This is one of the principles of buying and selling corporate bonds stated at Circular 16/2021/TT-NHNN on November 2021 stipulates the purchase and sale of corporate bonds by credit institutions and foreign bank branches.
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Credit institutions are only allowed to buy corporate bonds when their bad debt is below 3% (Artwork)
Specifically, a credit institution is only allowed to buy corporate bonds when that credit institution has a bad debt ratio of less than 3% according to the latest classification period according to the regulations of the State Bank of Vietnam on the classification of assets, level of deduction, method of setting up risk provisions and use of provisions to handle risks in operations for credit institutions before the time of purchase of corporate bonds.
(Currently, Circular 22/2016/TT-NHNN and Circular 15/2018/TT-NHNN of Vietnam do not stipulate this content).
In addition, credit institutions may only purchase corporate bonds when:
- Corporate bonds must meet the following requirements:
+ Are corporate bonds issued in accordance with the provisions of law.
+ Issued in Vietnamese Dong.
+ Under the legal ownership of the seller, the principal and interest have not been paid yet, and the seller commits that the corporate bond is free of dispute, is allowed to be traded in accordance with the law, and is not in a state of being term trading, discounting, rediscounting (except for the case where credit institutions buy corporate bonds issued for the first sale).
- The purpose of using the proceeds from the bond issuance of the enterprise is lawful and consistent with the bond issuance plan and/or capital use plan, the proceeds from the offering, the approved issuance approved in accordance with the law;
- The issuer commits to redeem bonds before maturity when:
+ The issuer changes the purpose of using proceeds from the bond issuance while the credit institution holds the bond;
+ The issuer violates the law of Vietnam on corporate bond issuance;
+ The issuing enterprise violates the plan.
- The feasible plan and the bond issuer has the financial capacity to ensure full payment of bond principal and interest on time;
- The issuing enterprise has no bad debt at credit institutions within the last 12 months before the time the credit institution buys corporate bonds.
In addition to meeting the above provisions, credit institutions may only buy corporate bonds that the issuing enterprise has changed the purpose of using proceeds from bond issuance in accordance with the law before the time the credit institution is issued. Buy bonds when the bond issuer is rated at the highest level according to the credit institution's internal credit rating regulations at the latest time.
In addition, Circular 16/2021 of Vietnam also stipulates cases where credit institutions are not allowed to buy corporate bonds, including:
- Corporate bonds issued with the purpose to restructure the debts of the issuing enterprises;
- Corporate bonds issued for the purpose of contributing capital or buying shares in other enterprises;
- Corporate bonds issued with the purpose to increase the size of operating capital.
Especially, a credit institution is not allowed to sell corporate bonds to a subsidiary of that credit institution, unless the credit institution is the transferee and is forced to sell corporate bonds to the bank. compulsory transfer of commerce.
Circular 16/2021/TT-NHNN of Vietnam takes effect from January 15, 2022.
Bao Ngoc
- Key word:
- sale of corporate bonds in Vietnam
