Which issue about credit institutions trading corporate bonds in Vietnam will be proposed to amend in Circular No. 16/2021/TT-NHNN?
- What is the draft amendment to the corporate bond trading of credit institutions in Circular No. 16/2021/TT-NHNN?
- Not allowed to purchase corporate bonds for the purpose of letting the enterprise purchase shares, contribute capital, and/or cooperate with other enterprises?
- Proposing to amend internal regulations and responsibilities of credit institutions in purchasing corporate bonds in Vietnam?
What is the draft amendment to the corporate bond trading of credit institutions in Circular No. 16/2021/TT-NHNN?
Draft amendments to Circular No. 16/2021/TT-NHNN amending 04 main contents on the corporate bond trading of credit institutions, including:
(1) Allowing banks to repurchase corporate bonds previously sold up to December 31, 2023.
(2) Allow the bank to buy corporate bonds issued for the purpose of supplementing working capital when managing income from business activities and income has sufficient documents to prove the use of working capital.
(3) Banks are not allowed to buy corporate bonds issued for the purpose of contributing capital or buying shares in other enterprises.
(4) Some other amendments related to payment methods, internal ratings of banks and monitoring of capital use purposes of enterprises.
Which issue about credit institutions trading corporate bonds in Vietnam will be proposed to amend in Circular No. 16/2021/TT-NHNN?
Not allowed to purchase corporate bonds for the purpose of letting the enterprise purchase shares, contribute capital, and/or cooperate with other enterprises?
Currently, Clause 8, Article 4 of Circular No. 16/2021/TT-NHNN stipulates 03 cases where a credit institution is not allowed to purchase corporate bonds when:
- One of the purposes of issued corporate bond is to restructure debts of the issuer;
- One of the purposes of issued corporate bond is to contribute capital and/or purchase share in other enterprises;
- One of the purposes of issued corporate bond is to increase working capital.
In the draft amendments to Circular No. 16/2021/TT-NHNN, the above provisions are supplemented and amended as follows:
c) To amend and supplement Point b, Clause 8 as follows:
“b) One of the purposes of issued corporate bond is to purchase shares, contribute capital, and/or cooperate with other enterprises;”.
d) Point d Clause 8 is added as follows:
“d) One of the purposes of issued corporate bond is for business cooperation, investment cooperation with other enterprises;”.
Thus, if the draft amendment to Circular No. 16/2021/TT-NHNN is approved, credit institutions may not purchase corporate bonds in the following cases:
- One of the purposes of issued corporate bond is to restructure debts of the issuer;
- One of the purposes of issued corporate bond is to purchase shares, contribute capital, and/or cooperate with other enterprises;
- One of the purposes of issued corporate bond is to increase working capital.
- One of the purposes of issued corporate bond is for business cooperation, investment cooperation with other enterprises.
Proposing to amend internal regulations and responsibilities of credit institutions in purchasing corporate bonds in Vietnam?
Proposed content of amendments and supplements to internal regulations and responsibilities of credit institutions in purchasing corporate bonds in Vietnam in Clause 2, Article 1 of the Draft Circular amending and supplementing a number of articles and ceases to be effective implement Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN, specifically as follows:
- Amending and supplementing Clause 3, Article 6 of Circular No. 16/2021/TT-NHNN on internal regulations:
+ Professional process and regulations on risk management for trading corporate bonds;
+ Specific criteria for determining the feasible option and specific criteria for determining the bond issuer has financial capacity to ensure full payment of bond principal and interest on time as prescribed at Point d. Clause 6, Article 4 of this Circular;
+ Specific regulations on appraisal, examination and supervision of the use of proceeds from bond issuance to ensure the appraisal and decision to buy corporate bonds, inspection and supervision of proceeds from the issuance of corporate bonds strictly, comply with the provisions of law, supervise the use of proceeds from the issuance of bonds by the issuer and the secured party.”.
- Amending and supplementing Clause 2, Article 7 of Circular No. 16/2021/TT-NHNN on responsibilities of credit institutions in purchasing corporate bonds as proposed in Clause 3, Article 1 of the Draft Circular Amending, supplementing a number of articles and stopping the effect of Clause 11 Article 4 of Circular No. 16/2021/TT-NHNN:
Credit institutions have the right and obligation to inspect and supervise the use of proceeds from bond issuance by the issuer to ensure that the proceeds from bond issuance are used for the right purposes in the plan, committed to credit institutions and according to internal regulations specified at Point c, Clause 3, Article 6 of Circular No. 16/2021/TT-NHNN;
In case it is discovered that the issuing enterprise or the security-receiving party has used the proceeds from the bond issuance for improper purposes in the plan or commitment with the credit institution, the credit institution shall request the issuing enterprise to purchase bonds before maturity.
See the entire Draft: Click here.
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