Vietinbank Allowed to Pilot Commodity Price Options

Accordingly, the SBV permitted Vietinbank to pilot commodity price options for domestic customers, perform counterpart financing for foreign partners in order to setting aside price risks of agricultural products (coffee, rubber, cotton, rice, wheat and soybean), energy, fuel and ferrous metals (excluding gold) on basis of Vietinbank’s risk prevention processes which are built on Vietnamese and international practices, and ensure business safety and efficiency. The pilot period cannot exceed one year dating from the date of signing of this document.

 

The SBV required Vietinbank to meet all conditions in piloting commodity price options, including:

 

(i) Based on commodity price options made to customers, Vietinbank has plans to specify risk types and risk-prone money to calculate financial compensation during the options products are deployed;

 

 (ii) Vietinbank requires customers to show original purchase/sale contracts to demonstrate the purpose of transaction and liability to the legality of commodity purchase contracts;

 

(iii) Vietinbank only provides commodity price options for customers in the range of commodity volume in the contract. The validity of commodity price options cannot exceed the remaining validity of original purchase and sale contracts.

 

(iv) Vietinbank shall comply with Vietnam’s current legal regulations on capital adequacy ratio, provisioning, risk management, foreign exchange management;

(v) Vietinbank shall guide and inform customers with full information about the nature of commodity price options, risks and provisioning;

 

(vi) At the end of each working day, the difference in commodity value of options contracts is positive. If the difference is negative, it cannot be greater than 5 percent of the bank’s equity.

 

Additionally, after signing contracts with customers, Vietinbank will send the photocopied contracts to the SBV (Monetary Policy Department and Banking Inspection and Supervision Agency). The lender will send periodical reports to this effect to the SBV.