How to Handle When a Credit Institution Fails to Pay for SBV Treasury Bills?

To be specific: in cases where the credit institution does not pay or does not fully pay the amount for purchasing treasury bills issued by the State Bank, the handling shall be carried out according to each method (auction or mandatory), as specifically instructed in Article 12 of Circular 16/2019/TT-NHNN as follows:

Illustrative image (source: internet)

Firstly: The handling of credit institutions failing to pay or not fully paying the amount for purchasing treasury bills issued by the State Bank through the auction method shall be carried out according to the regulations of the State Bank on open market operations.

Secondly: The handling of credit institutions failing to pay or not fully paying the amount for purchasing treasury bills issued by the State Bank through the mandatory method shall be carried out as follows:

- By the end of the Treasury bill settlement day, the State Bank (including the Transaction Office and branches of the State Bank in provinces and centrally governed cities) shall automatically debit the settlement account of the credit institution at the State Bank until the full amount for purchasing treasury bills is recovered and notify the credit institution in writing;

- In cases where the settlement account of the credit institution at the State Bank does not have sufficient funds to pay the remaining amount for purchasing treasury bills, the credit institution must pay a late payment penalty on the remaining amount for purchasing treasury bills at the interbank overnight lending rate, with the late payment penalty calculated daily according to the following formula:

Where:

P: Late payment penalty per day;

Gp: Remaining amount for purchasing treasury bills as of the end of the day;

Lp: Interbank overnight lending rate as decided by the Governor of the State Bank at the time of calculating the late payment penalty (% per year);

Within the next 5 consecutive working days from the settlement date, the State Bank (including the Transaction Office and branches of the State Bank in provinces and centrally governed cities) shall automatically debit the settlement account of the credit institution at the State Bank daily until the full remaining amount for purchasing treasury bills and any unpaid late payment penalty are recovered; the remaining amount for purchasing treasury bills shall be collected first, followed by the late payment penalty.

Upon the expiration of the debit period of the settlement account:

+ Credit institutions failing to pay the full amount for purchasing treasury bills shall be subject to administrative penalties according to the regulations on administrative penalties in the field of currency and banking;

+ The State Bank (including the Transaction Office and branches of the State Bank in provinces and centrally governed cities) shall: cancel the unpaid portion of the treasury bills based on the face value and round up according to the multiple of the treasury bill's face value; cease calculating the late payment penalty; simultaneously continue to automatically debit the settlement account or collect from other sources (if any) of the credit institution to recover the full unpaid late payment penalty;

+ The State Bank (including the Transaction Office and branches of the State Bank in provinces and centrally governed cities) shall determine the remaining amount for purchasing treasury bills and any unpaid late payment penalties at the end of each working day and automatically debit the settlement account to recover these amounts on the next working day; simultaneously, notifying the credit institution in writing.

See additional regulations in Circular 16/2019/TT-NHNN which took effect from December 09, 2019.

Tuesday

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