(Issued together with the State Bank Governor�s Decision No.356/1999/QD-NHNN14 of October 6, 1999)

Chapter I

GENERAL PROVISIONS

Article 1.- This Regulation prescribes the performance of the State Bank�s discount and rediscount operations for banks with a view to materializing the monetary policy and enhancing the capability to balance the operation funds of banks.

Article 2.- In this Regulation, the following terms shall be understood as follows:

1. Discount operation means the purchase by the State Bank of short-term valuable papers, which are still in their payment terms and under the banks� ownership. Such short-term valuable papers have been purchased or bidden by banks on the primary market.

2. Rediscount operation means the purchase by the State Bank of short-term valuable papers, which are still in their payment terms and under the banks� ownership. Such short-term valuable papers have already been discounted by banks on the secondary market.

3. Discount and rediscount interest rates means the interest rates applied by the State Bank when discounting or rediscounting short-term valuable papers for banks.

Article 3.- General principles

1. The State Bank shall discount and/or rediscount only short-term valuable papers being credit bills issued by the State Treasury through bidding at the State Bank and the State Bank�s credit bills. The addition of other short-term valuable papers as instruments for discount and/or rediscount operations shall be decided by the State Bank Governor for each period.

2. The State Bank�s operation of rediscounting short-term valuable papers for banks shall comply with the provisions on the discount operation in this Regulation (hereafter collectively referred to as the discount operation).

3. The discount and rediscount interest rates provided for in this Regulation are set according to one common interest rate (referred to as the discount interest rate).

4. The discount limit and rediscount limit applicable to banks specified in this Regulation shall be applied according to one common limit (hereafter referred to as the discount limit).

Article 4.- The State Bank shall organize the discount operation through its Transaction Bureau and provincial/municipal branches, which are designated in writing by the State Bank Governor (referred to as the State Bank for short).

Article 5.- Basing him/herself on the monetary policy�s objectives and the total to be-supplied money volume which are annually approved, the State Bank Governor shall prescribe the total limit for the discount operation in each period.

On the basis of the own capital levels and operation situation of the banks as well as the total limit prescribed for the discount operation, the State Bank Governor shall prescribe the discount limit for each bank in each period. In the course of implementation, the State Bank Governor may reconsider and readjust the discount limit for to each bank, in order to make it appropriate.

Article 6.- In cases where it is necessary to meet the requirements of the materialization of the monetary policy in each period, the State Bank may discount short-term valuable papers under the banks� ownership together with contracts for reselling such papers (time discount).

Chapter II

SPECIFIC PROVISIONS

Article 7.- Conditions for banks to participate in the discount operation:

1. They must be licensed to operate in Vietnam under the Law on Credit Institutions, and participate in the open-market operations or the inter-bank domestic currency market;

2. They must own short-term valuable papers as specified in Article 8 of this Regulation;

3. They wish to have their papers discounted;

4. They participate in the discount operation through their head offices.

Article 8.- The short-term valuable papers to be discounted by the State Bank shall include credit bills issued by the State Treasury through bidding at the State Bank and the State Bank�s credit bills denominated in Vietnam dong with their payment terms remaining unexpired for at least 30 days.

Article 9.- The discount interest rate applicable to short-term valuable papers shall be determined by the State Bank, based on reference to the issuance interest rate for the State Bank�s credit bills and the bid-winning interest rate for the State Treasury�s credit bills at the latest bidding session.

The discount interest rate applicable to this operation shall be readjusted in accordance with the monetary policy�s objectives in each period.

The State Bank shall publicly announce the discount interest rate at its Transaction Bureau and its designated provincial/municipal branches, so that banks may be aware of and apply.

Article 10.- The State Bank shall carry out the discount operation with banks by direct mode or indirect mode as follows:

1. Direct mode: The banks shall directly contact and conduct transactions with the State Bank;

2. Indirect mode:

- For banks that have been connected with the State Bank through computer networks, the transactions shall be conducted through such computer networks;

- For banks that have not yet been connected with the State Bank through computer networks, the transactions shall be conducted via facsimile.

Article 11.- The discount of short-term valuable papers at the State Bank shall be carried out in the following order:

1. On the basis of the discount interest rate and discount limit announced by the State Bank for each bank, the banks which wish to have their short-term valuable papers discounted shall send their written requests for discount of such short-term valuable papers (according to Appendix No.01) to the State Bank on week-days;

2. Basing itself on the discount interest rate, the discount limit approved by the State Bank Governor for each bank and the written requests of banks, the State Bank shall consider and decide whether or not to discount the short-term valuable papers already registered by the banks. On the working day following the day it receives the banks� written requests, the State Bank shall notify each bank of its consent (according to Appendix No.02) or refusal (according to Appendix No.03);

The State Bank shall refuse to discount short-term valuable papers for banks in the following cases where:

- Such short-term valuable papers fail to meet the conditions prescribed in Article 8 of this Regulation.

- Written discount requests sent to the State Bank have contents not compatible with Appendix No.01, or such requests are signed by incompetent persons.

- The volume of short-term valuable papers requested to be discounted exceeds the discount limits prescribed for the banks.

3. The hand-over and reception of, and payment for short-term valuable papers shall be effected by the following mode:

On the working day following the date when the State Bank announces its consent to discount the short-term valuable papers, the banks shall proceed with the procedures for handing over their to be discounted short-term valuable papers to the State Bank and receiving payments from the State Bank according to the regulations on the discount operation procedures.

4. In cases where the State Bank makes the time discount of short-term valuable papers for the banks:

On the working day following the date when the State Bank announces its consent to make time discount of the short-term valuable papers (according to Appendix No.02), the banks shall sign repurchase/resale contracts with the State Bank (according to Appendix No.04). The hand-over and reception of to be discounted short-term valuable papers and the payment therefor shall comply with provisions in Clause 3 of this Article.

Upon the expiry of the discount term, the State Bank shall return short-term valuable papers to the banks, and the latter shall have to pay money to the State Bank according to the commitment in the re-purchase/re-sale contracts.

5. After completing the operation of discounting short-term valuable papers for the banks, the State Bank�s designated provincial/municipal branches shall have to send reports thereon to the State Bank (the Transaction Bureau);

6. The transaction time shall be calculated in working days, except for weekends, public holidays and new year�s festivals.

Article 12.- The formula for determining the money amount to be paid when the discount operation is carried out:

Gt

St = ��������

Lsc x Tc

1 + �����

100 x 365

In which:

St: The money amount to be paid by the State Bank upon discounting short-term valuable papers;

Gt: The payment value of short-term valuable papers when they are due;

Tc: The remaining duration of short-term valuable papers (from the date they are discounted to their payment due date);

Lsc: The discount interest rate;

365: The conventional number of days for one calendar year;

Article 13.- In cases where the State Bank carries out the time discount of short-term valuable papers for banks, the formula for determining the money amount for which the State Bank resells short-term valuable papers shall be as follows:

{ Ls x Tm }

Gbl = St x { 1 + ����� }

{ 100 x 365 }

In which:

Gbl: The reselling price;

St: The money amount paid by the State Bank when discounting short-term valuable papers;

Ls: The bid-winning interest rate at the latest bidding session or the interest rate set for the latest issuance of each kind of short-term valuable papers;

Tm: The time for which the State Bank discounts short-term valuable papers (the number of days).

Article 14.- The banks whose short-term valuable papers are accepted by the State Bank for discount shall have to hand over such papers to the latter according to the regulations. The State Bank shall make payments to such banks upon receiving such short-term valuable papers in full.

If the banks fail to hand over their short-term valuable papers within the prescribed time limit, the State Bank shall rule that the banks cancel their discount requests. In cases where a bank cancels its discount requests for three times or more, such bank shall not be entitled to participate in the discount operation with the State Bank at subsequent times.

Article 15.- The responsibilities of the concerned units attached to the State Bank:

1. The Monetary Policy Department shall have to verify the data on the banks� liquid capital, then propose to the State Bank Governor to approve the total limit set for the discount operation and the discount interest rate in each period;

2. The Credit Department shall have to:

a/ Propose to the State Bank Governor to approve the discount limit for each bank;

b/ Send notices on the discount limit set for each bank to the State Bank�s Transaction Bureau and the State Bank�s designated provincial/municipal branches and the participating banks.

3. The State Bank�s Transaction Bureau shall have to:

a/ Publicly announce the discount interest rate at the State Bank�s Transaction Bureau, and at the same time notify the State Bank�s designated provincial/municipal branches thereof;

b/ Guide the procedures for carrying out the discount operation;

c/ Carry out the discount operation;

d/ Conduct the hand-over and reception of short-term valuable papers and the accountancy and book-keeping according to the regulations;

e/ Synthesize, monitor and report on information on the discount operation to the State Bank Governor, and at the same time to the Monetary Policy Department, the Credit Department and the Accountancy-Finance Department.

4. The Accountancy-Finance Department shall have to guide the procedures for accounting the discount operation.

5. The State Bank�s designated provincial/municipal branches shall have to:

a/ Publicly announce the discount interest rate at their respective branches;

b/ Carry out the discount operation;

c/ Conduct the hand-over and reception of short-term valuable papers and the accountancy and book-keeping according to the regulations;

d/ Report on the performance of the discount operation at their respective localities to the State Bank (the Transaction Bureau).

Chapter III

IMPLEMENTATION PROVISIONS

Article 16.- All amendments and/or supplements to this Regulation shall be decided by the State Bank Governor.

For the State Bank Governor
Deputy Governor
NGUYEN VAN GIAU