5 things you should know about State Bank of Vietnam Bills

5 things you should know about State Bank of Vietnam Bills (Internet image)

1. What are State Bank of Vietnam Bills (SBV bills)?

According to Clause 1, Article 3 of Circular 16/2019/TT-NHNN, SBV bill means a short-term financial instrument issued by the SBV for the purpose of implementing the national monetary policy.

2. Terms and conditions of SBV bills in Vietnam

According to Article 4 of Circular 16/2019/TT-NHNN, the terms and conditions of SBV bills are as follows:

- Eligible buyers: SBV bills are issued to credit institutions that have VND checking accounts opened at SBV.

- Currency: SBV bills are issued, recorded and paid in VND.

- Term: The term of SBV bills shall be decided by SBV and not exceed 364 days.

- Face value: The face value of a SBV bill is VND 100,000 (one hundred thousand) or a multiple of VND 100,000.

- Form: SBV bills are issued in book entry form.

- Interest rate: The interest rate of a SBV bill shall be subject to SBV’s decision which is made in conformity with the money market development and specific objectives of the monetary policy in each period.

- SBV bills are issued at a discount from the face value of the bill and the holder will be paid the face value when the bill matures.

3. Price of SBV bills in Vietnam

Specifically, in Article 5 of Circular 16/2019/TT-NHNN, the price of SBV bills is calculated as follows

- The price of a SBV bill shall be calculated by adopting the following formula:

Where:

= G: Price of a SBV bill

= MG: Face value of the SBV bill;

= L: Interest rate of the SBV bill (%/year);

= t: Term of the SBV bill (number of days).

- Total amount received from selling SBV bills shall be calculated by adopting the following formula:

GG = G x N

Where:

= GG: Total amount received from selling SBV bills;

= G: Price of a SBV bill;

= N: The number of SBV bills issued.

4. Methods of issuance of SBV bills in Vietnam

Methods of issuance of SBV bills include:

- SBV bills may be purchased through bidding or through a compulsory purchase process.

- Issuance of SBV bills through bidding:

The issuance of SBV bills through bidding shall comply with SBV’s regulations on bidding through open market operations.

- Compulsory purchase of SBV bills:

= Based on specific objectives of the monetary policy in each period and actual conditions, SBV shall decide to issue SBV bills to a credit institution through a compulsory purchase process. Credit institutions must purchase SBV bills through a compulsory purchase process according to the decision of SBV’s Governor;

= SBV may consider repurchasing SBV bills offered through a compulsory purchase process before maturity. The repurchase of SBV bills offered through a compulsory purchase process shall be subject to the decision of SBV’s Governor.

(Article 6 of Circular 16/2019/TT-NHNN)

5. Regulations on settlement for SBV bills in Vietnam

According to Article 7 of Circular 16/2019/TT-NHNN on settlement for SBV bills as follows:

- Foreigners shall pay for SBV bills purchased through bidding in accordance with SBV’s regulations on open market operations.

- Foreigners shall pay for SBV bills purchased through a compulsory purchase process as follows: The credit institution shall make payment for SBV bills to the account designated by SBV within the settlement date. The credit institution must provide sufficient information on the money transfer order at the request of SBV.

- When SBV bills mature, credit institutions shall be paid the face value of SBV bills they hold. If the maturity date falls on a weekend or a public holiday, the payment for SBV bills shall be made on the following business day.

Thanh Rin

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE