Hanoi, Vietnam: Corporate bond purchase limit of credit institutions in Vietnam from August 12, 2024

Corporate bond purchase limit of credit institutions in Vietnam from August 12, 2024

• The total balance of corporate bond purchases (including bonds issued by the enterprise and related parties of that enterprise) is counted towards the total credit limit for a single customer, or a customer and its related parties as stipulated in the Law on Credit Institutions 2024 and the regulations of the State Bank of Vietnam on limits and safety ratios in the operations of credit institutions.

• Credit institutions shall specify detailed limits on the purchase of corporate bonds: Bonds issued by a single enterprise; bonds issued by a single enterprise and its related parties; secured corporate bonds; unsecured corporate bonds; corporate bonds available for sale; corporate bonds held to maturity; corporate bonds for trading.

Responsibilities of credit institutions in Vietnam in corporate bond purchase from August 12, 2024

• Assess compliance with the principles stipulated in Article 4 of Circular 16/2021/TT-NHNN to consider the decision to purchase corporate bonds.

• Monitor and supervise the use of funds raised from bond issuance by the issuing enterprise; if the issuing enterprise is found to misuse the funds, contrary to the plan or commitment with the credit institution, the credit institution must request the issuing enterprise to buy back the bonds before maturity.

• Require the issuing enterprise to pay the principal and interest of the bonds when due. In case the issuing enterprise is unable to pay the bond principal and interest when due or fails to buy back the bonds before maturity as committed in point c, clause 6, Article 4 of Circular 16/2021/TT-NHNN, the credit institution shall proceed with the handling, and recovery of the bond principal and interest.

• During the bond-holding period, at least every 06 months, the credit institution shall evaluate the business performance of the issuing enterprise, assess the financial situation, and the ability of the enterprise to pay the bond principal and interest.

• Address arising issues in the process of purchasing corporate bonds in compliance with relevant legal regulations to ensure the ability to recover the bond principal and interest.

More details can be found in Circular 11/2024/TT-NHNN, effective in Vietnam from August 12, 2024.

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