To allow credit institutions in Vietnam to purchase corporate bonds from April 24, 2023

To allow credit institutions in Vietnam to purchase corporate bonds from April 24, 2023 (Internet image)

The State Bank of Vietnam issued Circular 03/2023/TT-NHNN dated April 23, 2023 stipulating the suspension of the implementation of Clause 11 Article 4 of Circular 16/2021/TT-NHNN on credit institutions and branches. Foreign banks buy and sell corporate bonds.

To allow credit institutions in Vietnam to purchase corporate bonds from April 24, 2023 

During the period of suspension of implementation of Clause 11 Article 4 of Circular 16/2021/TT-NHNN from April 24, 2023 to the end of December 31, 2023, credit institutions may redeem unlisted corporate bonds sold by credit institutions and/or unlisted corporate bonds issued in the same lot/same tranche as unlisted corporate bonds sold by credit institutions when:

- All other requirements under Article 4 of Circular 16/2021/TT-NHNN are satisfied;

- The buyer of the corporate bonds from the credit institution must settle all corporate bond purchase expenses when the credit institution signs contract for selling corporate bonds to the buyer;

- The issuer is at the highest rating according to the latest internal credit rating system prior to the date on which the credit institution purchases their corporate bonds.

Contents of the regulation on termination of effect on the purchase and sale of corporate bonds by credit institutions in Vietnam

Specifically, Circular 03/2023/TT-NHNN ceases to be effective, Clause 11 Article 4 of Circular 16/2021/TT-NHNN with the following provisions:

Within 12 months from the date on which a credit institution sells corporate bonds that are unlisted on securities market or unregistered on Upcom trading system (hereinafter collectively referred to as “unlisted corporate bonds”), the credit institution is not allowed to purchase sold unlisted corporate bonds and/or purchase unlisted corporate bonds issued in the same batch/period as the sold unlisted corporate bonds.

After 12 months from the date on which a credit institution sells unlisted corporate bond, the credit institution is only allowed to purchase sold unlisted corporate bonds and/or unlisted corporate bonds issued in the same batch/period as the sold unlisted corporate bonds when:

- All other requirements under Article 4 of Circular 16/2021/TT-NHNN are satisfied;

- The buyer of the corporate bonds from the credit institution must settle all corporate bond purchase expenses when the credit institution signs contract for selling corporate bonds to the buyer;

- The issuer is at the highest rating according to the latest internal credit rating system prior to the date on which the credit institution purchases their corporate bonds.

The above provisions will cease to be effective from April 24, 2023 to the end of December 31, 2023.

Corporate bond eligible for trading in Vietnam

According to Article 5 of Circular 16/2021/TT-NHNN, a corporate bond is eligible for trading when all requirements below are satisfied:

- The corporate bond is issued in accordance with regulations and law.

- The corporate bond is issued in VND.

- The corporate bond is under legal ownership of the seller, has not reached maturity which requires payment of both principal and interest, is not subject to any dispute, is allowed to be traded as per the law, is not under forward contract or discount contract or rediscount contract as guaranteed by the seller (except for cases where a credit institution purchases corporate bond to sell for the first time).

Circular 03/2023/TT-NHNN takes effect from April 23, 2023

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