Vietnam: What are the regulations on Government Bonds? What is the par value of Government bonds?
What is the par value of Government bonds in Vietnam?
Based on the provisions of Clause 1 Article 2 of Decree 01/2011/ND-CP , Government bonds are bonds issued by the Ministry of Finance to mobilize capital for the state budget or mobilize capital for specific investment programs and projects within the scope of state investment.
Pursuant to Clause 2, Article 14 of Decree 95/2018/ND-CP, the par value of Government bonds is recorded as follows:
- Government bonds have a face value of one hundred thousand (100,000) VND or a multiple of one hundred thousand (100,000) VND.
Vietnam: What are the regulations on Government Bonds? What is the par value of Government bonds?
In what form are Government Bonds issued in Vietnam?
According to the provisions of Clause 4 Article 14 of Decree 95/2018/ND-CP on the form of issuance of Government bonds as follows:
Terms and conditions of Government bonds
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4. Form of Government bonds
a) Government bonds are issued in the form of certificates, bookkeeping entries or electronic data depending on the method of issuance.
b) The issuer shall make a specific decision on the form of Government bonds for each issuance.
Accordingly, Government bonds can be issued in the following form: Certificates, book entries or electronic data.
In addition, according to the provisions of Clause 1, Clause 3, Clause 5, Clause 6, Article 14 of Decree 95/2018/ND-CP on Government bonds:
- Regarding the maturity of Government bonds:
+ Government bonds have standard tenors of 3 years, 5 years, 7 years, 10 years, 15 years, 20 years, 30 years and 50 years.
+ Other maturities of Government bonds shall be decided by the Minister of Finance in each period.
- The currency of issuance and payment is Vietnamese dong. In case of issuance of Government bonds in the domestic market in foreign currencies, the issuing and payment currencies are freely convertible foreign currencies according to the provisions of foreign currency bonds.
- Regarding the method of payment of interest and principal of Government bonds:
+ Interest is paid periodically every 06 months, or every 12 months, or paid 01 time on the due date along with the principal payment. The issuer shall specifically notify the method of payment of bond interest for each issuance.
+ The principal is paid 01 time on the maturity date or paid ahead of time according to the notice of the issuer for each issuance.
How are Government Bonds issued in Vietnam?
According to the provisions of Clause 7 Article 14 of Decree 95/2018/ND-CP on the method of issuing Government bonds as follows:
Terms and conditions of Government bonds
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7. Method of issuance: Government bonds are issued by the method of bidding for issuance, underwriting and private issuance as prescribed in Articles 15, 16 and 17 of this Decree.
According to the above provisions, the method of issuing Government bonds includes:
Bidding for government bond issuance is specified in Article 15 of Decree 95/2018/ND-CP as follows:
- Issuance bidding is a method of selling Government bonds through bidding organizations for interest rates for bond buyers.
- Principles of organizing bidding:
+ Keep confidential all bid information of bidders.
+ Publicly and equally perform rights and obligations between bidders.
- Bidders:
+ Regulated market maker.
+ Subjects entitled to buy Government bonds by bidding method through market makers include: Domestic and foreign organizations and individuals may buy Government debt instruments in unlimited amounts, unless otherwise provided for by law;
Securities investment funds and voluntary pension funds may purchase government debt instruments through trusts to fund management organizations;
Non-budget state financial funds may purchase debt instruments of the Government in accordance with relevant laws.
- The form of bidding is carried out in one of the following two forms:
+ Competitive bidding for interest rates;
+ Bidding combines interest rate competition and non-interest rate competition. In case the bidding session is held in this form, the total volume of bonds issued without competing interest rates shall not exceed 30% of the total volume of bonds called for tender in the bidding session.
- The determination of bidding results is carried out according to either single-price bidding or multi-price bidding methods. Based on the development of the market, the Ministry of Finance decides on the method of unit-price bidding or multi-price bidding in each period.
- The issuer directly organizes the bidding for Government bonds or organizes bidding through the Stock Exchange in accordance with the regulations of the Ministry of Finance.
Government bond underwriting is specified in Article 16 of Decree 95/2018/ND-CP as follows:
- Underwriting is a method of selling Government bonds through an underwriting complex including:
+ Main guarantor organization and/or main co-guarantor organizations;
+ Underwriting organizations and/or co-underwriting organizations.
- Conditions for being the main guarantor organization:
+ Financial institutions with the function of providing securities guarantee services in accordance with the provisions of law legally established and operating in Vietnam;
+ Experience in the field of securities guarantee;
+ Have a feasible underwriting plan that meets the requirements of the issuer's subject for each issuance.
- Bond underwriting process:
+ Based on the requirements of each underwriting period, the conditions of the main underwriter, the State Treasury selects the main guarantor/co-guarantor organization for each underwriting.
The main underwriter/co-guarantor shall select the underwriter/co-underwriter and report it to the State Treasury for approval.
+ The State Treasury provides basic information about the issuance to organize the main guarantee / main co-guarantee and the guarantee complex to find investors.
The content of providing information includes: expected volume of issuance, expected term of issuance, interest rate orientation for each issuance term, expected time of issuance.
+ The main guarantor/co-guarantor organization and members of the guarantee complex summarize the investor's demand for buying bonds, including: expected purchase volume, solid purchase volume and expected interest rate for each term sent to the State Treasury.
+ The State Treasury shall negotiate with the main guarantor/co-guarantor organization on the volume, conditions and terms of the bond (maturity, interest rate on issuance date, date of payment of bond purchase, bond selling price), guarantee costs and other related contents.
+ Based on the results of negotiations with the main guarantor/co-guarantor, the State Treasury signs an underwriting contract with the main guarantor/co-guarantor to sell bonds.
Underwriting contracts are legal bases confirming the rights and obligations of the main guarantor/co-guarantor; rights and obligations of the State Treasury.
+ The main guarantor/co-guarantor organization and the guarantee complex are responsible for distributing bonds as committed in the guarantee contract. In case of failure to distribute all bonds, the main guarantor/co-guarantor organization and the guarantee complex are responsible for buying up the remaining volume.
+ At the end of the underwriting, the State Treasury issues Government bonds to investors according to the list provided by the main guarantor/co-guarantor.
Private issuance of Government bonds as prescribed in Article 17 of Decree 95/2018/ND-CP:
- Individual issuance is a method of direct sale of Government bonds to each buyer.
- The State Treasury shall formulate a plan to issue Government bonds in an individual manner and report it to the Ministry of Finance for approval. The individual release plan includes the following basic contents:
+ Subjects of bond purchase;
+ Expected volume of release;
+ Bond maturity;
+ Expected interest rate;
+ Estimated time of release.
- On the basis of the individual issuance plan approved by the Ministry of Finance, the State Treasury shall issue a decision on bond issuance and directly issue and pay bond principal and interest for each issuance.
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