Terms and conditions of bonds and special bonds of Vietnam Asset Management Company in 2020

According to Clause 4 Article 1 of Circular No. 32/2019/TT-NHNN of the State Bank of Vietnam amending Article 11 of Circular No. 19/2013/TT-NHNN, terms and conditions of bonds and special bonds are specified as follows:

- The face value of a bond is equal to the purchase price of the bad debt. The face value of a special bond equals the purchase price of the bad debt according to Clause 1 Article 14 of Decree No. 53/2013/ND-CP of Vietnam’s Government;

- If the purchased bad debt is a syndicated loan, the face value of bonds/special bonds issued to each of the credit institutions that provide the syndicated loan will be:

+ The book value of outstanding principal of the bad debt after deducting the unused reserve for such bad debt which is monitored by the credit institution that provides the syndicated loan in case VAMC purchases the bad debt with special bonds;

+ The purchase price of bad debt shall be determined according to the holding of each of the credit institutions that provide the syndicated loan if VAMC purchases bad debts at market prices with bonds.

Some notable provisions on bonds and special bonds of VAMC:

- Bonds and special bonds are issued in VND.

- Bonds may be transferred between SBV and credit institutions and among credit institutions. Special bonds may not be transferred. Bonds and special bonds are issued in the form of book entries or identified electronic data or registered certificates. VAMC shall decide the forms of bonds and special bonds.

- The interest rate of bonds and special bonds is 0%.

Besides, the duration of bonds and special bonds is as follows:

- VAMC and the debt-selling credit institution shall reach an agreement on the duration of bonds, which is at least 01 year. If the collected debt is not sufficient to pay the bonds when they mature, VAMC shall extend the duration of bonds for up to 03 more years. The extension of the duration of bonds for more than 03 years requires the consent by the entity that owns the bonds. VAMC is not allowed to extend the duration of bonds used for performing open market operations;

- The maximum duration of special bonds is 05 years. In case special bonds are issued to purchase bad debts of credit institutions that are undergoing restructuring or having financial difficulties, the maximum duration of special bonds shall be 10 years.

In particular, bonds and special bonds must be deposited at SBV in accordance with SBV’s regulations on depositing of financial instruments, and used in refinancing transactions with SBV.  Bonds are used for open market operations as prescribed by law. Bonds and special bonds must be deposited at SBV free of charge.

Credit institutions holding bonds are not required to make provisions for bond-related risks.

View relevant provisions at Circular No. 32/2019/TT-NHNN of the State Bank of Vietnam effective from February 14, 2020.

Thu Ba

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