Hanoi, Vietnam: Amendments to regulations on corporate bond trading of credit institutions and branches of foreign banks

Amendments to regulations on corporate bond trading of credit institutions and branches of foreign banks in Vietnam (Internet image)

Amendments to Regulations on corporate bond trading of credit institutions and branches of foreign banks in Vietnam

According to Article 1 of Circular 11/2024/TT-NHNN amending Circular 16/2021/TT-NHNN regarding corporate bond trading of credit institutions and branches of foreign banks issued by the State Bank of Vietnam:

* Amending the Scope of Regulation

Amending Clause 4 Article 1 of Circular 16/2021/TT-NHNN on the scope of regulation:

The purchase and sale of corporate bonds between credit institutions under special control and the supporting credit institutions, and the mandatory transferee shall be implemented according to the restructuring plan of the credit institution under special control approved by the competent authority.

* Supplementing Regulations on the Principles of corporate bond trading

Supplementing Clauses 14 and 15 into Article 4 of Circular 16/2021/TT-NHNN on principles of corporate bond trading as follows:

** Supplementing Clause 14 Article 4 of Circular 16/2021/TT-NHNN

The issuing firm must provide the credit institution with information about related persons as stipulated in the Law on Credit Institutions before the credit institution purchases the corporate bonds. A related person of the issuing enterprise is an organization or individual with a relation to the issuing enterprise as defined in Clause 24 Article 4 of the Law on Credit Institutions.

Information on related persons who are individuals includes: full name; personal identification number; nationality, passport number, date of issue, place of issue for foreigners; relationship with the issuing enterprise.

Information on related persons who are organizations includes: name, business registration number, headquarters address, business registration certificate number or equivalent legal document; legal representative, relationship with the issuing enterprise.

** Supplementing Clause 15 Article 4 of Circular 16/2021/TT-NHNN

Credit institutions must use non-cash payment methods when making payments in the buy-sell activities of corporate bonds as per the law on non-cash payments.

* Amending regulations on Responsibilities of credit institutions in corporate bond trading

Amending Clause 2 Article 7 of Circular 16/2021/TT-NHNN on the responsibilities of credit institutions when purchasing corporate bonds as follows:

Monitor and supervise the utilization of funds raised from the bond issuance of the issuing enterprise; if the issuing enterprise is found to use the raised funds inappropriately from the bond issuance contrary to the plan or commitments with the credit institution, the credit institution shall request the issuing enterprise to repurchase the bonds before maturity. If the issuing enterprise does not repurchase the bonds ahead of time as committed and requested by the credit institution, the credit institution shall handle and recover the principal and interest of the bonds according to the law.

* Amending Provisions on Limits of purchasing corporate bonds

Amending Clause 1 Article 8 of Circular 16/2021/TT-NHNN on the limits of purchasing corporate bonds:

The total outstanding balance of corporate bond purchases (including bonds issued by the enterprise and its related persons) is calculated into the total credit limit for a single customer and for one customer and their related persons under the Law on Credit Institutions and regulations of the State Bank of Vietnam on limitations and safety ratios in the operations of credit institutions.

* Replacing phrases and annulling of certain regulations of Circular 16/2021/TT-NHNN

According to Article 2 of Circular 11/2024/TT-NHNN:

• Replace the phrase "Law on Credit Institutions (as amended and supplemented)" in Clause 1 Article 2, Clauses 2 and 4 Article 4, Clause 1 Article 6 of Circular 16/2021/TT-NHNN with the phrase "Law on Credit Institutions."

• Annul Clauses 11 and 12 Article 4 of Circular 16/2021/TT-NHNN on principles of corporate bond trading.

Circular 11/2024/TT-NHNN is effective in Vietnam from August 12, 2024.

Le Nguyen Anh Hao

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE