State Bank of Vietnam     Socialist Republic of Vietnam
   No.11/TT-NH5           Independence-freedom-Happiness
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                                   Hanoi, 6 July, 1992.

CIRCULAR ON GUIDANCE fOR PRESCRIBED COMPULSORY RESERVES.

The Governor of the State Bank of Vietnam signed Decision No.117/QD-NH1 on 26 June, 1992 governing "Prescribed Compulsory Reserves Ratios for banks and credit organizations". The State Bank of Vietnam hereby provides some more detailed guidance for the im plementation of this Decision as follows :

1. Regulations on prescribed compulsory reserves are applied to all state commercial banks, join-stock banks, banks for investment and development that have been awarded new license permits or are in the process of organizational and operational restoring in order to obtain new license permits (including overseas bank subsidiaries and join-venture banks that are operating in Vietnam) that include the mobilization of bank deposits in terms of Vietnamese dong.

- Credit co-operatives in rural areas and financial companies are not yet subject to regulation on prescribed compulsory reserves, for the time being.

- In cases where certain credit organizations are in severe default situations and are forced to continue to operate, or those credit organizations that have gone bankrupt, until they are officially shut down, depending on certain circumstances, the Stat e Bank may consider and permit those credit organizations to mobilize part or all of their prescribed compulsory reserves.

2. Those credit organizations that mobilize bank deposits in term of foreign currencies, until new rules and regulations are enacted for them specifically, are subject to rules and regulations on prescribed compulsory reserves, namely, compulsory reserve s which are 10% of the value of their mobilized bank deposits in term of foreign currencies. Prescribed compulsory reserves in terms of foreign currencies are to be deposited in the Exchange Bureau of the State Bank or in those banks which are officially authorized by the Exchange Bureau of the State Bank into a separate sub-account within their prescribed compulsory reserves accounts, which are not allowed to be in terms in Vietnamese dong converted from the foreign currencies mobilized, nor the vice ve rsa.

3. The Exchange Bureau of the State Bank, City and Provincial subsidiaries of the State Bank, where credit centers and credit organizations have opened their main bank accounts before, now have to open additional bank accounts of prescribed compulsory re serves for those credit centers and credit organizations. These additional bank accounts will be used for cases which are higher and lower the 35% ratio.

Subsidiaries of credit organizations do not have to open bank accounts of prescribed compulsory reserves.

4. The basis for the calculation of prescribed compulsory reserves in terms of Vietnamese dong is the deposits in term of cash and liquid assets which are represented in the consolidated accounts balance sheet of a credit organization (including operation s of its subsidiaries).

The following kinds deposits in terms of cash and liquid assets are the basis for the calculation of prescribed compulsory reserves :

- Deposits which are payments paid by organizations and individuals (including deposits at the State Treasury, deposits made by jewellery and precious stones companies);

- Time deposits and sight deposits made by organizations and individuals;

- Deposits made by economic organizations;

- Time or sight savings deposits made by the public;

- Amounts of money being kept on behalf of the owners;

- Time Government bonds which are valid less than one year.

Specifically, these include those accounts of grade I : from account 30 to account 35 and account 37; and those accounts of grade II : accounts 660 and 780 (according to the system of banks accounts governed by Decision No.104/NH-QD dated 10 August, 1991 by the Governor of the State Bank of Vietnam).

5. How to calculate the prescribed compulsory reserves :

5.1 The following formula is to be used :

Prescribed         Average value             required ratio
compulsory      =  of the balance of    x    for prescribed
reserves of        the last month's          compulsory
this month         deposits                  reserves

5.2 How to calculate the average value of the balance of the last month's deposits :

for the time being, the balance of the accounts mentioned in part 4 of this documents represented in the last month's accounts balance sheet must be used for the calculation purposes : the value at the beginning of the month is added to the value at the end of the month, and then is divided by 2.

for example, credit organization A had a balance of deposits mentioned in part 4 of this document at the beginning of July, 1992 which was 12 billions and 400 dong and at the end of July, 1992 it was 13 billion and 200 dong.

Now the average value of the balance for July, 1992 of credit organization A is as follows :

12,000,000,400 d + 13,000,000,200 d
htmlhtmlhtmlhtmlhtmlhtml- = 12,000,000,800 d
                 2

With a ratio of 10% for the prescribed compulsory reserves, the balance of prescribed compulsory reserves for deposits to be carried forward to August, 1992 of credit organization A should be as follows :

12,000,000,800 d
htmlhtml----- x 10 = 1,000,000,028 d
       100

5.3 The Exchange Bureau of the State Bank or its provincial and city subsidiaries should consider the real balance for prescribed compulsory reserves of credit organization A to identify its surplus or deficit and to deal with accounting practices and pr ocedures.

6. In cases where the Governor of the State bank declare those ratios for prescribed compulsory reserves which are higher than 35%, the above - mentioned formula should still be applied. However, the calculation of the interests of prescribed compulsory r eserves with ratios of 35% or higher should be carried out in two steps as follows :

6.1 Step 1 :

Prescribed compulsory  the new ratio           average
reserves with ratios = for prescribed - 35% x  value of
higher than 35%        compulsory             last month's
                       reserves            deposits balance

for example : In May, 1993, the Governor of the State bank declared a ratio of 40% for prescribed compulsory reserves. Assuming that the average value of prescribed compulsory reserves for May, 1993 was 12,000,000,800 d, applying the above-mentioned formu la, now we have :

(45-35) x 12,000,000,800 d
htmlhtmlhtmlhtml----- = 640,000,000 d
           100

(12,000,000,800 d x 40)   12,000,000,800 d x 35)
htmlhtmlhtml---- - htmlhtmlhtml--- =640,000,000d
       100                          100

6.2 Step 2 : Calculation of interest

After having carried out part 7 of this document, the real value of the prescribed compulsory reserves account that exceeds the ratio of 35% (namely, 640,000,000d) will be paid interest by the State Bank applying interest rates for sight deposits of credi t organizations at the State Bank since the day full amounts of prescribed compulsory reserves according the new ratios are deposited.

7. How to deal with situations where prescribed compulsory reserves surplus or deficit occurs :

7.1 On the 15th of every month, credit organizations have to check the balances in their prescribed compulsory reserves accounts at the State bank against the amounts of prescribed compulsory reserves they are subject to and then they have to report the r esults to the State Bank where they open their main deposit accounts.

7.2 After having checked those data reported by credit organizations, no later than the 20th of every month, the State Bank will notify credit organizations of the amounts of prescribed compulsory reserves for the current month which they are subject to. And then the State Bank will deal with surplus or deficit situation in accordance with articles 7 and 8 of the rules and regulations on prescribed compulsory reserves.

a. How to deal with deficit situations : If in their main deposit accounts in the State Bank there is no money left for immediate payments, credit organizations are required to pay in cash or obtain a loan within 30 days. If after 30 days, credit organiz ations still being unable to pay for the deficits will be considered as violating rules and regulations on prescribed compulsory reserves and will be punished for those deficits compulsory reserves and will be punished for those deficits according to rul es and regulations on disciplinary measures issued by the Governor of the State Bank.

b. How to deal with surplus situations : The State Bank takes the initiatives to make transfer from the prescribed compulsory accounts to the main deposits accounts of the credit organizations. After 3 days, if the State Bank fails to make any transfers, it will be subject to disciplinary actions by the Governor of the State Bank according to rules and regulations on disciplinary measures.

c. To deal with surplus and deficit situation against prescribed compulsory reserves, the State Bank will also have to :

- Calculate and pay interest to credit organizations in cases of surplus from day 1 to the day interest payments are made;

- Calculate and collect interest payments made by credit organizations for their deficits from day 1 to the day interest payments are paid.

The basis for calculation of prescribed compulsory reserves in term foreign currencies are those deposits in term of cash or liquid assets represented in the consolidated accounts balance sheet of credit organizations, specifically including the following grade 1 accounts :

- Account 17 : Deposit account in terms of foreign currencies by foreigners;

- Account 22 : Deposit account in terms of foreign currencies by Vietnamese individuals or organizations, and joint-ventures with foreigner.

The way to calculate prescribed compulsory reserves in term foreign currencies and the way to deal with surplus and deficit situations are the same with those stated in parts 5 and 7 of this Circular regarding the Vietnamese Dong.

9. Complaints and authority to deal with them :

9.1 No later than 5 days working days after receipt of letters of complaints on prescribed compulsory reserves placed by credit organizations, director of the State Bank subsidiaries located in provinces and cities, or the director of the Exchange Bureau of the State Bank have to quickly consider and solve them or transfer them to the State Bank of Vietnam for solution. Until their complaints are settled, credit organizations will have to carry out decisions by the State Bank subsidiaries concerned.

10. On 25th of every month, the State Bank subsidiaries located in provinces and cities, and the Exchange Bureau of the State Bank have to collect reports on the implementation of prescribed compulsory reserves (according to the attached form).

10.1 State Bank subsidiaries located in provinces and cities from Quang Binh province have to produce two copies of their reports :

- 1 copy to be sent to the Department for Banks Credit Organizations of the State Bank of Vietnam (in Hanoi);

- 1 copy for file

10.2 State Bank subsidiaries located in provinces and cities from Quang Tri province have to produce three copies of their reports :

- 1 copy to be sent to the Department for Banks and Credit Organizations of the State Bank of Vietnam (in Hanoi);

- 1 copy to be sent representative office of the Department for Banks and Credit Organizations of the State Bank of Vietnam based in 17 Ben Chuong Duong, Ho Chi Minh City.

- 1 copy for file

11. The Head of the Accounting Department is responsible for proving guidelines on accounting procedures and practices for prescribed compulsory reserves in terms of either Vietnamese Dong of foreign currencies.

During the course of implementation, should any problems or difficulties arise, they should be reported to the State bank of Vietnam (for the attention of the Department for Banks and Credit Organizations) for further guidance on the solution.

for the Governor of the State Bank of Vietnam Deputy Governor

CHU VAN NGUYEN (Signed)