Thông tư 04/2013/TT-NHNN

CIRCULAR

PROVIDING ON DISCOUNT ACTIVITIES OF NEGOTIABLE INSTRUMENTS AND OTHER VALUABLE PAPERS OF CREDIT INSTITUTIONS, FOREIGN BANKS’ BRANCHES FOR THEIR CUSTOMERS

Pursuant to the Law on the State bank of Vietnam No. 46/2010/QH12, of June 16, 2010;

Pursuant to the Law on credit institutions No. 47/2010/QH12, of June 16, 2010;

Pursuant to the Law on negotiable instruments No. 49/2005/QH11, of November 29, 2005;

Pursuant to the Government’s Decree No. 96/2008/ND-CP of August 26, 2008, defining the functions, tasks, powers and organizational structure of the State bank of Vietnam;   

At the proposal of the Director of the Monetary policy department;

The Governor of the State bank of Vietnam promulgates the Circular providing on discount activities of negotiable instruments and other valuable papers of credit institutions, foreign banks’ branches for their customers,

Article 1. Scope of regulation

This Circular provides on discount activities of negotiable instruments and other valuable papers of credit institutions, foreign banks’ branches for their customers.

Article 2. Subjects of application

1. Credit institutions, including:

a) Commercial banks;

b) Financial companies;

c) Finance-leasing companies and cooperative banks when being approved in writing by the State bank.

2. Foreign banks’ branches.

3. Customers of discount of negotiable instruments and other valuable papers who are the beneficiaries of negotiable instruments being allowed to implement transaction in Vietnam, owners of valuable papers being allowed to issue in Vietnam’s territory (hereinafter referred to as customers), include:

a) Domestic organizations (excluding credit institutions, foreign banks’ branches) and domestic individual;

b) The foreign legal entities and foreign individuals that are operating, residing lawfully in Vietnam, have civil legal capacity as prescribed in the Civil Code on the civil legal capacity of the foreign legal entities and foreign individuals.  

Article 3. Interpretation of terms

In this Circular, the following terms are construed as follows:

1. Contracts of discount of negotiable instruments or other valuable papers are written agreement between credit institutions, foreign banks’ branches and their customers aiming to form, change or terminate rights and obligations of parties regarding discount (hereinafter abbreviated to contract of discount). 

2. The remaining time limit of negotiable instruments and other valuable papers is duration as from negotiable instruments or other valuable papers are received discount by credit institutions or foreign banks’ branches to the time of payment of all amounts written on negotiable instruments, or other valuable papers.

3. The time limit for discount of negotiable instruments and other valuable papers is duration calculated as from the next day after credit institutions or foreign banks’ branches receive discount of negotiable instruments or other valuable papers till day when the customers must implement obligations of commitment on re-purchase or the due day for payment of all amounts written on negotiable instruments, or other valuable papers, including the off days and holidays.

4. The price for discount of negotiable instruments and other valuable papers is amount which credit institutions or foreign banks’ branches pay to customer when implementing discount of negotiable instruments, or other valuable papers.

Article 4. Conditions of credit institutions, foreign banks’ branches entitled to implement discount activities of negotiable instruments and other valuable papers 

Credit institutions, foreign banks’ branches are entitled to implement discount activities of negotiable instruments and other valuable papers when have full the following conditions:

1. Being subjects specified in clause 1 and clause 2 Article 2 of this Circular (according to 542/QD-NHNN dated 08/3/2013).

2. Content of credit extension under form of discount of negotiable instruments and other valuable papers is written in license of establishment and operation granted by the State bank of Vietnam.

3. There is internal regulation in order to implement discount activities of negotiable instruments and other valuable papers in conformity with this Circular, the Law on credit institutions and relevant laws.

Article 5. Principles of discount of negotiable instruments and other valuable papers

Credit institutions, foreign banks’ branches implementing discount activities of negotiable instruments and other valuable papers for their customers must ensure the following principles:

1. To implement under agreement between credit institutions, foreign banks’ branches with customers, in conformity with provisions in Law on credit institutions, Law on negotiable instruments, this Circular and relevant laws and international trade practice promulgated by the International Chamber of Commerce.

2. The customers must use discount amount in order to pay transactions not prohibited by law, ensure financial capability for re-purchase of negotiable instruments, other valuable papers or full payment of discount amount, discount interest and other legal costs to credit institutions, foreign banks’ branches under agreements written in contracts of discount.

3. Credit institutions, foreign banks’ branches must implement consideration and approval of discount in according to principle of responsibility delineation between the appraisal stage and stage of decision on implementing discount activities of negotiable instruments and other valuable papers.

4. Credit institutions, foreign banks’ branches and customers must reach agreement in contract of discount regarding payment of discount amount ahead of schedule, collection of charges or no charge when customers pay the discount amount ahead of schedule.

5. When credit institutions or foreign banks’ branches implement discount under method of the purchasing in a definite term of negotiable instruments or other valuable papers which time limit of payment has not yet come, customers must commit that they will re-purchase negotiable instruments or other valuable papers as soon as the time limit of discount is expired.

6. When implement discount activities of negotiable instruments or other valuable papers with par value was written for payment in foreign currency, credit institutions, foreign banks’ branches and their customers must ensure compliance with provisions in this Circular, provisions on management of foreign exchange and relevant laws.

7. When implement discount activities of negotiable instruments involving foreign elements, credit institutions, foreign banks’ branches and their customers must comply with provisions of Law on negotiable instruments regarding the application of International treaties, international trade practices in relations of negotiable instruments involving foreign elements, as well as provisions of law on civil relation involving foreign elements, regulations on foreign exchange management and this Circular.

8. Credit institutions, foreign banks’ branches shall consider, decide on discount of negotiable instruments and other valuable papers, ensure safety, withdrawing fully and on time of discount amounts, interest amounts and other lawful costs relating to discount activities.

Article 6. Types of negotiable instruments and other valuable papers allowed to be discounted

1. Credit institutions, foreign banks’ branches shall select to discount negotiable instruments issued in Vietnam or issued other countries and transferred in Vietnam, including:  

a) Bills of exchange;

b) Promissory notes;

c) Cheques;

d) Other negotiable instruments allowed to be discounted as prescribed by law.

2. Credit institutions, foreign banks’ branches shall select to discount other valuable papers including:

a) Bills of the State bank;

b) Bonds of the Government;

c) Bonds guaranteed by the Government;

d) Bonds of local authorities;

dd) Term bills, bills, deposit certificates, bonds issued by credit institutions, foreign banks’ branches in accordance with regulation of the State bank of Vietnam;

e) Term bills, bills, bonds issued by other organizations and discounted in accordance with current regulation.

Article 7. Conditions for discount of negotiable instruments and other valuable papers

1. Credit institutions, foreign banks’ branches shall accept the discount of negotiable instruments when they fully satisfy following conditions:

a) They are issued legally as prescribed by law of Vietnam, law of issuance countries or international trade practices in conformity with law of Vietnam;

b) They belong to the legal beneficial right of customers, have no dispute, are not used for mortgage or guarantee for other obligations;

c) On negotiable instruments not written the phrase "Non-transferable", "Transfer banned", "Not payable on demand” or other phrase with similar meaning;

d) They are not yet matured;

e) They are intact, not erased, repaired.

2. Credit institutions, foreign banks’ branches shall accept the discount of other valuable papers when they fully satisfy following conditions:

a) Being issued legally as prescribed by law of Vietnam;

b) They belong to the legal beneficial right of customers, have no dispute, are not used for mortgage or guarantee for other obligations;

c) They are permitted for transactions (purchase, sale, donation, conversion, transfer, mortgage, guarantee and other lawful transactions) as prescribed by law;

d) They are not yet matured;

e) They are intact, not erased, repaired.

Article 8. Currency used for discount

1. For negotiable instruments and other valuable papers written for payment in Vietnam dong, the currency used for discount is Vietnam dong. 

2. For negotiable instruments and other valuable papers written for payment in foreign currency, credit institutions, foreign banks’ branches and their customers shall implement as follows:

a) They shall be discounted in foreign currency written for payment on negotiable instruments, other valuable papers for customers, who are allowed to collect and use foreign currency in Vietnam’s territory as prescribed by law on foreign exchange management or customers, who use discount amounts to implement payment transactions in which the transaction currency must be in foreign currency as prescribed by law.

b) They shall be discounted in Vietnam dong if customers are not allowed to collect and use foreign currency in Vietnam’s territory as prescribed by law on foreign exchange management or if customers have demand for discount in Vietnam dong.

Article 9. Currency used for re-purchase of negotiable instruments and other valuable papers when they are expired for discount under method of purchase in a definite term

1. For negotiable instruments and other valuable papers discounted in Vietnam dong, the currency used for re-purchase is Vietnam dong.

2. For negotiable instruments and other valuable papers discounted in foreign currency, the currency used for re-purchase is foreign currency or Vietnam dong.  The re-purchase in foreign currency shall comply with current regulations on foreign exchange management and regulations of relevant law.

Article 10. Methods of discount

Credit institutions, foreign banks’ branches and customers shall agree on, select one of following discount methods:

1. Purchase of negotiable instruments, other valuable papers for terms means that credit institutions or foreign banks’ branches shall purchase and receive transfer of ownership of negotiable instruments, other valuable papers which are not yet matured from customers, together with customers’ commitment on their repurchase of those negotiable instruments, other valuable papers after a duration defined in contract of discount.

2. Purchase with reservation for the recourse of negotiable instruments, other valuable papers means that Credit institutions, foreign banks’ branches shall purchase and receive ownership of negotiable instruments, other valuable papers which are not yet matured from customers; customers shall return discount amount, discount interest and other lawful costs relating to discount activities in case credit institutions, foreign banks’ branches not receive full amount allowed for payment from the persons who are responsible for payment of negotiable instruments, persons who issue other valuable papers.

Article 11. Discount prices, terms, interest rates and relevant costs

1. The discount prices shall be agreed by credit institutions, foreign banks’ branches and customers on the basis of the payment value upon maturity, risk level of negotiable instruments, value of other valuable papers, discount interest rate, the remaining term of negotiable instrument, other valuable papers and other elements.

2. The discount term shall be agreed by credit institutions, foreign banks’ branches and clients, which, however, must not exceed the remaining payment term of negotiable instruments, other valuable papers; for other valuable papers which are issued by other credit institutions or bank’s branches, the maximum discount term is less than 01 year.

3. The discount interest rate and other lawful costs relating to discount activities of negotiable instruments, other valuable papers shall be agreed by credit institutions, foreign banks’ branches and customers in conformity with current regulations.

4. Credit institutions, foreign banks’ branches shall define the interest rates to apply to overdue discount amounts and make agreement on them with customers in contract of discount, which, however, they must not exceed 150% of discount interest rate applied in term of discount.

Article 12. Contract of discount

A contract of discount include the following principal contents: Name, address of credit institutions, foreign banks’ branches implementing discount activities; Name, address of customers; number of ID card/ passport/ tax code number of customers; main information of negotiable instruments, other valuable papers to be accepted for discount; discount prices; purpose of discount amounts use; currency used for discount; discount terms; discount interest rates and relevant costs; rights and obligations of parties; cases of terminating the discount contract before term; handling of violations to contracts; other contents agreed by parties in conformity with regulations of law.  

Article 13. The maximum discount level for a customer and relevant person

The credit institutions, foreign banks’ branches shall consider the maximum discount level for a customer and relevant person as prescribed by current law.

Article 14. Procedures for discount of negotiable instruments and other valuable papers 

1. When receiving a customer's request for discount of a negotiable instrument, other valuable paper, the credit institution, or foreign bank’s branch shall verify, assess purpose of use of discount amounts, financial capacity of customer and the solvency of the negotiable instrument, other valuable paper, before deciding to accept the discount.   The credit institution, foreign bank’s branch may request the customer to prove that the negotiable instrument, or other valuable paper fully meets the discount conditions set in this Circular.

2. When the credit institution or foreign bank’s branch accepts a client's request for discount of a negotiable instrument, or other valuable paper, the customer shall immediately deliver and carry out procedures for transferring the negotiable instrument, ownership of other valuable paper to the credit institution, foreign bank’s branch as prescribed by law.

3. For the discount under method of purchase in a define term, credit institutions shall deliver the valuable papers and carry out procedures for transfer of negotiable instrument, the ownership of other valuable paper to customers as prescribed by law, when customers have completed their commitment for the repurchase of negotiable instrument, or other valuable paper.

4. The process of and procedures for discount of negotiable instruments and other valuable papers shall be specified in internal regulations on discount activities of credit institutions, foreign banks’ branches.

Article 15. Rights and obligations of customers

1. Customers have rights:

a) To decide on selecting one of credit institutions, foreign banks’ branches in order to suggest to be accepted discount of negotiable instruments and other valuable papers.

b) To refuse requirements of credit institutions, foreign banks’ branches which are not proper with agreements in contract of discount and regulations of law.

c) To receive negotiable instruments and other valuable papers from credit institutions, foreign banks’ branches under agreements set in contract of discount.

d) To repurchase negotiable instruments and other valuable papers sooner than the discount term if credit institutions, foreign banks’ branches accept.

e) Other rights as prescribed by law.

2. Customers have obligations:

a) To implement properly with contents agreed in contract of discount.

b) To supply fully papers proving that the negotiable instrument, or other valuable paper are eligible to implement discount as prescribed in this Circular.

c) To commit in writing for lawful use of discount amounts, prove financial capacity ensuring for repurchase of negotiable instruments and other valuable papers as agreed in contract of discount.

d) To be responsible before law for legitimacy of negotiable instruments and other valuable papers which are accepted for discount at credit institutions, foreign banks’ branches.

Article 16. Rights and obligations of credit institutions, foreign banks’ branches

1. Credit institutions, foreign banks’ branches have rights:

a) To request customers for fully supplying papers proving that the negotiable instrument, or other valuable paper are eligible to implement discount as prescribed in this Circular.

b) To request customers for written commitment on lawful use of discount amounts, prove financial capacity ensuring for repurchase of negotiable instruments and other valuable papers as agreed in contract of discount.

c) To refuse the discount requirement of customer if considering that the negotiable instruments, other valuable papers are not eligible for discount or the use of discount amounts is not conformable with regulations of law or the credit institution, foreign bank’s branch have insufficient capital sources for discount.

d) Credit institutions, foreign banks’ branches are entitled to stop discount, collect discount amounts sooner than discount term if detecting that customers supplied untruth information, violated contract of discount.

dd) The credit institutions, foreign banks’ branches have right to inspect, supervise use of discount amounts of customers as prescribed by law.

e) Other rights as prescribed by law.

2. Credit institutions, foreign banks’ branches have obligations:

a) Implementing properly with contents agreed in contract of discount.

b) Doing procedures and implementing transfer of negotiable instrument, transfer of ownership of other valuable papers to customers as prescribed in Law on negotiable instruments, relevant current laws when customers fully pay discount amounts, discount interest rate and relevant other costs.

c) Preserving and using negotiable instruments, other valuable papers as prescribed by law.

d) Other obligations as prescribed by relevant law.

Article 17. Classifying assets, levels and methods of setting up provisions and use provisions to deal with risks

Credit institutions, foreign banks’ branches shall carry out the classification of assets, the levels and methods of setting up of provisions and use of provisions to deal with risks for the discount amount in accordance with applicable provisions of the State Bank of Vietnam on the classification of assets, method of provisioning and use of provisions to deal with risks  in banking activity of credit institutions, foreign banks’ branches when implementing discount of negotiable instruments and other valuable papers.

Article 18. Accounting, reporting and statistics on discount activities of negotiable instruments and other valuable papers of credit institutions, foreign banks’ branches

Credit institutions, foreign banks’ branches shall account, report on and make statistics of discount activities of negotiable instruments and other valuable papers as prescribed by current law on accounting, reporting and statistical regimes.

Article 19. Organization of implementation

1. This Circular takes effect from May 01, 2013. The following documents cease to be effective: 

a) Regulation on discount, rediscount of valuable papers of credit institutions for their customers promulgated together with the Decision No. 1325/2004/QD-NHNN of October 15, 2004;

b) Decision No. 17/2006/QD-NHNN of April 20, 2006 on amending and supplementing Article 10 and Article 12 of Regulation on discount, rediscount of valuable papers of credit institutions for their customers promulgated together with the Decision No. 1325/2004/QD-NHNN;

c) Regulation on discount, rediscount of negotiable instruments of credit institutions for their customers promulgated together with the Decision No. 63/2006/QD-NHNN of December 29, 2006;

2. For discount contracts of negotiable instruments, other valuable papers of credit institutions, foreign banks’ branches signed before this Circular takes effect, customers and credit institutions, foreign banks’ branches may continue implementing content in the signed discount contracts in conformity with regulations of law which have been effective at time of signing of those contracts or make agreements for amendment, supplementation of discount contracts in conformity with specified in this Circular.

3. The Chief of office, the Director of the Monetary policy department and heads of units of the State bank of Vietnam, Directors of the State bank of Vietnam’s branch of central-affiliated cities and provinces, chairpersons of Board of Directors, chairperson of Members' Council and Directors general (Directors) of credit institutions, foreign banks’ branches, other relevant organizations and individuals shall implement this Circular.