Building and adhering to the structure of official foreign exchange reserves investment in Vietnam from September 23, 2024

Building and adhering to the structure of official foreign exchange reserves investment in Vietnam from September 23, 2024 (Image from the internet)

On August 9, 2024, the Governor of the State Bank of Vietnam issued Circular 43/2024/TT-NHNN amending and supplementing certain provisions of Circular 01/2014/TT-NHNN guiding the organization and implementation of state foreign exchange reserves management activities.

Building and adhering to the structure of official foreign exchange reserves investment in Vietnam from September 23, 2024

Article 6 of Circular 01/2014/TT-NHNN (amended and supplemented by Circular 43/2024/TT-NHNN) sets forth regulations on building and adhering to the structure of official foreign exchange reserves investment in Vietnam as follows:

- The content of the official foreign exchange reserves investment structure includes:

+ Structure by foreign currency: type of foreign currency and percentage by type of foreign currency;

+ Structure by foreign currency investment term: proportion of short-term investments under 01 year, medium-term from 01 to under 03 years, and long-term from 03 years and above for the Foreign Exchange Reserve Fund; proportion of investments with no fixed term and with fixed term under 01 year for the Exchange Rate Stabilization and Gold Market Management Fund;

+ Structure by form of foreign currency investment: percentage of deposits, types of securities, valuable papers, investment trusts, and other forms of investment for the Foreign Exchange Reserve Fund; percentage of deposits, types of securities, valuable papers, and other forms of investment for the Exchange Rate Stabilization and Gold Market Management Fund;

+ Structure of gold: volume of the types of gold held by the Foreign Exchange Reserve Fund and the Exchange Rate Stabilization and Gold Market Management Fund;

+ The maximum amount of foreign currency for purchasing gold on the international market by the Exchange Rate Stabilization and Gold Market Management Fund.

- Every six months, the State Foreign Exchange Reserves Management Department shall lead, in cooperation with the Monetary Policy Department, the Foreign Exchange Management Department, and the Forecasting and Statistics Department, to assess the management and implementation of the official foreign exchange reserves investment structure; formulate the official foreign exchange reserves investment structure for the next term and report to the Executive Board for submission to the Governor for a decision.

- The State Foreign Exchange Reserves Management Department is responsible for ensuring compliance with the official foreign exchange reserves investment structure according to the Governor's Decision on the last working day of the month.

- In cases of fluctuations in domestic and international financial markets, changes in monetary policy targets, and investment trends in types of foreign currencies and gold in the international reserves of other countries, changes in the scale of state foreign exchange reserves, and other cases affecting the compliance with the official foreign exchange reserves investment structure, the State Foreign Exchange Reserves Management Department shall report to the Executive Board.

Based on the Executive Board's directives, the State Foreign Exchange Reserves Management Department shall lead, in cooperation with relevant units, to study and propose plans to adjust the official foreign exchange reserves investment structure and report to the Executive Board for submission to the Governor for a decision.

- The Governor shall decide or authorize the Executive Board's Head to decide on the foreign exchange reserves investment structure.

Regulations on buying and selling foreign currencies between the official foreign exchange reserves and the state budget of Vietnam from September 23, 2024

The regulations on buying and selling foreign currencies between the official foreign exchange reserves and the state budget are stipulated in Article 9 of Circular 01/2014/TT-NHNN (amended and supplemented by Circular 43/2024/TT-NHNN) as follows:

(1) Purchasing foreign currencies from the state budget:

Based on the annual foreign currency sale plan of the state budget and the request document for foreign currency sales from the Ministry of Finance and/or directives from the Prime Minister of the Government of Vietnam, the State Foreign Exchange Reserves Management Department shall purchase foreign currencies to supplement the state foreign exchange reserves from the state budget at the exchange rate specified in clause (3).

(2) Selling foreign currencies to the state budget:

- Based on the request document for foreign currency purchases from the Ministry of Finance to meet the foreign currency demand of the state budget, the State Foreign Exchange Reserves Management Department shall collaborate with the Monetary Policy Department to formulate a plan to balance the foreign currency sale to the state budget for submission to the Governor for approval and notification to the Ministry of Finance;

- Based on the foreign currency sale balance plan approved by the Governor, the State Foreign Exchange Reserves Management Department shall execute the sale of foreign currencies to the state budget at the exchange rate specified in clause (3).

(3) The exchange rates for buying and selling foreign currencies of the State Bank:

- In case of buying and selling US dollars, the buying and selling exchange rates shall be the spot exchange rates in the intervention plan; if at the time of execution there is no intervention plan or the intervention plan does not contain spot exchange rates, the buying and selling exchange rates shall be the central exchange rates announced by the State Bank applicable to the transaction date;

- In case of buying and selling foreign currencies other than US dollars, the buying and selling exchange rates shall be based on the cross rates of the exchange rates specified at point a of this clause and the average purchase and sale rates between the foreign currency being bought or sold and the US dollar listed on the international foreign exchange market through the Refinitiv or Bloomberg information system before 10 AM on the transaction date.

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