Thông tư số 19/2004/QD-BTC Circular providing guidelines on the treasury bill and foreign currency bond bidding through Vietnam State Bank (<font color = "red">content attached</font>)

CIRCULAR No. 19/2004/TT-BTC OF MARCH 18, 2004 GUIDING THE TREASURY BILL AND FOREIGN-CURRENCY BOND BIDDING THROUGH VIETNAM STATE BANK

In furtherance of the Government’s Decree No. 141/2003/ND-CP of November 20, 2003 on the issuance of Government bonds, Government-underwritten bonds and local administration bonds; after reaching an agreement with Vietnam State Bank, the Finance Ministry hereby guides the Treasury bill and foreign-currency bond bidding through Vietnam State Bank as follows:

Chương I. GENERAL PROVISIONS

1. This Circular applies to Vietnam State Bank, the Finance Ministry, organizations and individuals involved in the bidding for Treasury bills and foreign-currency bonds through Vietnam State Bank.

2. Basing itself on its tasks of mobilizing capital for the State budget and for development investment, the Finance Ministry shall decide on the volume of Treasury bills and foreign-currency bonds to be issued annually. The State Treasury may take initiative in deciding on the volume and time for each issuance drive, suitable to capital use demands and the situation of the financial and monetary markets.

3. Vietnam State Bank shall act as an agent for the Finance Ministry in organizing bidding and payment of Treasury bills and foreign-currency bonds. Vietnam State Bank shall be entitled to purchase the volumes of Treasury bills left after bidding sessions if the bidding participants have not yet bought them out.

4. Treasury bills and foreign-currency bonds shall be traded on the monetary market or discounted, re-discounted or pledged at the State Bank according to law provisions.

5. Interpretation of terms In this Circular, the terms below are construed as follows:

5. 1. Interest rate competition bidding means the offer of tendering interest rates by bidding participants for Vietnam State Bank to select the bid-winning interest rate.

5. 2. Interest rate non-competition bidding means the non-offer of tendering interest rate but instead the registration by bidding-participating organizations for purchase of Treasury bills or foreign-currency bonds at the bid-winning interest rate determined according to the results of interest rate competition bidding.

5. 3. Ceiling interest rate means the maximum interest rate of the issued Treasury bills or foreign-currency bonds announced by the Finance Minister in each period.

5. 4. Sale of Treasury bills and foreign-currency bonds by mode of discount means the sale of such bills and bonds by the issuing organizations at prices below their par values and payment thereof at values equal to their par values upon their maturity.

5. 5. Sale of Treasury bills and foreign-currency bonds by mode of denomination parity means the sale of such bills and bonds at prices equal to their par values. Bill and bond interests shall be paid periodically or in lump sums together with the principals upon their maturity.

Chương II. SPECIFIC PROVISIONS

1. Issuance and payment currency

1. 1. Treasury bills to be bid through Vietnam State Bank shall be issued and paid in Vietnam dong.

1. 2. Foreign-currency bonds to be bid through Vietnam State Bank shall be issued and paid in freely convertible foreign currencies. Issuance foreign currency shall be prescribed by the Finance Minister for each issuance drive. Bonds already issued in a foreign currency shall have their principals and interests paid in such foreign currency. In cases where there are odd amounts in a bond payment sum (smaller than a currency unit), such amounts shall be converted into Vietnam dong at the average exchange rate on the inter-bank foreign-currency market announced by

2. Forms and par values of Treasury bills and foreign-currency bonds

2. 1. Forms Treasury bills and foreign-currency bonds to be bid through Vietnam State Bank shall be issued in forms of certificates or book entries; registered or bearer. a/ For the form of certificates: The Finance Ministry shall prescribe their contents to be printed and distributed by the State Treasury to the bid-winning organizations. b/ For the form of book entries: Vietnam State Bank shall enter and manage books. Treasury bills and foreign-currency bonds shall take the form of book entries upon their issuance. Where bill or bond owners wish to receive bill or bond certificates, Vietnam State Bank shall notify such to the State Treasury for granting of certificates.

2. 2. Par values Par values of Treasury bills and foreign-currency bonds shall be announced by the Finance Ministry (the State Treasury) for each issuance drive.

3. Terms of Treasury bills and foreign-currency bonds

3. 1. Treasury bills have different terms of 91 days, 182 days, 273 days and 364 days.

3. 2. Foreign-currency bonds have a term of one year or more. The Finance Minister shall decide on the bond term for each issuance drive suitable to investment capital use demands of projects and the practical situation of financial and monetary markets.

4. Interest rates of Treasury bills and foreign-currency bonds

4. 1. The Finance Minister shall announce the ceiling interest rate for each period. The general director of the State Treasury shall decide on the specific interest rate for each bidding session within the permitted ceiling interest rate limit. Depending on specific conditions, the Finance Minister may not prescribe the ceiling interest rate for organization of bidding.

4. 2. Issuance interest rates of Treasury bills and foreign-currency bonds shall be determined on the result of each bidding session.

4. 3. Foreign-currency bond interest rates may be fixed for the whole bond term or annually floated according to the fluctuation of interest rates on the financial and monetary markets. For the case of application of floating interest rates, the Finance Ministry (the State Treasury) shall announce the reference interest rates before bidding. The official interest rate shall be announced in advance in each period or at the time of bond interest payment on the basis of reference interest rates at the time of announcement.

5. Bidding principles

5. 1. All bidding information of the tendering units and information related to interest rates for organization of bidding shall be kept secret.

5. 2. Bidding shall be organized publicly, ensuring equality in interests and obligations among organizations participating in the bidding.

5. 3. Bid-winning units shall have to purchase Treasury bills and/or foreign-currency bonds according to the announced bid-winning volumes and interest rates.

6. Bidding forms The bidding for Treasury bills and foreign-currency bonds shall be effected in either of the two forms: interest rate competition bidding, or combination of interest rate competition bidding and interest rate non-competition bidding. In case of application of form combining interest rate competition bidding and interest rate non-competition bidding, the volume of bills or bonds opened to interest rate non-competition bidding must not exceed 30% of the total announced volume of bills or bonds to be issued for such bidding. The general director of the State Treasury shall decide on the specific bidding form of each bidding session.

7. Eligible subjects and conditions for bidding participation

7. 1. Subjects eligible to participate in bidding Subjects eligible to participate in bidding for Treasury bills or foreign-currency bonds through Vietnam State Bank include: a/ Credit institutions operating under the Law on Credit b/ Insurance companies, insurance funds, investment funds lawfully operating in Vietnam; branches of foreign investment funds in Units enjoying funding allocated from the State budget must not use such funding to purchase Treasury bills or foreign-currency bonds.

7. 2. Conditions for bidding participation a/ Having the legal person status, being lawfully established or operating under current laws of Vietnam; b/ Having the minimum legal capital of VND 20 billion (for organizations participating in Treasury bill bidding); c/ Having Vietnam-dong accounts opened at banks (for organizations participating in Treasury bill bidding); having foreign-currency accounts opened at the State Bank's Transaction Bureau (for organizations participating in foreign-currency bond bidding); d/ Filing applications for participation in the market for bidding of Treasury bills and/or foreign-currency bonds, which are accepted by The foreign-currency bond bidding shall apply only to credit institutions operating under the Law on Credit Institutions in Vietnam and licensed by Vietnam State Bank for dealing in foreign exchange. Annually, Vietnam State Bank shall consider conditions of subjects participating in bidding to grant new certificates of participants to Treasury bill and foreign-currency bond bidding or withdraw the granted ones.

8. Modes of selling Treasury bills and foreign-currency bonds Treasury bills and foreign-currency bonds bid through Vietnam State Bank shall be sold by two modes: denomination parity and discount.

9. Organization of bidding for Treasury bills and foreign-currency bonds

9. 1. Time for organizing bidding The Treasury bill and foreign-currency bond bidding shall be organized on a weekly, monthly or quarterly basis, depending on the State budget's capital demand, the progress of project execution and the situation of financial and monetary markets.

9. 2. Bidding announcement Two working days before the date of organizing bidding, basing itself on requests for issuance of Treasury bills or foreign-currency bonds of the Finance Ministry (the State Treasury), Vietnam State Bank shall send issuance notices to bidding participants and announce it on the mass media. Notice contents include: volume of bills or bonds to be issued; bidding date; issuance date, maturity date; bidding mode; forms of bills or bonds; bill or bond selling modes; principal and interest payment modes.

9. 3. Bidding registration and bid opening a/ The procedures for bidding registration, the order for opening of bids, checking of regularity and legality of tender tickets as well as the bidding order and procedures shall be prescribed by Vietnam State b/ Minimum tendering volume of Treasury bills shall be VND 100,000,000 (one hundred million dong). Minimum tendering volume of foreign-currency bonds shall be 10,000 currency units (ten thousand currency units) of the issuance of foreign currency.

9. 4. Determination of bid-winning volumes and interest rates of Treasury bills and foreign-currency bonds

9. 4.1. Bases for determination Bases for determination of bid-winning volumes and interest rates of Treasury bills and foreign-currency bonds include: - Volumes and interest rates tendered by bidding participating organizations. - Announced volumes of Treasury bills and foreign-currency bonds to be issued and the ceiling interest rate (if any).

9. 4.2. Principles for determination a/ For interest rate competition bidding - In case of absence of ceiling interest rate: The bid-winning volume of Treasury bills or foreign-currency bonds shall be selected in the order from the lowest interest rate to the interest rate at which the volume of bills or bonds announced for issuance is reached. In cases where many tender tickets are made at the same interest rate at which the bid-winning bill or bond volume exceeds the bill or bond volume announced for issuance, the bid-winning bill or bond volume (after subtracting bid-winning volumes at lower interest rates) shall be divided to each tender ticket in direct ratio to tendering bill or bond volume of each ticket. - In case of presence of ceiling interest rate: The bid-winning volume of Treasury bills or foreign-currency bonds shall be selected in the order of the increase of tendering interest rates within the ceiling interest rate. If at the highest tendering interest rate within the ceiling interest rate, the tendering bill or bond volume exceeds the volume announced for issuance, the bid-winning bill or bond volume (after subtracting bid-winning volumes at lower interest rates) shall be divided to each tender ticket in direct ratio to tendering bill or bond volume at such interest rate. In both above cases, the highest bid-winning interest rate shall be the issuance interest rate commonly applicable to all bid winners. b/ For interest rate competition bidding combined with interest rate non-competition bidding - Determination of interest rate competition bidding volume and interest rate non-competition bidding volume: + In cases where the interest rate non-competition tendering volume is smaller than or equal to 30% of the announced volume of bills or foreign-currency bonds to be issued, the interest rate non-competition bidding volume shall be equal to the tendering volume. The interest rate competition bidding volume shall be equal to the bill or foreign-currency bond volume announced for issuance minus (-) the interest rate non-competition bidding volume. + In cases where the interest rate non-competition tendering volume is larger than 30% of the announced volume of bills or foreign-currency bonds to be issued, the volume of bills or foreign-currency bonds opened to interest rate non-competition bidding shall be equal to 30% and the volume of bills and foreign-currency bonds opened to interest rate competition bidding shall be equal to 70% of the announced volume of bills or foreign-currency bonds to be issued. - Determination of bid-winning volumes and interest rates: + For interest rate competition bidding participants: Their bid-winning volumes and interest rates shall be determined according to the provisions in Item a of this Section. + For interest rate non-competition bidding participants: Subjects participating in interest rate non-competition bidding shall be entitled to purchase bills or foreign-currency bonds at the issuance interest rates applicable to interest rate competition bidders. In cases where interest rate non-competition tendering volume is larger than 30% of the bill or foreign-currency bond volume announced for issuance, the bill or foreign-currency bond volume to be issued to such subjects shall be divided in direct ratio to tendering bill or foreign-currency bond volume of each subject. In cases where bidding participants do not buy out the volume of Treasury bills of a bidding session, Vietnam State Bank shall be entitled to purchase the remainder.

9. 5. Determination of sale prices of Treasury bills and foreign-currency bonds and amounts to be paid upon their maturity

9. 5.1. For Treasury bills a/ Sale of Treasury bills by mode of denomination parity: - Sale prices of Treasury bills shall be equal to 100% of their par values. - Amounts of Treasury bills to be paid upon their maturity shall be calculated according to the following formula: n T = G + (G x Ls x ---) 365 In which: T: Total amount (principal + interest) of bills to be paid upon their maturity G: Sale price of Treasury bills Ls: Bid-winning bill interest rate (calculated in per cent/365 days) n: Number of days in the bill term b/ Sale of Treasury bills by mode of discount: - Sale prices of bills shall be determined according to the following formula: MG Ls x n 1 + ----- 365 In which: G: Sale price of Treasury bills MG: Par value of Treasury bills Ls: Bid-winning bill interest rate (calculated in per cent/365 days) n: Number of days in the bill term - Upon their maturity, bills shall be paid equal to their par values. Vietnam State Bank shall specify the method of rounding up the prices of Treasury bills.

9. 5.2. For foreign-currency bonds a/ Sale of bonds by mode of denomination parity: - For bonds with their principals and interests paid in lump sums upon their maturity: + Sale prices of bonds are equal to 100% of their par values. + Bond amounts paid upon their maturity shall be calculated according to the following formula: T = MG x (1 + Ls)n In which: T: Total amount (bond principal and interest) to be paid MG: Bond par value Ls: Bid-winning bond interest rate (%/year) n: Bond term (years) - For bonds with their interest paid periodically: + Sale prices of bonds are equal to 100% of their par values. + Interest to be periodically paid shall be calculated according to the following formula: L = MG x --- k In which: L: Interest amount to be periodically paid MG: Bond par value Ls: Bid-winning bond interest rate (%/year) k: Number of times of interest payments in a year + Upon bond maturity, bond owners shall have bond principals paid equal to bond par value and interest amount of the last interest payment period. b/ Sale of bonds by mode of discount - Sale price of bonds shall be determined according to the following formula: MG (1 + Ls ) n In which: G: Bond sale price MG: Bond par value Ls: Bid-winning bond interest rate (%/year) n: Bond term (years) - Upon their maturity, bonds shall be paid equal to their par values. Vietnam State Bank shall specify the method of rounding up the prices of foreign-currency bonds.

9. 6. Announcement of bidding results After determining bid-winning interest rates and volumes, the Board for Treasury bill or foreign-currency bond bidding shall sign and send the summary of bidding results to the Finance Minister and the State Bank Governor. The State Bank shall notify such results to the bidding participating units and announce them on the mass media.

10. Payments for purchase of Treasury bills or foreign-currency bonds

10. 1. The date of issuance of Treasury bills or foreign-currency bonds shall be the second working day after the bidding date. Within two working days following the bidding date, the bid-winning units shall have to transfer payments for purchase of Treasury bills or foreign-currency bonds according to the State Bank's notices into the State Treasury's account opened at the State Bank's Transaction Vietnam State Bank shall credit the proceeds from the sale of Treasury bills or foreign-currency bonds to the State Treasury's account and credit the Treasury bill or foreign-currency bond accounts for the bid-winning organizations. Where the bid-winning organizations wish to receive bill or bond certificates, Vietnam State Bank shall notify such to the State Treasury for granting of certificates.

10. 2. In cases where the bid-winners carry out the payment procedures later than the prescribed deadline, Vietnam State Bank shall make deductions from deposit accounts of bid winners or request the banks where bid winners open their accounts to make such deductions and transfer them to the State Treasury. If balances of deposit accounts of bid winners are not enough for payment, the unpaid bid-winning part shall be canceled and such bid winners shall be imposed fines equal to 5% of the canceled amount, which shall be remitted into the State budget.

10. 3. Basing itself on credit notes of the State Bank's Transaction Office, the State Treasury shall carry out the procedures for recording the central budget's revenues or accounting them according to the Finance Ministry's regulations.

11. Payment of Treasury bills and foreign-currency bonds

11. 1. Payment of Treasury bills and foreign-currency bonds upon their maturity a/ The payment of principals and interests of Treasury bills and foreign-currency bonds upon their maturity shall be made through Vietnam State Bank. One working day (for Treasury bills) and two working days (for foreign-currency bonds) before the maturity date for principal and interest payment, the Finance Ministry shall carry out the procedures for transferring Vietnam-dong or foreign-currency amounts to Vietnam State Bank for payment to bond owners. In case of foreign currency shortage, the Finance Ministry shall transfer Vietnam dong amounts for purchase from Vietnam State Bank of the adequate foreign-currency amounts required for payment. The foreign currency buying rate shall be the average exchange rate on the inter-bank market at the time of purchase. b/ On the maturity date, if receiving no money transfer document of the State Treasury, Vietnam State Bank shall automatically deduct money from the State Treasury's deposit account at its Transaction Office to pay to owners of Treasury bills or foreign-currency bonds. c/ If the maturity date for payment of principals and interests of Treasury bills or foreign-currency bonds falls on weekend or a holiday according to the prescribed regime, the bill or bond principals and interests shall be paid on the working day following such weekend or holiday.

11. 2. Repurchase of immature foreign-currency bonds In case of necessity, the Finance Ministry may repurchase immature foreign-currency bonds in suitability to the State budget capability and the national financial policy's objectives. The repurchase of immature foreign-currency bonds shall be effected under specific decisions of the Finance Minister and notified at least two working days in advance to the bond owners.

12. Issuance and payment expenses

12. 1. All expenses for organization of bidding and payment of Treasury bills or foreign-currency bonds shall be covered by the central budget and paid to Vietnam State Bank at the rate of 0.05% of the bid-winning Treasury bill or foreign-currency bond value. Expenses for issuance and payment of foreign-currency bonds shall be converted into Vietnam dong for payment to Vietnam State Bank at the accounting exchange rate prescribed by the Finance Ministry. Vietnam State Bank shall be entitled to use funding for bidding and payment of Treasury bills and foreign-currency bonds for the following purposes: a/ Procurement of equipment in service of Treasury bill or foreign-currency bond bidding; b/ Expenses for regular maintenance and irregular repair of machinery and equipment; c/ Expenses for designing and formulation of software program for Treasury bill or foreign-currency bond bidding; d/ Expenses for information on and advertisement for Treasury bill or foreign-currency bond bidding on the mass media; e/ Expenses directly for each bidding session; f/ Expenses for seminars, surveys, study of experiences on Treasury bill or foreign-currency bond bidding; g/ Expenses for customers' annual conferences to review the organization of bidding; h/ Irregular and regular rewards for bidding board members and bidding servants and other relevant agencies. Such expenses must not exceed 10% of the total funding for bidding and payment of Treasury bills or foreign-currency bonds; i/ Expenses for meetings of the treasury bill and/or foreign-currency bond bidding board; periodical preliminary review of the bidding situation and discussion of working directions; j/ Expenses for stationery; k/ Other expenses in service of the Treasury bill and/or foreign-currency bond bidding. Expenses for the bidding and payment of Treasury bills and/or foreign-currency bonds shall be accounted into operation expenditures of

12. 2. Expenses for printing of Treasury bills and foreign-currency bonds shall be covered by the central budget and paid to the bill and bond-printing organizations.

13. Responsibilities of the units involved in bidding

13. 1. The Finance Ministry and Vietnam State Bank a/ To inspect and supervise the organization of Treasury bill and foreign-currency bond bidding through Vietnam State Bank; b/ To settle disputes and complaints arising in the course of bidding and payment of Treasury bills or foreign-currency bonds through Vietnam c/ Vietnam State Bank shall promulgate the Regulation guiding in detail Treasury bill and/or foreign-currency bond bidding through

13. 2. The treasury bill and foreign-currency bond bidding board a/ The treasury bill and foreign-currency bond bidding board shall be decided by the governor of Vietnam State Bank, comprising three represen-tatives of the Finance Ministry (two from the State Treasury and one from the Department for Finance of Banks and Financial a/ Tasks of the treasury bill and foreign-currency bond bidding board : - To inspect the conditions of the bidding participating units. - To prepare necessary conditions for the organization of Treasury bill and/or foreign-currency bond bidding; - To supervise the opening of bids, determination of bid-winning volumes, issuance prices, interests of Treasury bills and foreign-currency bonds; - To approve bidding results and certify bidding result notices; - To supervise the payment for purchase of Treasury bills and/or foreign-currency bonds of bid-winning organizations; - To monitor developments of the Treasury bill and foreign-currency bond bidding market, so as to propose to the Finance Ministry and Vietnam State Bank measures to manage market operations.

Chương III. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its publication in the

2. The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies, the presidents of the People's Committees of the provinces and centrally-run cities, the general director of the State Treasury and the heads of the relevant units shall have to strictly comply with the guidance in this For the Finance Minister LE THI BANG TAM