Vietnam: New circular on foreign exchange transactions


In short

On March 31, 2021, the State Bank of Vietnam (SBV) issued Circular No. 02/2021 / TT-NHNN (“Circular 02”) guiding the implementation of foreign exchange (FX) transactions in the foreign exchange market. foreign exchange transactions of credit institutions authorized to engage in foreign exchange activities (“approved credit institutions”).

Circular 02 takes effect from May 17, 2021 and replaces Circular No. 15/2015 / TT-NHNN of the SBV (“Circular 15”). The parties may continue to implement foreign exchange transaction agreements that were established and entered into force before May 17, 2021. Such agreements may only be amended or supplemented if the amendment or supplement is in accordance with the Circular 02. The main salient points of Circular 02 are as follows:


More in detail

1. Circular 02 does not apply to foreign exchange transactions on the international market.

Circular 02 expressly provides that it does not apply to foreign exchange transactions on the international market. Accordingly, authorized credit institutions authorized to conduct foreign exchange activities may conduct such foreign exchange transactions in accordance with the scope of the license / approval issued by the government, the Prime Minister and the SBV.

2. Authorized credit institutions may sell currency futures to foreign investors holding government bonds denominated in VND and issued in Vietnam.

Circular 15 authorizes authorized credit institutions to engage only in spot foreign exchange transactions with non-foreign exchange residents. Circular 02 retains and also introduces a new exception to this restriction. Specifically, authorized credit institutions can now sell foreign currencies in a forward exchange contract, foreign exchange non-residents being foreign investors holding government bonds denominated in VND issued in Vietnam. These forward exchange contracts may be entered into to hedge the currency risk of this investor’s obligation.

When entering into such a forward exchange contract, the foreign investor must present supporting documents proving his ownership in the government bonds, ensuring that the value and duration of the forward exchange contract does not exceed the purchase price and the remaining term of this government bond. In order for the forward exchange contract to become effective, the foreign investor must additionally provide proof within seven business days from the date of trading of the forward exchange contract that this government bond has been blocked with Vietnam. Securities Depository and Clearing Corporation.

3. Foreign exchange swaps between VND and foreign currencies no longer need to have a duration of at least three working days.

Circular 02 retains the following provisions of Circular 15:

  • An FX spot must have a duration of at most two business days.
  • A forward exchange contract must have a term of at least three business days.
  • A currency swap may include: (i) two currency spots; (ii) two forward currency contracts; or (iii) an FX spot and an FX forward.

However, Circular 02 no longer requires an FX swap between VND and a foreign currency to have at least one forward FX. Accordingly, it is understood that an exchange rate swap between VND and a foreign currency may include two exchange points. In such a case, the currency swap may have a duration of less than three business days.

4. Sale of foreign currency for bonds not yet due

Circular 02 slightly relaxes the requirements relating to the sale of foreign currency by approved credit institutions for their clients’ outstanding obligations, as follows:

  • For purposes other than those described below, similar to Circular 15, Circular 02 authorizes authorized credit institutions to sell only foreign currencies in a forward exchange contract. However, Circular 02 now allows the settlement date of this forward exchange contract to be no more than five business days before the maturity date of the client’s underlying obligations. The deadline provided for in Circular 15 was two working days.
  • Circular 02 still provides for the right of a foreign investor to buy foreign currency to remit his legitimate income from direct investment activities on an exceptional basis abroad.
  • In addition, Circular 02 now expressly authorizes authorized credit institutions to sell foreign currencies to customers to meet their obligations falling due within more than three working days if the customers are Vietnamese individuals purchasing foreign currencies, and these foreign currencies are used to meet their demand for studies, medical care, business trips, trips and visits abroad.

5. Using the FX Swap to Modify the Content of an Executed Forward Currency Contract

If the customer’s foreign currency settlement schedule changes for objective reasons agreed between the approved credit institution and the customer, the customer sends the approved credit institution a written request to change the content of the forward exchange contract. executed, accompanied by supporting documents as to why such a modification is necessary. Upon receipt of the customer’s written request, the approved credit institution and the customer may execute a foreign exchange swap to change the content of the executed forward foreign exchange contract. The cumulative duration of the executed forward exchange contract and of these modified foreign exchange swaps may not exceed 365 days from the date of the transaction.

6. Using the FX Swap to Extend the Term of an Executed Forward Currency Contract

The authorized credit institution and the customer may execute a foreign exchange swap to extend the term of an executed forward foreign exchange contract under the following circumstances:

  • For offshore foreign currency loans with an initial or remaining term of more than 365 days, the client can use VND to purchase forward currencies with a term of 365 days from an approved credit institution in order to hedge the risk of exchange. Upon receipt of the customer’s written request, the authorized credit institution and the customer may execute a foreign exchange swap to extend the term of the executed forward exchange contract. The term of the forward exchange contract in such a foreign exchange swap is 365 days or, if the remaining term of the offshore loan is less than 365 days, is equal to the remaining term of the offshore loan.
  • If a foreign investor holding a government bond in VND issued in Vietnam has executed a forward exchange contract with an approved credit institution to hedge the exchange risk, within two working days before the settlement date of this forward exchange contract, if the foreign investor still has to hedge the exchange rate risks for the bond, the authorized credit institution and the customer can execute a foreign exchange swap to extend the term of the executed forward exchange contract . The approved credit institution must ensure that the term of this currency swap and any subsequent currency swap does not exceed the remaining term of the blocked government bond. The cumulative duration of the executed FX forward and FX swap must not exceed the duration of the blocked government bond.

7. Improve the use of electronic methods for foreign exchange transactions

Circular 02 authorizes foreign exchange transactions directly or through transaction methods, including telephone and electronic methods, and removes the requirement in Circular 15 that the agreement for a foreign exchange transaction must be in writing. The parties will be responsible for and must ensure the safety, security, protection of data messages and confidentiality if the foreign exchange transaction is carried out via electronic methods. A data message will have the same value as a written document if it meets the requirements of Article 12 of the Law on Electronic Transactions.

For transactions between approved credit institutions, the parties must establish and send to each other a transaction confirmation on the date of the transaction or, if the transaction is executed outside of working hours, the next working day if an agreement is reached by electronically or by telephone. For transactions between an approved credit institution and its counterparty other than a credit institution, the parties must create and send each other a transaction confirmation no later than the working day following the date of the transaction.

In addition, Circular 02 now expressly recognizes the use of SWIFT to confirm foreign exchange transactions. More specifically, Circular 02 provides that if a confirmation of a foreign exchange transaction is sent via SWIFT, the authorized credit institution must establish a procedure to create, send and receive the confirmation, guaranteeing security and avoiding risks. A confirmation is no longer required to have a signature, but must have the approval of the person authorized to confirm the transactions.

If a transaction confirmation is sent by fax or attached to an email, the parties must send the original hard copy to each other within 10 working days. The previous deadline provided for in Circular 15 was five working days.

The content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee similar results. For more information, please visit: www.bakermckenzie.com/en/disclaimers.


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