CIRCULAR

GUIDING THE ISSUANCE OF TREASURY BILLS VIA THE STATE BANK

In furtherance of the Government’s Decree No.01/2000/ND-CP of January 13, 2000 promulgating the Regulation on the issuance of the Government’s bonds, after consulting the Vietnam State Bank, the Finance Ministry hereby guides the issuance of treasury bills via the State Bank as follows:

I. GENERAL PROVISIONS

1. Treasury bills are issued via the State Bank in form of bidding according to the specific provisions of this Circular.

2. Bidding for treasury bills means the interest-rate bidding, whereby the bid-offering and bid-winning interest rates are calculated on the yearly basis (365 days).

3. The Finance Ministry shall base itself on the annual State budget estimate as well as the State budget revenue and expenditure situation to estimate the volume of the to be-issued treasury bills, time and form of selling the treasury bills, their terms and directed interest rates, and inform such to the State Bank before organizing bidding for treasury bills.

4. The State Bank shall act as an agent for the Finance Ministry in issuing and settling treasury bills, performing the treasury bill-bidding operations, organizing and supervising the market for re-sale and re-purchase of treasury bills after the bidding.

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1. Bidding principles:

- Keeping secret all bid-offering information of the bid-offering units and the directed interest rates (if any) of the Finance Ministry.

- Organizing open biddings, ensuring the interest- and obligation- equality between the bid participants in terms of their interests and obligations.

- Bid-wining units shall have to buy treasury bills according to the notified bid-winning volumes and interest rates.

2. Subjects participating in biddings defined in Article 14 of the Regulation on the issuance of the Government’s bonds issued together with Decree No.01/2000/ND-CP must fully meet the following conditions:

- Having legal person status and having been established under the current Vietnamese laws;

- Having the legal capital of 20 billion VND or more;

- Having their Vietnam dong accounts opened at banks;

- Having filed their application for participation in the market of bidding for treasury bills to the State Bank.

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3. Terms of treasury bills:

Treasury bills have a term of 91, 182, 273 or 364 days.

4. Interest rates of treasury bills: shall be determined on the basis of the results of each bidding session.

5. Mode of treasury bill sale:

Treasury bills subject to bidding via the State Bank may be sold by either of the two following modes:

- Par-value equivalence: Treasury bills shall be sold at prices equal to their par values; the principals and interests shall be settled in lump-sum when the bills mature.

- Discounting: Treasury bills shall be sold at prices under their par values and shall be settled equally to their par values when they mature.

6. Forms of treasury bill

Treasury bills shall be issued in form of certificates or book-entries.

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- Book entries: shall be carried out and managed by the State Bank.

7. Organization of bidding for treasury bills

The bidding for treasury bills shall be organized once a week, every two weeks or a month, depending on the State budget’s demand for capital and the monetary market situation.

7.1. Bidding notification:

Two days before organizing a bidding, on the basis of the Finance Ministry’s proposal for the issuance of treasury bills, the State Bank shall send notices on the issuance of treasury bills to participants in the treasury bill-bidding market and announce such on the mass media.

7.2. Registration for bidding:

7.2.1. Before 13.00 hrs of the bid-opening day, bidders shall have to send their bid-offering cards to the State Bank.

7.2.2. The minimum bid-offering volume is 100,000,000 VND (one hundred million dong). Where the treasury bills are issued in form of certificates, their par values shall be determined and announced by the Finance Ministry in the issuance notices.

7.2.3. Participants in a bidding shall have to pay a collateral of 5% of the offered treasury bill volume at the transaction bureau or designated branches of the State Bank and shall not enjoy interests during the collateral period.

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The prescribed bid-opening time is 13.30 hrs of the bidding day. The bidding may be conducted through the computer networks and the State Bank shall guide the order and procedures for bidding via computer networks in order to ensure the accuracy, safety and high confidentiality.

The procedures for bid registration, the order of opening bid-offering cards, the examination of the validity and legality of bid-offering cards as well as the bidding order and procedures shall be stipulated by the State Bank.

7.4. Determination of bid-winning treasury bill volume and interest rate:

7.4.1. The determination of bid-winning treasury bill volume and interest rate shall be based on:

- The volumes and interest rates offered by the bidding participants.

- The estimated volume of the to be-issued treasury bills and directed interest rate (if any).

7.4.2. In case using the directed interest rate, the bid-winning treasury bill volume shall be calculated according to the rising order of the bid-offering interest rates within the scope of directed interest rate.

If, at the highest bid-offering interest rate within the scope of the directed interest rate, the bid-offering volume exceeds the estimated volume of treasury bills to be issued, the bid-winning treasury bill volume shall be shared among the bid-offering cards according to the direct ratio of the bid-offering volume of each card at such interest rate.

7.4.3. If the directed interest rate is not used, the bid-winning treasury bill volume shall be calculated according to the rising order of bid-offering interest rates till the achievement of the estimated volume of the to be-issued treasury bills.

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7.4.4. The interest rate for the issuance of treasury bills shall be the highest bid-winning interest rate applicable to all bid winners.

7.5. Method of calculation of selling prices and interests of treasury bills:

7.5.1. For treasury bills issued by the mode of par-value equivalence:

- The selling prices of the treasury bills shall be 100% of their par values.

- The sum of money to be paid for treasury bills when they mature shall be calculated according to the following formula:

                              n

T = G + (G x Ls x ---------- )

                              365

Of which:

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G: is the selling price of the treasury bills

Ls: is the bid-winning treasury bill interest rate (calculated in percentage/365 days)

n: is the number of days in the treasury bills� term

7.5.2. For treasury bills issued by the mode of discounting:

- The selling prices of treasury bills shall be calculated according to the following formula:

G

=

MG

1    +

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365 x 100

Of which:

G: is the selling price of the treasury bills

MG: is the par value of treasury bills

Ls: is the bid-winning treasury bill interest rate (calculated in percentage/365 days)

n: is the number of days in the treasury bills’ term

The State Bank shall specify the method of rounding up the prices of treasury bills.

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After completing the bid opening, determining the bid-winning volume and interest rate, the bidding board shall sign for certification the sum-up of the bidding results at the place where bid consideration is organized and send the bidding results to the Finance Ministry. Basing itself on the sum-up of the bidding results, the State Bank shall send notices to the bid-winning units, announce the bidding results on the mass media and post them up at the headquarters of the State Bank.

8. Payment for treasury bills:

8.1. Payment for bid-winning treasury bills:

- Within 2 working days following the bidding day, the bid winners shall have to pay the whole sum of money for the purchase of treasury bills according to their selling prices already determined in the bid-winning notices, and at the same time be granted certificates or have their treasury bill accounts credited (for book-entries) by the State Bank.

- Where the bid-winners delay the fulfillment of the payment procedures, the State Bank shall make a deduction of their collateral money and deposit money (for bid-winners being banking organizations) or request the banks where such bid-winners open accounts to deduct their deposit money (for bid-winners being subjects defined at Point 2, Article 14 of the Regulation on the issuance of the Government bonds issued together with the Government’s Decree No.01/2000/ND-CP of January 13, 2000) and transfer such money to the State Bank.

- Where the balance on the deposit account of a bid-winner is not enough for the payment, the bidding results of such bid-winner shall be cancelled and his/her entire collateral money at the State Bank shall be remitted into the State budget.

- The State Bank shall credit to the account of the central State Treasury opened at the State Bank�s transaction bureau the total sum of money actually collected (according to the selling prices of treasury bills) right on the day the bid-winners make payment for the purchase of treasury bills.

8.2. Settlement of mature treasury bills:

1 day before the maturity of treasury bills, the Finance Ministry (the central State Treasury) shall transfer the settlement money to the central State Bank. On the day the bills mature, if the central State Bank has yet received the money-transfer vouchers from the central State Treasury, it shall automatically make deduction from the deposit account of the central State Treasury at the State Bank�s transaction bureau to make payment to the bill owners.

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The State Bank and the State Treasury shall have to perform their settlement obligation in strict compliance with the above-mentioned stipulations; cases of violation of the settlement time-limit and the capital amount of late payment shall be sanctioned according to the current regulations of the State Bank.

9. Expenses for organization of the issuance and settlement of treasury bills:

9.1. Expenses for bidding and settlement of treasury bills:

All expenses for organization of bidding and settlement of treasury bills shall be covered by the State budget, which shall not exceed 0.1% of the total turnover of the issued treasury bills and shall be transferred to the State Bank quarterly, based on the bidding results. This source of fund shall be used for the following purposes:

- The expense for the procurement of equipment in service of treasury bill- bidding;

- The expense for regular maintenance and unexpected repair of machinery and equipment;

- The expense for designing and writing software program on treasury bill- bidding;

- The expense for treasury bill-bidding advertisements on mass media;

- The direct expense for each bidding session;

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- The expense for annual customers’ conferences to sum up the work of organization of biddings;

- The expense for irregular and regular rewards for members of the bidding board and cadres working in service of the bidding work, as well as for the relevant agencies, which shall not exceed 10% of the total expenses for treasury bill- bidding and settlement;

- The expense for regular meetings of the treasury-bill bidding board to preliminarily sum up the bidding situation and discuss working orientations;

- The expense for stationery;

- Other expenses in service of treasury bill- bidding.

These expenses shall be effected according to the Finance Ministry’s regulations on financial management regime applicable to the State Bank and be accounted into the State Bank’s annual expenditure.

9.2. The expense for the printing of treasury bill certificates

The Finance Ministry shall pay the expense for the printing of certificates according to the contracts signed with the printing bodies.

10. Responsibilities of branches in organi-zation of treasury bill-bidding:

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10.1.1. Prepare contents related to the bidding session to be submitted to the Finance Ministry for decision:

- The estimated volume of the to be-issued treasury bills in each bidding session;

- The terms of treasury bills;

- The directed interest rate (if any) for each treasury bill issuance;

- The mode of selling treasury bills and the form of treasury bills;

- The time for issuance of treasury bills.

10.1.2. Inspect the conditions of units participating in the bidding;

10.1.3. Supervise the bid opening, determine the bid-winning volume, issuance prices and interests of treasury bills;

10.1.4. Approve the bidding results and certify the bidding result notices;

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10.2. The Finance Ministry and the State Bank shall have to settle all disputes and complaints arising in the course of treasury bill- bidding and settlement.

III. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect as from the date of its signing and replaces Inter-ministerial Circular No.01/NHNN-TC of February 10, 1995 of the State Bank and the Finance Ministry guiding the issuance of treasury bills via the State Bank and Circular No.02/NHNN-TC of June 4, 1997 amending and supplementing Inter-ministerial Circular No.01/NHNN-TC.

2. The State Bank shall coordinate with the Finance Ministry in promulgating a regulation guiding in detail the treasury bill- bidding via the State Bank and organize the implementation of the provisions of this Circular.

FOR THE FINANCE MINISTER
VICE MINISTER




Vu Van Ninh