Thông tư 16/2021/TT-NHNN

CIRCULAR

ON CORPORATE BOND TRADING OF CREDIT INSTITUTIONS AND BRANCHES OF FOREIGN BANKS

Pursuant to the Law on State Bank of Vietnam dated June 16, 2010;

Pursuant to Law on Credit Institutions dated June 16, 2010 and Law on amendments to a number of Articles of the Law on Credit Institutions dated November 20, 2017;

Pursuant to the Law on Securities dated November 26, 2019;

Pursuant to Law on Enterprises dated June 17, 2020;

Pursuant to Decree No. 153/2020/ND-CP dated December 31, 2020 of the Government on private placement and trading of privately placed corporate bonds in domestic market and offering of corporate bonds in international market;

Pursuant to Decree No.155/2020/ND-CP dated December 31, 2020 of the Government on elaborating to Law on Securities;

Pursuant to Decree No. 16/2017/ND-CP dated February 17, 2017 of the Government on functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

At the request of Director of the Monetary Policy Department;

Governor of State Bank of Vietnam promulgates Circular on corporate bond trading of credit institutions and branches of foreign banks.

Article 1. Scope

1. This Circular prescribes corporate bond trading of credit institutions and branches of foreign banks within the territory of the Socialist Republic of Vietnam.

2. This Circular does not prescribe trading of corporate bond issued by credit institutions; trading of corporate bond issued by Single-member Limited liability Vietnam Asset Management Company; purchase of corporate bond in form of discount; trading of corporate bond between credit institutions, branches of foreign banks under forward contracts; trading of corporate bond issued in international market; trading of corporate bond in form of rediscount.

3. Corporate bond trading of credit institutions placed under special control shall conform to decision of State Bank of Vietnam for each credit institution placed under special control.

4. Corporate bond trading between credit institutions under special control and assisting credit institutions shall conform to solutions for recovering credit institutions under special control approved by competent authority.

Article 2. Regulated entities

1. Credit institutions and branches of foreign banks (hereinafter collectively referred to as “credit institutions”) which are established and operating according Law on Credit Institutions (amended).

2. Bond issuing enterprises which are joint-stock companies and limited liability companies which are established and operating according to regulations and law of Vietnam.

3. Other individuals and organizations related to the trading of corporate bond under this Circular.

Article 3. Term interpretation

In this Circular, terms below are construed as follows:

1. “corporate bond” is a type of debt security with a term to maturity of at least 01 year, issued by an enterprise to confirm the bondholder's legitimate rights and interests over a part of its debts.

2. “convertible bond” means a type of bonds which are issued by a joint-stock company and can be converted into a number of common shares of the issuer under terms and provisions predetermined in the bond issuance plan.

3. “secured bond” means a type of bonds whose principal and interest payments, when they become due, are entirely or partially secured by a specific asset of the issuer or a third party in accordance with law regulations on secured transactions, or guaranteed in accordance with regulations of law.

4. “warrant-linked bonds” means a type of bonds which are issued by a joint-stock company with warrants that entitle bondholders to buy a specific number of common shares of the issuer under terms and provisions predetermined in the bond issuance plan.

5. “corporate green bond” means a corporate bond issued to raise funds for environmental protection projects or projects that generate environmental benefits in accordance with regulations and law on environmental protection.

Article 4. Corporate bond trading principles

1. Credit institutions may trade corporate bond in accordance with corporate bond trading provisions under the Permit issued by the State Bank of Vietnam.

2. Corporate bond trading of credit institutions must conform to the amended Law on Credit Institutions, Law on Securities, Law on Enterprises, this Circular, and relevant law provisions.

3. Credit institutions that trade corporate bond must have available internal credit rating system and must promulgate internal regulations on corporate bond trading in accordance with this Circular and relevant law provisions.

4. Credit institutions that purchase convertible bond or warrant-linked bonds must comply with the amended Law on Credit Institutions, guidelines of State Bank of Vietnam on capital contribution and share purchase, and relevant law provisions.

5. A credit institution is only allowed to purchase corporate bond when their non-performing loan ratio is less than 3% in the latest classification according to regulations of the State Bank of Vietnam on classification of existing assets, amount of risk provisions, methods of setting up risk provisions, and the use of risk provisions in operations of credit institutions prior to the day of corporate bond purchase.

6. A credit institution is only allowed to purchase corporate bond when:

a) Corporate bond satisfies Article 5 hereof;

b) Use purpose of revenues generated from corporate bond issue is legitimate and compliant with bond issuance plans and/or plans for utilizing capital, revenues generated from bond offering and issuance approved as per the law (hereinafter collectively referred to as “plans”);

c) Issuer guarantees to redeem bond before maturity when: The issuer repurposes revenues generated from bond issuance during the period in which credit institutions hold the bond; the issuer violates regulations and law on issuance of corporate bond; the issuer violates the plans;

d) The plans are feasible and the issuer is financially capable in order to settle both principal and interest of the bond adequately;

dd) The issuer has no non-performing loan in credit institutions in the last 12 months prior to the date on which credit institutions purchase corporate bond.

7. In addition to satisfying other regulations under this Article, credit institutions are only allowed to purchase corporate bond whose issuer has repurposed revenues generated by bond issuance as per the law prior to the date on which credit institutions purchase corporate bond if the issuer is at the highest rating according to the latest internal credit rating system of the credit institutions.

8. A credit institution is not allowed to purchase corporate bond when:

a) One of the purposes of issued corporate bond is to restructure debts of the issuer;

b) One of the purposes of issued corporate bond is to contribute capital and/or purchase share in other enterprises;

c) One of the purposes of issued corporate bond is to increase working capital.

9. A credit institution is not allowed to sell corporate bond to their subsidiaries, except for cases where the credit institution which acts as the agent in a mandatory transfer is required to sell corporate bond to a financial institution which acts as the receiver in a mandatory transfer.

10. Branches of foreign banks are not allowed to purchase convertible bonds or warrant-linked bonds.

11. 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:

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.

12. Clause 11 of this Article does not apply to corporate bond trading between a financial institution which acts as the receiver of a mandatory transfer and a party which acts as the agent of a mandatory transfer, and corporate bond sale under a forward contract.

13. The currency used in corporate bond trading is VND.

Article 5. Corporate bond eligible for trading

A corporate bond is eligible for trading when all requirements below are satisfied:

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

2. The corporate bond is issued in VND.

3. 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).

Article 6. Internal regulations

1. Pursuant to the amended Law on Credit Institutions, this Circular, and relevant law provisions, credit institutions shall promulgate and, on an annual basis, review internal regulations on corporate bond trading depending on management model, operating activities, and prudence of credit institution operation (hereinafter referred to as “internal regulations”).

2. Internal regulations must clarify responsibilities and obligations of each entity and individual involved in corporate bond trading.

3. Internal regulations must contain operational procedures and risk management regulations for corporate bond trading.

4. Pursuant to this Circular and relevant law provisions, within 10 working days from the date on which credit institutions promulgate and amend internal regulations on corporate bond trading:

a) Credit institutions shall send their internal regulations to the State Bank of Vietnam (via Bank Supervision and Inspection Agency), except for cases under Point b of this Clause;

b) Credit institutions that are subject to microprudential supervision and inspection of branches of State Bank of Vietnam of provinces and central-affiliated cities shall send their internal regulations to the respective branches of State Bank of Vietnam.

Article 7. Responsibilities of credit institutions in purchasing corporate bonds

1. Inspect fulfillment of principles under Article 4 hereof.

2. Monitor and supervise the use of revenues generated by corporate bond issuance of the issuers; in case the issuers are found to be using revenues generated by corporate bond issuance incorrectly according to the plans and commitment with credit institutions, credit institutions shall request the issuers to repurchase corporate bonds under forward contracts.

3. Request the issuers to settle both principal and interest of corporate bonds when the bonds reach maturity. In case the issuers are incapable of settling principal or interest of corporate bonds that reach maturity or when the issuers fail to repurchase corporate bonds under forward contracts according to commitment under Point c Clause 6 Article 4 hereof, credit institutions shall collect principal and interest of corporate bonds.

4. During the period in which credit institutions are holding corporate bonds, the credit institutions must assess business operations of the issuers, financial situations, and the ability to settle corporate bond principal and interest of the issuers at least once every 6 months.

5. Deal with issues that arise during the process of trading corporate bonds in accordance with relevant law provisions in order to guarantee the ability to recover principal and interest of corporate bonds.

Article 8. Corporate bond purchase limit

1. The total corporate bond purchase balance shall be included in total amount of credit extended of a customer or a customer and a related person according to Article 128 of the amended Law on Credit Institutions and regulations of the State Bank of Vietnam on prudential limits and ratios in operations of credit institutions.

2. Credit institutions shall elaborate on corporate bond purchase limits: Corporate bonds of an issuer; corporate bonds of an issuer and a related person; secured bonds; non-secured bond; readily marketable bonds; bonds held until maturity; corporate bonds being traded.

Article 9. Classification, setting up for risk provisions, and risk control, management of corporate bond purchase balance

1. For corporate bonds that have been listed on securities market or have been registered for trading on the Upcom trading system, credit institutions shall set up and utilize risk provisions in accordance with regulations and law on setting up and utilizing provision against devaluation of inventory, losses of investment, bad debts, and warranties of products, commodities, services, and constructions at enterprises.

2. For corporate bonds that have not been listed, credit institutions must classify, set up risk provisions, and control, manage risks for the corporate bond purchase balance in accordance with regulations of the State Bank of Vietnam regarding classification of existing assets, amount of risk provisions, methods of setting up risk provisions, and the use of risk provisions in operations of credit institutions.

Article 10. Record, accounting, statistics, and storage of documents on corporate bond trading

1. Credit institutions shall record any corporate bond trading in accordance with regulations and law on accounting.

2. Credit institutions shall product statistical reports on corporate bond trading, including corporate green bond in accordance with regulations of State Bank of Vietnam on statistical reporting regime of credit institutions.

3. Credit institutions shall store documents on corporate bond trading in accordance with regulations and law on storing credit documents.

Article 11. Transition clauses

For corporate bond trading contracts signed before the effective date hereof, credit institutions and customers continue to comply with signed corporate bond trading contracts in accordance with regulations and law applicable at the time of signing. Any detail of the contracts revised after the effective date hereof must conform to this Circular.

Article 12. Implementation

1. This Circular comes into force from January 15, 2022.

2. The following documents expire from the effective date hereof:

a) Circular No. 22/2016/TT-NHNN dated June 30, 20165 on corporate bond trading of credit institutions and branches of foreign banks;

b) Circular No. 15/2018/TT-NHNN dated June 18, 2018 on amendment to Circular No. 22/2016/TT-NHNN.

Article 13. Implementation

Chief of Office, Director of Financial Policy Department, heads of entities affiliated to State Bank of Vietnam, directors of branches of State Bank of Vietnam in provinces and central-affiliated cities, credit institutions, and foreign banks are responsible for organizing implementation of this Circular./.