The State Bank of Vietnam has just issued Circular No. 25/2021/TT-NHNN (Circular 25) amending and supplementing some articles of Circular No. 01/2015/TT-NHNN regulating business operations, providing interest rate derivative products of commercial banks and foreign bank branches.
Accordingly, Circular 25 on interest rate derivatives introduced the specific concept that foreign investors are organizations that own government bonds issued in Vietnam Dong in the domestic market.
Net profit or net loss of interest rate derivative contracts of credit institutions, foreign bank branch at a point in time is the net profit or net loss of all paid periods of interest rate derivative contracts up to that time.
The date of entering into the interest rate derivative contract is the date on which the parties complete the signing of the interest rate derivative contract.
The effective date of the interest rate derivative contract as agreed by the parties is the date on which the parties start to perform the interest rate derivative contract; the effective date of interest rate derivative contract coincides with or after the date of conclusion of interest rate derivative contract.
The performance period of an interest rate derivative contract is the period from the effective date of the interest rate derivative contract to the maturity date of that interest rate derivative contract. The performance term of the interest rate derivative contract is equal to or shorter than the remaining execution term of the original transaction.
Commercial banks, foreign bank branches may reach an agreement on the net payment of interest rate derivative contracts entered into with customers, reciprocal transactions performed with commercial banks, other foreign bank branches, or foreign financial institutions.
Commercial banks and foreign bank branches that trade-in and supply interest rate derivatives by electronic means must develop a business process for providing interest rate derivatives by electronic means.
The process must be following the provisions of the law on prevention and combat of money laundering, the law on electronic transactions and related legal provisions, ensuring safety; customer information security, and operation safety of commercial banks, foreign bank branches.
Commercial banks, branches of foreign banks must fully store information related to business, provide interest rate derivative products by electronic means to serve the inspection, comparison, settlement of inspection, complaints, disputes, and provide information at the request of competent state management agencies.
When there is a need to enter into a new interest rate derivative contract, commercial banks, and foreign bank branches must determine the limit of net loss on business activities; supply and use interest rate derivative products as a basis for compliance with the provisions of this Circular. The net loss limit on the use of interest rate derivatives is determined by the sum of the net profit and loss of the valid interest rate derivative contracts plus the sum of the net profit and loss of the interest rate derivative contracts. settlement in the financial year.
According to Circular 25, credit institutions and foreign bank branches must also report on interest rate derivative transactions following the regulations on the statistical reporting regime of the State Bank of Vietnam.
This Circular takes effect from 14/2/2022. For interest-rate derivative contracts signed before the effective date of this Circular, commercial banks and foreign bank branches shall continue to perform the contents stated in the interest rate derivative contracts following the provisions of the Law on interest rate derivatives. provisions of the law take effect at the time of signing such interest rate derivative
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