Vietnam

Vietnam[VND]

...

Institutional setup of monetary policy decisions and operations

Policy decision body, size and composition Department of Monetary Policy, in coordination with other units (Department of Forecasting and Statistics, Banking Supervision Agency, Legal Department, etc..) advises the Governor, Deputy Governor in charge about monetary policy decision making
Major mandates 1 According to the Law on the State Bank of Vietnam of 2010, the State Bank of Vietnam is a ministerial-level agency of the Government and is the Central Bank of the Socialist Republic of Vietnam. The State Bank performs the function of State management over monetary, banking and foreign exchange activities; performs the function of a Central Bank in money issuance, the bank of credit institutions and provision of monetary services to the Government. The State Bank's activities aim to currency value stabilization; protection of the safety of banking operations and the system of credit institutions; protection of the safety and efficiency of the national payment system; contributing to promoting socialist-oriented socio-economic development 2
Decision-making process SBV's Management Board directs functional units to research and propose solutions in the monetary policy management process. At the same time, functional units actively give advice and proposals to the SBV's Management Board. 3
Frequency / length of meetings Not fixed
Frequency of announcements Not fixed
Main policy target Manage monetary policy instruments in proactive and flexible manner to control inflation, stabilize the macro-economy and reasonably support economic growth.

Overview of key features

Key policy rate Refinancing rate: 4.0 percent p.a
Rediscounting rate: 2.5 percent p.a
Overnight rate for the inter-bank electronic payments, and the interest rate of loans to finance short-term balances in the clearing transactions between the SBV and the commercial banks: 5 percent p.a 4
maturity (days)
Operating target No
maturity (days)
Standing facilities Yes
Corridor width (bp)
Reserve requirements Yes
maintenance period one month
Main operation 5 The State Bank of Vietnam conducts monetary policy tools in flexible and synchronous manner to stabilize the monetary and foreign exchange markets, control inflation, ensure liquidity for the economy, and support growth.
functions
maturity (days)
regular interval
frequency
Overall frequency As above
Discretion left to operational desk As above
Key policy signals via No
announcement
keynote tender
standing facility
other

Monetary policy communication

Explicit use of forward guidance Not applicable
Timing / media of policy announcement The mechanisms and policies of the State Bank are promptly, clearly and systematically communicated. In addition to the official communication channels such as the Central Bank's website, press conferences, seminars, workshops, symposiums, SBV's communication also covers the National Assembly delegates, Government agencies, the press, enterprises, investors, economic experts, etc.
Policy announcement and documents As above
Explaining policy decisions As above
Dissemination of minutes (timing / media) As above
Content of minutes As above
Publication of forecasts 6 The State Bank of Vietnam makes a report to the Government on setting inflation targets so that the Government submits to the National Assembly for approval on annual basis.
The State Bank does not directly publish or announce to the public about its macroeconomic, inflation or monetary policy forecasts
Publication of projected path of policy rate 7 The State Bank does not forecast policy interest rates

Reserve requirements: ratios and size

Main functions served Monetary policy tools 8
Domestic currency Deposits of less than 12-month maturity: 3 percent, 12-month maturity and above 1 percent 9
Foreign currency Deposit of less than 12-month maturity: 8 percent, 12-month maturity and above: 6 percent, deposit by foreign credit institutions: 1 percent 10
Average On average, required reserve in VND accounts for 2 percent and that in foreign currency accounts for 7 percent of the deposit outstanding used to calculate required reserve.
Required reserves SBV's trading desk does not publicise this figure
Required reserve as % of GDP As above
Actual reserves As above
Actual reserve as % of GDP As above

Main features of reserve requirements

Averaging Yes 11
Carry-over No
Type Deposit at the State Bank of Vietnam 12
Maintenance period One month 13
end (day) The last day of a month
Calculation period One month 14
end (day) The last day of a month
Lag before maintenance One month 15
Vault cash No 16
restrictions Not Applicable
Remuneration According to monetary policy objectives 17
average rate
marginal rate
Framework last changed 2003

Liquidity position and forecasting

Structural Position Generally, liquidity is guaranteed
Most volatile factor(s) - Cash, due to the seasonality of citizens' cash holding
- Government spending
Most unpredictable factor(s) Government spending; cash
Forecast horizon(s) Daily, monthly
Frequency Daily, monthly
Frequency of revision Daily, monthly
Forecast published? No

Standing facilities: lending / market ceiling

Name Refinancing 18
Form Valuable papers-mortgaged lending 19
Pricing method SBV's refinancing rate 20
Maturity Below 12-month 21
Access limited by/to Credit institutions established and operating under the Law on Credit Institutions; having qualified valuable papers and on the list of valuable papers used as collateral to borrow money from the State Bank in accordance with the regulations of the Governor of the State Bank of Vietnam, with the purpose of borrowing being in line with the SBV's objectives of monetary policy conduction in each period; and having no overdue debts with the State Bank 22
Function(s) To provide short-term capital and liquidity to credit institutions 23

Standing facilities: deposit / market floor

Name Not applicable
Form Not applicable
Pricing method Not applicable
Maturity Not applicable
Access limited by/to Not applicable
Function(s) Not applicable

Open market operations: repo or reverse repo

Name/Type 24 RP, RRP, Outright transaction 25
Maturity Determined by the SBV
Frequency OMOs are executed on a working day. If the date of redemption or the due date of the securities does not coincide with the working day, the payment and transfer of ownership of the securities shall be made immediately on the next working day, from which interest payment will be calculated 26
Pricing method 1. When buying or selling with a term
1.1. Securities at the time of valuation
1.1.1. For short-term securities:
a) Interest payment immediately upon issue:
G = MG / ((1+ (L * t) / 365))

G: Value of securities at the valuation time
MG: Face value of securities
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
t: Remaining term of securities (number of days).

b) Short-term securities, with lump-sum principal and interest payment:
G = GT/((1+ (L * t) / 365))

Inside:
G = MG * (1+ (Ls * n) / 365)
G: Value of securities at the valuation time
GT: Value of securities at maturity including face value and interest
MG: Face value of securities
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
t: Remaining term of securities (number of days)
Ls: Interest rate for securities (% / year)
n: Term of securities (number of days).

1.1.2. For long-term securities:
a) For long-term securities, pay interest immediately upon issue:
G = MG / 〖(1 + L)〗 ^ (t⁄365)

Inside:
G: Value of securities at the valuation time
MG: Face value of securities
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
t: Remaining term of securities (number of days).

b) For long-term securities with lump-sum payment of principal and interest (interest without principal):
G = GT / ((1+ (L * t) / 365))

Inside:
GT = MG * [1 + (Ls * n)]
G: Value of securities at the valuation time
GT: Value of securities at maturity, including face value and interest
MG: Face value of securities
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
t: Remaining term of securities (number of days)
Ls: Interest rate for securities (% / year)
n: Term of securities (year).

c) For long-term securities with lump-sum payment of principal and interest (interest on principal):
G = GT / 〖(1 + L)〗 ^ (t⁄365)

Inside:
GT = MG * (1 + Ls) n
G: Value of securities at the valuation time
GT: Value of securities at maturity, including face value and interest
MG: Face value of securities
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
t: Remaining term of securities (number of days)
Ls: Interest rate for securities (% / year)
n: Term of securities (year).

d) For long-term valuable papers, with periodic interest payment:
G = ∑_ (i, Ti> 0) ▒Ci / 〖(1 + L / k)〗 ^ (((Ti * k)) ⁄365)

Inside:
G: Value of securities at the valuation time
Ci: Amount of the ith payment of interest and principal (excluding the amount of interest, principal with the last day of interest registration, original securities before the valuation date).
i: The ith time of interest and principal payment
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
Ti: Term is from the valuation date to the first interest and principal payment due date (number of days).
k: Number of periodic interest payments in a year.

1.2. Payment price between the State Bank and a member is determined by the following formula:
GTT = G * (1 - h)

Inside:
GTT: Payment price
G: Value of securities at the valuation time
h: Ratio of the difference between the securities value at the valuation time and the payment price.

1.3. The price for redemption of securities between the State Bank and its members is determined by the following formula:
Gm = GTT * (1+ (L * tb) / 365)

Inside:
Gm: Redemption price
GTT: Payment price
L: Interest rate by method of unit price or multi-price bidding (in case of auction with interest rate) or the interest rate announced by the State Bank (in case of auction by volume) at the auction (% / year)
tb: Buying and selling term (number of days).

1.4. The right to enjoy periodic interest and other income (if any) from securities in term purchase and sale transactions belongs to the Seller. In case the Buyer receives periodic interest and other income (if any) at the time (s) within the term of the time purchase or sale transaction, the Buyer is responsible for returning the Seller the interest periodic and other income (if any) received at the date of acquisition. The periodical interest and other income (if any) from securities in the term purchase and sale will not enjoy interest while the Buyer keeps it on behalf of the Buyer.
2. In case of outright purchase or outright sale of securities:
The price of outright purchase or outright sale of securities between the State Bank and its members is applied as prescribed in Point 1.1, Clause 1 of this Article. 27
Access limited by/to Credit institutions, foreign bank branches (except microfinance institutions, people's credit funds) will be recognized as members when fully satisfying the following conditions:
1. Have a Vietnamese dong payment account at the State Bank.
2. To have a bank code issued by the State Bank. 28
Function(s) To serve the objectives of operating monetary policy in each period

Open market operations: central bank bills

Name State Bank bills 29
Total issuance The total issuance volume depends on the orientation and objectives of the monetary policy in each period
Maturity The term of bills of the State Bank shall be decided by the State Bank and shall not exceed 364 days. 30
Restrictions on possible maturities No
Pricing method The selling price of one (01) State Bank bill is determined by the following formula:
Inside:
G: Selling price of one (01) State Bank bill;
MG: Face value of State Bank bills;
L: Interest rate for State Bank bills (% / year);
t: Term of the State Bank's bills (number of days).

2. The amount for sale of the State Bank's bills is determined by the following formula:
GG = G x N
Inside:
GG: Amount of money from the sale of State Bank bills;
G: Selling price of one (01) State Bank bill;
N: Number of treasury bills issued by the State Bank. 31
Access limited by/to Credit institutions
Discretion left to operational desk No

Open market operations: FX swaps

Maturity The State Bank used to implement FX Swap with credit institutions, but stopped according to Circular 05/2019/TT-NHNN 32
Frequency As above
Pricing method As above
Access limited by/to As above
Function(s) As above

Other significant liquidity management means

Name/Type 33 OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Form OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Frequency OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Maturity OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Pricing Method OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Access limited by/to OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN
Function(s) OT: Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021; Circular 16/2019/TT-NHNN

Settlement systems and intra-day liquidity facilities

Settlement system SBV's trading desk does not publicise this details
Intra-day liquidity facility Overdrafts and overnight lending in interbank electronic payments 34
Charge SBV's trading desk does not publicise this details
Foreign currency settlement system As above
CLS participation by banks As above
Other settlement system(s) As above

Collateral

Standing facilities: List of eligible collateral Securities used in transactions with the State Bank:
- SBV bills
- Government bonds, including: Treasury bills/ Treasury bonds/ Central project bonds/ Government bonds issued by the Vietnam Development Bank (formerly Vietnam Development Fund) per request of the the Prime Minister
- Bonds guaranteed by the Government, including: Bonds issued by the Vietnam Development Bank and guaranteed by the Government for payment of 100% of the principal and interest value upon maturity; Bonds issued by Vietnam Bank for Social Policy are guaranteed by the Government for payment of 100% of the principal and interest value upon maturity; Bonds issued by VEC by the Government for payment of 100% of the principal and interest value upon maturity;
- Local Government bonds issued by the People's Committee of Hanoi and the People's Committee of Ho Chi Minh City; the People's Committee of Da Nang City
Standing facilities: Discretion of central bank on collateral 35 According to the decision of the Governor in different points in time
Open market operations: List of eligible collateral List of securities used in transactions with the State Bank is specified in Decision 11/QD-NHNN 2010
Open market operations: Discretion of central bank on collateral 36 The addition to the portfolio of securities to be used in transactions with the State Bank is stipulated in Decision 11/QD-NHNN in 2010 and other decisions on amendments and supplements.

Dissemination of operational information: liquidity forecast

Forecast published? No
Channel(s) No
Timing No
Remarks No

Dissemination of operational information: open market operations

Volume and price published? Depending on the method of bidding:
OMOs are done through volume bidding or interest rate bidding. Based on the objective monetary policy in different points in time, the State Bank shall select an appropriate bidding method.
1. Volume bidding
a) The State Bank shall notify members of the interest rate for buying or selling securities;
b) The State Bank decides to announce or not to announce the volume of securities to be purchased or sold by the State Bank in the bidding notice of each transaction session of the OMOs;
2. Interest rate bidding
a) The State Bank decides to announce or not to announce the volume of securities to be purchased or sold by the State Bank in the bidding notice of each transaction session of the OMOs;
b) The State Bank shall decide the application of the unit price or multi-price bidding consideration method;
c) A member registers to bid based on the interest rates (maximum of 3 interest rates for a term of buying and selling securities in a bid) and quantity of securities to be purchased or to be sold corresponds to those interest rates. The bid rate is calculated at the as %/year and rounded to 2 decimal places;
d) The member's bid applications are ranked in the order of decreasing bid interest (in case the State Bank purchases securities), or the bid interest rate increases (in case the State Bank sells securities);
đ) The State Bank shall consider the bid in descending order from the highest bidding interest rate to the lowest tender interest rate (in case the State Bank buys securities) or consider the bid in ascending order from lowest bid interest rate up to the highest bid rate (in case the State Bank sells securities) within the minimum or maximum bid consideration interest rate of the State Bank at which the preferred quantity of securities is reached;
(i) For the unit price bidding method: The winning interest rate is the lowest bid interest rate (in case the State Bank buys securities) or the highest bid interest rate (in case the State Bank sells securities) within the minimum or maximum bid consideration interest rate of the State Bank at which the volume of securities to be purchased or sold by the State Bank is reached;
(ii) For multi-price bidding consideration method: The winning interest rate of each winning member is the bidding interest rate of that member;
e) Winning volume of members is the volume of the bid levels with an interest rate equal to and higher than the winning interest rate (in case the State Bank buys securities) or has a bid interest rate equal to and lower than the winning interest rate (in case the State Bank sells securities);
g) If at the winning interest rate, the total bid volume of the members exceeds the remaining volume of securities to buy or sell of the State Bank, the winning volume of each member shall be awarded proportionally to the bid volume of each member at the winning interest rate and corresponding to the volume of securities calculated according to par value rounded down to multiples of the par value of securities;
h) In case at the winning interest rate of a member, there are many types of securities that need to be purchased or sold, the State Bank shall consider the bid to determine according to the order of each securities as specified in Point e, Clause 1 of this Article. 37
Channel(s) OMO professional bidding software AOM
Timing Daily

Dissemination of operational information: standing facilities

Lending facility usage: Channel(s) Securities mortgaged-back lending
Lending facility usage: Timing Within 02 working days since the date of receipt of credit institutions' document for mortgage borrowing 38
Deposit facility usage: Channel(s) Not applicable
Deposit facility usage: Timing Not applicable

Other information dissemination

Type No
Channel(s) No
Timing No

1 Describe as well the legal status of the mandate and involvement of government

2 The Law on the State Bank of Vietnam of 2010 (Law No. 46/2010/QH12)

3 Decree No. 16/2017/ND-CP on functions, responsibilities, authorities and organizational structure of the State Bank of Vietnam

4 Decision No. 1728/QD-NHNN dated September 30, 2020

5 RP = reversed purchase (repo, inject liquidity), RS=RRP=reversed sale (reverse repo, absorb liquidity), RT=reversed transaction (repo or reverse repo).

6 For instance, economic and inflation forecasts related to policy decision.

7 If applicable, describe the publication of any fan-charts or uncertainty bands around the forecasts/projections.

8 2010 Law on the State Bank of Vietnam, Decree No. 30/2019/TT-NHNN dated December 27, 2019

9 Decision No. 1158/QD-NHNN of the Governor of the State Bank of Vietnam dated May 29, 2018 on required reserve ratio applied for credit institutions and foreign bank branches, valid from June 1, 2018

10 Decision No. 1158/QD-NHNN of the Governor of the State Bank of Vietnam dated May 29, 2018 on required reserve ratio applied for credit institutions and foreign bank branches, valid from June 1, 2018

11 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

12 2010 Law on the State Bank of Vietnam, Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

13 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

14 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

15 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

16 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

17 Circular No. 30/2019/TT-NHNN dated December 27, 2019 providing for the implementation of required reserve by credit institutions and foreign bank branches

18 2010 Law on the State Bank of Vietnam, Circular No. 17/2011/TT-NHNN dated August 18, 2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated December 12, 2011

19 Circular No. 17/2011/TT-NHNN dated August 18, 2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated December 12, 2011

20 Circular No. 17/2011/TT-NHNN dated August 18, 2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated December 12, 2011

21 Circular No. 17/2011/TT-NHNN dated August 18, 2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated December 12, 2011

22 Circular No. 17/2011/TT-NHNN dated August 18, 2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated December 12, 2011

23 2010 Law on the State Bank of Vietnam

24 RP=Reversed purchase (“repo”), RS=RRP=Reversed Sales (“reverse repo”), RT=Reversed transaction (RP or RRP).

25 Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42)

26 Article 12 Circular 42

27 Article 12 Circular 42

28 Article 5 Circular 42

29 Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) and Circular 16/2019/TT-NHNN on issuance of SBV bills (Circular 16)

30 Clause 3 Article 4 Circular 16

31 Article 5 Circular 16

32 - Decision 893/2001/QD-NHNN of the Governor of the State Bank of Vietnam on the implementation of a swap between the SBV and a credit institution to meet the demand for short-term capital in VND for banks. Circular 15/2019/TT-NHNN repeals all of Decision 893/2001/QD-NHNN.
- FX swap transactions between the SBV and credit institutions are now regulated under Circular 01/2014/TT-NHNN.m (this circular was declassified) on guilding operations of foreign exchange reserve managment activities, amended and supplemented by Circular 01/2020/TT-NHNN.

33 OT = Outright Transaction, DB = Direct Borrowing, DL = Direct Lending.

34 As regulated in Circular No. 29/2016/TT-NHNN dated October 12, 2016 regulating overdraft and overnight lending in interbank electronic payments

35 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.

36 Discretion of the central bank to expand collateral types, and list of additional collateral types that the central bank can take on a discretionary basis. Also, additional information such as delays required if discretionary collateral changes.

37 Regulations in Circular 42/2015/TT-NHNN on OMOs (Circular 42) as amended and supplemented by Circular No. 09/2021/TT-NHNN dated 07/07/2021

38 Circular No. 17/2011/TT-NHNN dated 18/8/2011 as amended and supplemented by Circular No. 37/2011/TT-NHNN dated 12/12/2011