Vietnam: Guidance on determination of required reserves from March 01, 2020

According to Vietnam’s regulations, the State Bank of Vietnam (SBV) shall determine the required reserve to be kept by a credit institution during a reserve maintenance period by multiplying the reserve ratio applied to that credit institution for each type of deposits during the reserve maintenance period by the average balance of reservable deposits it holds during the reserve computation period corresponding to that type of deposits.

According to Article 5 of Circular No. 30/2019/TT-NHNN of SBV, the following formula shall be adopted to calculate the required reserve:

DTBB = (DTBBi ratio x HĐi)

Where:

- DTBB: The required reserve to be kept by the credit institution during the reserve maintenance period;

- DTBBi ratio: The reserve ratio applied to the credit institution, corresponding to the reservable deposits of type i during the reserve maintenance period;

- HĐi: The average balance of reservable deposits of type i held by the credit institution during the reserve computation period.

The average balance of reservable deposits held at a credit institution during the reserve computation period is calculated by dividing the sum of end-of-day balances of reservable deposits held at the entire network of the credit institution (including the headquarters, domestic branches and domestic financially-dependent affiliates of a credit institution or of a foreign bank branch) in the period by the number of days in the reserve computation period.

The average balance of reservable deposits of each type is calculated by adopting the following formula:

Reserve maintenance period is the length of time of the current month, beginning from the first day of the month and ending on the last day of that month, including weekends and public holidays. Reserve computation period is the length of time of the previous month, beginning from the first day of the month and ending on the last day of that month, including weekends and public holidays.

View full text at Circular No. 30/2019/TT-NHNN of the State Bank of Vietnam, effective from March 01, 2020.

Thu Ba

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