Regulations on members of open market operation in Vietnam

Regulations on members of open market operation in Vietnam (Internet image)

1. What is open market operation?

According to Clause 1, Article 3 of Circular 42/2015/TT-NHNN, open market operation refers to an activity by a State bank to either buy or sell financial instruments to (or from) the members.

2. Regulations on members of open market operation in Vietnam

2.1. Eligibility requirements for members of open market operation in Vietnam

Credit institutions and branches of foreign banks (except for microfinance institutions and people’s credit funds) shall be recognized as a member in open market operation when all of the following conditions are satisfied:

- Have a VND checking account opened at the State bank.

- Have a swift code granted by the State bank.

(Article 5 of Circular 42/2015/TT-NHNN)

2.2. Procedures for recognizing members of open market operation in Vietnam

- Credit institutions and branches of foreign banks that wish to participate in open market operations shall send an application for participating in open market operation in accordance with Annex No. 01/TTM enclosed with Circular 42/2015/TT-NHNN to the State bank directly or by post so as to be considered granting the certificate of member of open market operation.

Annex No. 01/TTM

- Within 05 working days from the receipt of the application for participating in open market operation, the State bank shall grant the certificate of member of open market operation to the credit institution or the foreign bank branch if it satisfies the requirements specified in Article 5 hereof. If the application is not sufficient, a written notice must be sent to the credit institution/foreign bank branch.

- The procedure for re-recognizing members for members that have ended their membership status as specified in Point b Clause 1 and Clause 2 Article 7 of Circular 42/2015/TT-NHNN shall be implemented similar to those applying for the first time.

(Article 6 of Circular 42/2015/TT-NHNN)

2.3. Termination of membership

- The membership shall be terminated in the following cases:

+ A member is merged, consolidated, divided, dissolved or declared bankrupt;  

+ When the VND checking account opened at the State bank of a member is closed, the State bank shall issue a written notice on the termination of membership of such member.

- The member that wishes to terminate its membership status and has fulfilled its obligations to the State bank on the open market operation shall send an application for termination of membership status in accordance with Annex No. 02/TTM enclosed with Circular 42/2015/TT-NHNN to the State bank directly or by post.

Annex No. 02/TTM

Within 05 working days from the receipt of the application for termination of membership status the State bank shall issue a written notice on the termination of membership status to the member.

- When terminating a membership status, the transaction center of the State bank (hereinafter referred to as “transaction center”) shall notify the Information Technology Department to withdraw the access password and electronic signature password of the member.

(Article 7 of Circular 42/2015/TT-NHNN)

3. Financial instruments traded through open market operation in Vietnam

- Financial instruments which are permitted by the State bank to be traded through open market operation shall satisfy the following conditions:

+ They may be transferred and are in the list of financial instruments entitled to be traded through open market operation;

+ They belong to the legal beneficial right of the member;

+ They are issued in VND;

+ They are deposited directly at the State bank or deposited at customer accounts of the State bank opening at the Vietnam Stock Depository Center before applying for sale of financial instruments to the State bank;

+ Their remaining term to maturity in repo/reverse repo is longer than the period of repo/reverse repo under the notice of the State bank; they may only be applied for sale before the registered final maturity date.

- The list of financial instruments entitled to be traded through open market operation and the haircut regulated by the Governor of the State bank.

(Article 10 of Circular 42/2015/TT-NHNN)

Diem My

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