY GOVERNOR
Phung Khac Ke
REGULATION
ON
THE IMPLEMENTATION OF INTEREST SWAP TRANSACTION
(Issued in conjunction with the Decision No. 1133/2003/QD-NHNN dated 30
September, 2003 of the Governor of the State Bank)
Article 1. Scope and
subjects of application
1. This Regulation shall
stipulate the implementation of interest swap transaction between commercial
banks, foreign banks' branches operating in Vietnam, joint-venture banks
(hereinafter referred to as banks) with enterprises that are established and
operating in accordance with Vietnam's laws (hereinafter referred to as
enterprises), between banks, between banks and credit institutions in foreign
countries. Transactions of interest swap shall be performed in accordance with
provisions stated in this Regulation, in line with international customs but
not in contrary to Vietnam's laws.
2. Enterprises that borrow funds
from foreign countries under provisions in the Decree No. 90/1998/ND-CP dated 7
November, 1998 of the Government on the issuance of the Regulation on the management
of the foreign borrowings and repayments shall carry out interest swap
transactions with foreign lenders, other foreign organizations in accordance
with international customs and foreign laws but not in contrary to applicable
provisions of Vietnam's laws.
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Banks and enterprises carry out
the interest swap transactions with the aim of preventing and limiting risks,
which are caused by developments in the market interest rates.
Article 3. Interpretation
Following terms in this
Regulation shall be construed as follows:
1. Credit institutions in
foreign countries shall include commercial banks, finance companies, finance
leasing companies, investment banks, development banks and other financial,
credit institutions that are established and operating under foreign laws, or
established by international organizations and recognized by Vietnam's laws.
2. Interest swap transaction
shall be the entering into contract by parties, under which each party
undertakes to make payment to the other an interest amount calculated on
floating or fixed rate of the same principal for the same period of time.
3. Principal of an interest swap
transaction shall be an amount used as the basis for the calculation of
floating interest amount, fixed interest amount and net interest amount of
interest swap as agreed upon by parties to the interest swap transaction.
4. Floating interest rate shall
be the interest rate that changes during the term of the interest swap contract
in line with the market interest rates and agreed upon by parties.
5. Fixed interest rates shall be
the interest rate that does not change during the term of the interest swap
contract upon the agreement made by parties.
6. Floating interest amount
shall be the interest amount calculated on the basis of the principal and
floating interest rate, which a party to the contract undertakes to make
payment to the other.
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8. The periodical net interest
amount of a contract of interest swap shall be the difference between
receivable interest and payable one of each payment period of that contract.
9. Repayment period of net
interest amount shall be a period within the effective term of interest swap
contract agreed upon by parties and at the end of which the payment of net
interest amount shall be made by them to each other.
Article 4. Cases of implementation
of interest swap transactions
1. The swap of VND or foreign
currency interest between banks and enterprises that borrow funds from those
banks.
2. The swap of VND or foreign
currency interest between banks and enterprises that borrow funds from other
credit institutions, from foreign countries.
3. The swap of VND or foreign
currency interest between banks.
4. The swap of foreign currency
interest by banks with credit institutions in foreign countries.
Article 5. Conditions for
carrying out interest swap transaction
1. In respect of banks,
following conditions must be satisfied:
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b. Availability of a technical
process of interest swap, which includes also measures of risk prevention.
c. Their total net interests
from interest swap transactions must be positive, in case of being negative,
they should not be more than 5% of the own capital of that bank.
d. In case of foreign currency
interest swap, the acceptance from the State Bank of Vietnam for foreign
exchange activity must be available.
2. In respect of enterprises,
following conditions must be satisfied:
a. Being engaged in transactions
of funds borrowing, finance release or goods purchase in form of late payment.
b. Having full financial
capability or undertaking secure measures agreed upon by two parties to perform
the payment of payable net interest amount to banks.
Article 6. The limit of
term and principal amount swapped interest rates for an enterprise
1. Term of an interest swap
contract shall be consistent with the term of a principal loan and 5 years at
the maximum from the effectiveness of the contract. After this term, parties
shall base on market forces and conditions to extend the contract, or amend
agreements by contract appendix, or liquidate the contract in order to make a
new swap contract.
2. The principal amount of
interest swap contracts for an enterprise shall not be in exceed of 30% of a
bank's own capital.
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Parties shall agree on the fixed
and floating rate for interest swap transactions.
Article 8. Determination
of periodical net interests and total net interests
1. Periodical net interests of
an interest swap contract shall be the difference between the interest receivable
and payable within each period of the contract and determined under following
formula:
Periodical
net interest amount
=
Periodical
interest amount receivable
-
Periodical
interest amount payable
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=
Outstanding
principal debt
x
Fixed
or floating interest rate
x
The
number of interest calculation days in the period
2. Total net interests from
interest swap transactions of a bank at a certain time shall be the total of
net interest amounts of all interest swap contracts effective at that time.
The net interest amount of an
interest swap contract at a certain time shall be the total of periodical net
interest amount of effective periods of that contract calculated under the
agreed fixed interest rate and floating interest rate at that time.
Article 9. The payment of
periodical net interest amount
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2. Repayment period of net
interests shall be agreed upon by parties and be 1 year at the maximum.
3. When the payment of net
interests is made in foreign currency, parties shall perform in accordance with
provisions of applicable laws on foreign exchange control.
4. When the payment of net
interests is made to foreign countries, parties shall comply with provisions of
applicable laws on funds repatriation.
Article 10. Interest swap
contract
Interest swap transactions shall
be made in interest swap contract. Interest swap contract shall be agreed upon
by parties in compliance with provisions of this Regulation, other related laws
and international customs (Sample contract of International Association of Swap
and Derivatives) and contain following main contents:
1. Name, address, Tel No., fax
No., and representatives of parties to the contract.
2. Principal amount, interest
rate,
3. Effective time of the
contract
4. Fixed interest rate and
floating interest rate
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6. Calculation of periodical net
interest and mode of payment
7. Margin deposit, down-payment
of enterprise (if any) to secure the payment of net interest
8. Cases of early termination of
contract
9. Procedures of contract
liquidation
Article 11. Accounting
and risk provisions
1. Banks shall perform the
accounting for interest swap transactions and make provisions for risks in
accordance with applicable provisions of the State Bank of Vietnam.
2. Enterprises shall perform the
accounting for interest swap transactions and make provisions for risks in
accordance with related applicable provisions for financial accounting of
enterprises.
Article 12. Registration
and reporting of the performance of interest swap transactions
1. Banks, which satisfy fully
conditions as provided for in paragraph 1 Article 5 of this Regulation, shall,
in their first interest swap transaction, be obliged to submit the written
registration for the performance of interest swap transactions to the State
Bank of Vietnam (the Monetary - Policy Department).
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Article 13. Organization
of implementation
1. Banks shall, based on
provisions of related applicable laws and international customs, issue the
process of interest swap transactions in line with their conditions,
characteristics and financial capability.
2. Any amendment, supplement of
this Regulation shall be made by the Governor of the State Bank.
APPENDIX
OF
THE REGULATION ON THE IMPLEMENTATION OF INTEREST SWAP TRANSACTION ISSUED IN
CONJUNCTION WITH THE DECISION NO. 1133/2003/QD-NHNN DATED 30 SEPTEMBER, 2003 OF
THE GOVERNOR OF THE STATE BANK
Name of reporting
commercial bank: ........................
Receiver: The Monetary -
Policy Department of the State Bank
49 Ly Thai To - Hanoi; Tel
No.: 04-824 6955; Fax No.: 04-824 0132
Receiving
date: prior to the 10th of following month
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REPORT
OF EFFECTIVE INTEREST SWAP TRANSACTIONS
Month..............
Year 200............
Interest swap contract
Name of customers
Principal of the contract
Swapped interest
Term of the contract
Signing date of the contract
Effective date of the contract
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Accumulated net interests payable (-) receivable (+)
interest receivable
interest payable
I. Interest swap contract with enterprises
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Contract 1
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Contract 2
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Contract ...
Sum
I
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II. Interest swap contract with other commercial banks
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Contract 1
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-
Contract ...
Sum
II
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Total
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...............,
Date.............
GENERAL
MANAGER (MANAGER)
(Sign, seal)