On 31 March 2021, the State Bank of Vietnam (“SBV”) issued Circular No. 02/2021/TT-NHNN guiding foreign currency transactions on the foreign currency market by credit institutions (“CIs”) licensed to conduct foreign exchange operations (“Circular 02”).
Circular 02 took effect on 17 May 2021 and replaced Circular No. 15/2015/TT-NHNN dated 02 October 2015 (“Circular 15”). Parties may keep implementing foreign currency exchange agreements in force before Circular 02’s effective date. Any revisions to the such agreements after the effective date are only valid if they comply with Circular 02.

1. SCOPE OF APPLICATION
Circular 02, Article 1.3 expressly states that it does not apply to foreign exchange transactions in the international market. Licensed CIs are allowed to perform foreign exchange transactions with customers in accordance with their respective licenses.

2. FOREIGN EXCHANGE TRANSACTION MEANS
Circular 02 allows foreign exchange transactions to be conducted directly or by electronic means and telephonically. Parties to foreign currency transactions made via electronic and telephonic means shall agree upon and take responsibility for these transactions. Thus, ensuring security, safety, protection of data and confidentiality. All data messages will have the same validity as a written document if it meets the requirements under Article 12 of the Law on e-transactions.
For transactions between licensed CIs that are concluded by electronic or telephonic means the parties thereto must send confirmations of the transaction to each other. The transaction support unit of each party shall make and send a confirmation of the transaction within the transaction date. Circular 02 also recognises the Society for Worldwide Interbank and Financial Telecommunication (SWIFT), a global payment processing network, to confirm foreign exchange transactions. Licensed CIs must formulate procedures for the creation of sending and receipt of confirmations to ensure safety and prevent risk. If such confirmation is sent via fax or email, the parties must send each other the original hard copy within ten working days. The previous regulated period under Circular 15 was five working days.
On the other hand, for the transactions between a licensed credit institution and its customers, the confirmation of transaction shall be sent no later than the next following working day.

3. SCOPE OF PERMITTED TRANSACTIONS
According to Article 4 of Circular 02, licensed CIs are allowed to conduct the following transactions:
i. Foreign exchange spots, foreign exchange forwards, currency swaps and foreign exchange option transactions with other authorized CIs.
ii. Foreign exchange spots, foreign exchange forwards, currency swaps and put option transactions with business entities.
iii. Foreign exchange spots and foreign exchange forwards with residents being other organizations and individuals.
iv. Foreign exchange spots with non-residents being organizations and individuals.
v. Sell foreign currencies in foreign exchange forwards with non-residents being foreign investors holding governmental bonds in Vietnamese dong in the Vietnam market to prevent exchange rate risk for bonds held by these investors.
Circular 15 allows licensed CIs to engage in only foreign exchange spots with non-residents. Circular 02 not only maintains the same restriction but also provides a new exception to this restriction.

 4. EXTENDING AND AMENDING THE TENOR OF AN EXECUTED FOREIGN EXCHANGE FORWARD
Amending the tenor
In case the foreign currency payment plan of a client changes due to an objective reason approved by the licensed credit institution and agreed with the client in advance, on the basis of a written request from the client sent together with documentary proof of the necessity of a change to the transaction tenor, the licensed credit institution and the client may make currency swaps to amend the tenor of the signed foreign forward in line with the term stated in the documents presented.
Extend the tenor
For foreign loans in foreign currency whose initial or remaining loan term is longer than 365 days, the client may use Vietnamese dong to buy foreign currencies with a term of 365 days from a licensed credit institution for the purpose of exchange rate risk prevention. Based on a written request from the client, at least 02 working days before the expiration date of an executed foreign exchange forward, the licensed credit institution and the client may make foreign exchange swaps to extend the tenor. The tenor of foreign exchange forward in currency swaps shall be 365 days or equal to the remaining loan term if the remaining loan term is less than 365 days .
Circular 02 further provides that, if the foreign investor who is holding governmental bonds in Vietnamese dong wishes to continue preventing exchange rate risk of the bonds, at least 02 working days before the expiration date of a foreign exchange forward, the licensed credit institution and foreign investor may enter into currency swaps to extend the tenor of the signed foreign exchange forward. However, the extended tenor shall not exceed the remaining term of the blocked bonds.

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