What are the methods of issuance of State Bank of Vietnam bills?

What are the methods of issuance of State Bank of Vietnam bills? (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is State Bank of Vietnam bill?

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

2. What are the methods of issuance of State Bank of Vietnam bills?

State Bank bills are issued by bidding method or compulsory method, specifically:

(1) Issued by bidding method:

The issuance of State Bank bills by bidding method is carried out in accordance with the State Bank's regulations on bidding through open market operations.

(2) Issuance by compulsory method:

- Based on the monetary policy objectives in each period and the actual situation, the State Bank decides to issue State Bank bills in a mandatory manner for credit institutions.

Credit institutions must purchase treasury bills issued by the State Bank in a mandatory manner according to the Decision of the Governor of the State Bank;

- In case of necessity, the State Bank may consider buying back the State Bank's treasury bills issued by the mandatory method before maturity. The Governor of the State Bank decides on the pre-mature redemption of treasury bills issued by the State Bank in a mandatory manner.

Thus, there will be two methods of issuing State Bank bills

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

3. Regulations on settlement for State Bank of Vietnam bills

Specifically, Article 7 of Circular 16/2019/TT-NHNN stipulates the 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.

4. Terms and conditions of State Bank of Vietnam bills

Terms and conditions of State Bank of Vietnam bills are stipulated 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.

(Article 4 of Circular 16/2019/TT-NHNN)

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