Credit institutions can immediately redeem sold corporate bonds

VCN - The State Bank of Vietnam (SBV) is gathering comments on the draft Circular amending and supplementing a number of articles of Circular No. 16/2021/TT-NHNN regulating credit institutions and foreign bank branches on buying and selling corporate bonds.
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Amendments and supplements to legal regulations are expected to help remove difficulties for the corporate bond market. Photo: Internet
Amendments and supplements to legal regulations are expected to help remove difficulties for the corporate bond market. Photo: Internet

Accordingly, the draft amends Clause 4, Article 1 of Circular No. 16/2021/TT-NHNN to suit the specific activities of credit institutions participating in mandatory transfer.

Specifically, the trading of corporate bonds between specially-controlled credit institutions and credit institutions supporting and receiving mandatory transfer must follow the recovery plan and the restructuring plan for specially-controlled credit institutions approved by competent authorities.

In addition, the draft adds Clause 14, Article 4: Credit institutions must use non-cash payment services to pay the amount of purchased corporate bonds to the bond seller and issuer.

According to the State Bank, this regulation is intended to contribute to supporting the monitoring and supervision of the use of proceeds from corporate bond issuance, enhancing information transparency, and supporting the sustainable development of the corporate bond market; and complying with the Government's policy on promoting non-cash payments.

The SBV also proposed to abolish Clauses 11 and 12, Article 4, in which Clause 11 stipulates: “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 when a) All other requirements under this Article are satisfied; b) 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; c) 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” (Clause 11 of Article 4 is ineffective until December 31, 2023 according to Circular 03/2023/TT-NHNN).

The SBV believes that, a trading floor of privately placed corporate bonds has been operated and outstanding bonds must be registered, deposited and registered for trading according to the provisions of Decree No. 153/2020/ND-CP (amended and supplemented) to increase transparency and liquidity for privately placed corporate bonds.

In addition, when a credit institution redeems sold corporate bonds, it must comply with other regulations in Circular 16/2021/TT-NHNN similar to when a credit institution purchases bonds for the first time. Therefore, the SBV abolishes this regulation in Circular 16/2021/TT-NHNN and Circular 03/2023/TT-NHNN without extending the effective suspension period.

The draft also provides regulations on transitional provisions to create conditions for credit institutions and customers to continue implementing the contents of signed contract of corporate bond trading in accordance with effective legal regulations at the time of signing that contract or amendments and supplements to the above contract from the effective date of this Circular.

Previously, on April 23, 2023, the SBV issued Circular 03/2023/TT-NHNN stipulating the suspension of enforcement of regulations in Clause 11, Article 4 of Circular No. 16/2021/TT-NHNN until December 31, 2023 to increase liquidity, contributing to supporting the corporate bond market.

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VCN - According to preliminary statistics, about 20 credit institutions and foreign bank branches (CIs) have publicly ...

SBV believes that the amendments and supplements to Circular No. 16/2021/TT-NHNN are necessary and should be issued soon to contribute to solving difficulties in the current context of the corporate bond market.

By Huong Diu/ Huyen Trang

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