Compulsory reserve is the amount of money that a credit institution must deposit at the State Bank for each type of deposit with different terms. So, what is Vietnam's legal regulation on compulsory reserve?

Article 10 of the Law on the State Bank of Vietnam 2010 stipulates that compulsory reserve is one of the monetary policy tools that the State Bank of Vietnam can implement, along with refunding policy, adjustments of interest rate, open market operations and other tools and measures.

Clause 1, Article 14 of the Law on State Bank of Vietnam 2010 stipulates that the compulsory reserve is the amount of money that a credit institution must deposit at the State Bank to implement the national monetary policy.

The State Bank shall stipulate the compulsory reserve ratio for each type of credit institution and each type of deposit at the credit institution in order to implement the national monetary policy.

The State Bank shall stipulate the payment of interest on compulsory reserve deposits and deposits exceeding the compulsory reserve of each type of credit institution for each type of deposit.

Compulsory Reserve Requirement Ratio

Decision 1158/QD-NHNN stipulates the reserve requirement ratio applicable to credit institutions and foreign bank branches as follows:

  • People's credit funds, microfinance institutions: The reserve requirement ratio for deposits in Vietnamese dong and foreign currency deposits is 0%.
  • Policy banks: The reserve requirement ratio is determined by the Government.

Other credit institutions (excluding the above-mentioned credit institutions and the Vietnam Bank for Agriculture and Rural Development, and Cooperative Bank) apply the corresponding reserve requirement ratio for each type of deposit as follows:

a) Non-term and term deposits in Vietnamese dong with a maturity of less than 12 months: 3% of the total deposit balance subject to reserve requirement calculation.

b) Term deposits in Vietnamese dong with a maturity of 12 months or more: 1% of the total deposit balance subject to reserve requirement calculation.

c) Foreign currency deposits of foreign credit institutions: 1% of the total deposit balance subject to reserve requirement calculation.

d) Non-term and term foreign currency deposits with a maturity of less than 12 months: 8% of the total deposit balance subject to reserve requirement calculation.

e) Term foreign currency deposits with a maturity of 12 months or more: 6% of the total deposit balance subject to reserve requirement calculation.

Credit institutions exempt from reserve requirement

Credit institutions exempt from reserve requirement are regulated in Article 3 of Circular 30/2019/TT-NHNN, including:

  • Credit institutions under special control: The period of exemption from reserve requirement starts from the following month when the credit institution is put under special control by the State Bank of Vietnam until the month when the State Bank of Vietnam decides to terminate the special control.
  • Credit institutions that have not commenced operations: The period of exemption from reserve requirement lasts until the month when the credit institution starts its operations. The credit institution must notify the State Bank of Vietnam (Transaction Office) in writing about the date of commencement of operations within 3 working days from the date of commencement.
  • The credit institution approved for dissolution or there is a decision to open bankruptcy proceedings or a decision on revocation of the License issued by a competent authority: The period of non-execution of the compulsory reserve shall be from the month following the month the credit institution is approved for dissolution or the decision to open bankruptcy proceedings or revoke the License is in effect; The credit institution that has decided to open bankruptcy procedures shall send it to the State Bank (Transaction Office) for the decision to open bankruptcy procedures within 3 working days from the date of receipt of this decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.