The State Bank of Vietnam has just issued Circular No. 16/2021/TT-NHNN regulating the purchase and sale of corporate bonds by credit institutions and foreign bank branches.
The Circular takes effect from January 15, 2022 and will replace Circular No. 22/2016/TT-NHNN dated June 30, 2016, Circular No. 15/2018/TT-NHNN dated June 18, 2018. some contents have been supplemented and edited to suit the reality and operation situation of credit institutions.
Accordingly, the Circular stipulates that not only credit institutions, foreign bank branches can buy corporate bonds, policy banks are also allowed to buy and sell corporate bonds according to the Government's regulations.
Credit institutions are only allowed to buy corporate bonds when the bad debt ratio is below 3% according to the latest classification period according to the regulations of the State Bank, except for the case of purchasing corporate bonds under the restructuring plan approved by the competent authority.
Credit institutions are also not allowed to borrow capital from other credit institutions to buy corporate bonds.
Credit institutions are not allowed to buy bonds (including buying from initial issuance and buying back from other organizations and individuals) of issuers with bad debts at purchasing credit institutions and at other credit institutions within the last 12 months up to the date of purchase approval.
Credit institutions are not allowed to buy corporate bonds issued to restructure the debts of the issuing enterprises themselves. On the other hand, credit institutions are not allowed to buy corporate bonds issued to contribute capital or buy shares in other enterprises.
In case corporate bond issuers have changed their capital use plans, credit institutions are only allowed to buy bonds when the enterprise has been profitable continuously for the last 3 years and has the highest credit rating.
In addition, the Circular also has some other regulations to clearly define the cases where credit institutions are not allowed to buy corporate bonds, limiting the situation of circumventing the credit growth target.
Credit institutions must develop internal regulations on buying and selling corporate bonds following the characteristics of their business activities.
The Circular also stipulates a limit on buying corporate bonds, whereby, the total purchase balance of corporate bonds is included in the total outstanding credit balance for a customer, for customers, and related persons according to regulations on limits and rates operating safety rate.
Credit institutions specify limits on buying corporate bonds, including limits on buying corporate bonds of an issuing enterprise, buying bonds of enterprises and related enterprises; buying secured and unsecured corporate bonds; buying corporate bonds for selling, trading, holding to maturity.
For listed corporate bonds, credit institutions make provisions for devaluation and handle the provision according to regulations of the Ministry of Finance. For unlisted corporate bonds, credit institutions make provisions according to regulations of the State Bank.
Regarding the transitional clause, for contracts signed before the effective date of this Circular, the credit institution, and the customer shall continue to perform the signed contents or agree to amend and supplement the contract to suit the provisions of this Circular specified in this Circular.
Collected from source
Bui Trang