THE STATE BANK GOVERNOR

Pursuant to the Government's Decree No. 52/2003/ND-CP of May 19, 2003, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the director of the Monetary Policy Department,

Article 1.- To promulgate together with this Decision the Regulation on discount and rediscount of negotiable instruments by credit institutions for their clients.

Article 2.- This Decision takes effect fifteen days after its publication in "CONG BAO."

Article 3.- The director of the Office, the director of the Monetary Policy Department and heads of units under the State Bank of Vietnam, directors of the State Bank's provincial/municipal branches, chairmen of management boards and general directors (directors) of credit institutions shall implement this Decision.

For the State Bank Governor
Deputy Governor
NGUYEN DONG TIEN

Article 1.- Scope of regulation

This Regulation provides for the discount and rediscount of negotiable instruments by credit institutions for their clients in Vietnamese territory.

Article 2.- Subjects of application

1. Credit institutions which are established and operate under the Law on Credit Institutions and conduct operations of discounting and rediscounting negotiable instruments under the Law on Negotiable Instruments.

2. Negotiable instrument-discounting clients that are payees of negotiable instruments and wish to discount those negotiable instruments at credit institutions, including Vietnamese and foreign organizations and individuals. Organizations referred to in this Clause include also credit institutions.

3. Negotiable instrument-rediscounting clients that are credit institutions being payees of negotiable instruments and wish to rediscount those negotiable instruments at credit institutions.

Article 3.- Interpretation of terms

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

1. Negotiable instruments are valuable papers written with unconditional orders or commitments to pay a specified sum of money at a given point of time.

2. Drawers are those that make, sign and issue bills of exchange or checks.

3. Drawees are those responsible for paying the sum of money specified on the bills of exchange or checks by order of drawers.

4. Issuers are those that make, sign and issue promissory notes.

5. Discount of a negotiable instrument means the purchase by a credit institution of a negotiable instrument before its maturity from the payee.

6. Rediscount of a negotiable instrument means the redemption by a credit institution of a negotiable instrument already discounted by another credit institution before its maturity.

7. Discount or rediscount of the whole remaining term of a negotiable instrument means the definitive purchase by a credit institution of that negotiable instrument at the discount or rediscount price.

8. Term discount or rediscount means the purchase by a credit institution of a negotiable instrument according to the discount or rediscount term and price, enclosed with the client's commitments on the redemption of that negotiable instrument on the date the discount or rediscount expires.

9. Discount or rediscount price means a sum of money to be paid by a credit institution to its client upon discount or rediscount.

10. Discount or rediscount term means a period of time counting from the date a negotiable instrument is accepted to be discounted or rediscounted by a credit institution to the date the client should fulfill the commitment to redeem that negotiable instrument.

Article 4.- Discount and rediscount principles

The discount or rediscount of negotiable instruments by credit institutions for their clients must adhere to the following principles:

1. Compliance with the agreement between credit institutions and clients, adherence to the transfer principles provided for in the Law on Negotiable Instruments, and observance of relevant laws.

2. Credit institutions may consider and decide on the discount or rediscount of negotiable instruments in accordance with law to ensure safety and efficiency; credit institutions shall take responsibility for their decision.

3. For discount or rediscount of negotiable instruments written with a sum of money payable in a foreign currency, credit institutions and clients shall abide by the provisions of law on foreign exchange.

4. For discount or rediscount of negotiable instruments involving foreign elements, credit institutions and clients shall observe the provisions of the Law on Negotiable Instruments regarding the application of treaties on and international trade practice in negotiable instrument relations involving foreign elements as well as the provisions of law on civil relations involving foreign elements.

5. Only negotiable instruments already discounted by other credit institutions by the mode of definitive purchase may be rediscounted.

Article 5.- Types of negotiable instruments allowed to be discounted or rediscounted

Credit institutions shall consider, select, and accept to discount or rediscount negotiable instruments which are issued in Vietnam or are issued in other countries and transferred in Vietnam, including:

1. Bills of exchange.

2. Promissory notes.

3. Checks.

Article 6.- Conditions for negotiable instruments to be accepted to be discounted or rediscounted

Negotiable instruments may be accepted to be discounted or rediscounted by a credit institution when fully meeting the following conditions:

1. Being lawfully issued;

2. Being under the client's lawful right to payment;

3. Not bearing the words "Non-transferable", "Transfer banned", "Not payable on demand", or other words of similar meaning.

4. Having not yet expired.

Article 7.- Currency used in discount or rediscount

1. For negotiable instruments written with a payable sum of money in Vietnam dong, the currency used in discount or rediscount is Vietnam dong.

2. For negotiable instruments written with a payable sum of money in a foreign currency, credit institutions shall:

a/ Discount or rediscount negotiable instruments in the foreign currency indicated in the negotiable instruments for clients permitted to collect foreign currencies;

b/ Discount or rediscount negotiable instruments in Vietnam dong for clients not permitted to collect foreign currencies and those permitted to collect foreign currencies but wishing to discount or rediscount negotiable instruments in Vietnam dong.

Article 8.- Discount and rediscount modes

Credit institutions and clients shall agree to select one of the following modes of discount or rediscount:

1. Discount or rediscount for the whole remaining term of a negotiable instrument.

2. Term discount or rediscount. Upon the expiration of the discount or rediscount term, if the client fails to redeem a negotiable instrument, the credit institution may present that negotiable instrument for payment under the provisions of the Law on Negotiable Instruments.

Article 9.- Discount and rediscount price, term and interest rate and relevant expenses

1. The discount or rediscount price shall be agreed by credit institutions and clients on the basis of the payment value of a negotiable instrument upon maturity, the discount or rediscount interest rate and the remaining term of that negotiable instrument.

2. The discount or rediscount term shall be agreed by credit institutions and clients, which, however, must not exceed the remaining payment term of a negotiable instrument.

3. The discount or rediscount interest rate and other relevant expenses shall be agreed by credit institutions and clients.

Article 10.- Maximum discount and rediscount levels applicable to a client

1. Credit institutions shall consider and set the maximum discount and rediscount levels in compliance with the Vietnam State Bank's regulations on credit safety ratios in the following cases:

a/ The maximum discount level applicable to a client being a credit institution;

b/ The maximum rediscount level applicable to a client.

2. A credit institution may apply the maximum discount level equal to 15% of its own capital to a non-credit institution client. A foreign bank branch operating in Vietnam may apply the maximum discount level not exceeding 15% of the own capital of its parent bank to a client.

Article 11.- Discount and rediscount procedures

1. When receiving a client's request for discount or rediscount of a negotiable instrument, the credit institution shall assess the conditions for discount or rediscount, consider and assess the solvency of the negotiable instrument before deciding to accept the discount or rediscount. The credit institution may request the client to present papers proving that the negotiable instrument fully meets the discount or rediscount conditions set in this Regulation.

2. When the credit institution accepts a client's request for discount or rediscount of a negotiable instrument, the client shall carry out procedures for transferring the negotiable instrument to the credit institution in accordance with the Law on Negotiable Instruments.

3. In case of term discount and rediscount, the credit institution and the client shall agree in writing on the re-purchase or redemption of a negotiable instrument in accordance with the law on civil contracts, the Law on Negotiable Instruments, this Regulation and relevant laws.

Article 12.- Credit institutions' recourse right

Credit institutions have the right to recourse against clients and related persons for the unpaid sum of money for a negotiable instrument, an interest on the late-paid sum of money which arises from the date the negotiable instrument matures, the recourse expense and other reasonable expenses as provided for in the Law on Negotiable Instruments and relevant laws, and as agreed by the parties.

Article 13.- Classification of debts, setting up of provisions, and handling of risks

Credit institutions shall classify debts, set up and use provisions for handling risks for discounted and rediscounted amounts according to the Vietnam State Bank's regulations on classification of debts, setting up and use of provisions for handling credit risks in banking activities of credit institutions.

Article 14.- Accounting, reporting and statistics

Credit institutions shall account, report on and make statistics of discounted and rediscounted amounts of negotiable instruments according to the Vietnam State Bank's regulations on accounting, reporting and statistical regimes applicable to credit institutions.

Article 15.- Organization of implementation

Based on the provisions of this Regulation and relevant laws, credit institutions shall establish procedures for conducting the operations of discounting or rediscounting negotiable instruments suitable to their conditions, characteristics and charters.