03 CASES IN WHICH CREDIT INSTITUTIONS ARE NOT ALLOWED TO PURCHASE CORPORATE BONDS
On November 10, 2021, the State Bank of Vietnam issues the Circular No. 16/2021/TT-NHNN prescribing the purchase and sale of corporate bonds by credit institutions and foreign bank branches.
According to the Circular, corporate bonds eligible for purchase and sale transactions must fully meet the following requirements: Corporate bonds are issued in accordance with the law; Corporate bonds are issued in Vietnam dong; Corporate bonds are under the legal ownership of the sellers, are not yet mature for principal and interest payment, and the sellers commit that corporate bonds are not in dispute, are permitted for transactions under law provisions, are not in a state of being traded with a term, discounted or rediscounted.
Besides, a credit institution may purchase corporate bonds only when its non-performing loan ratio is under 3% according to the latest classification period under the State Bank of Vietnam’s regulations on the classification of assets, risk provisioning levels and methods and use of provisions for handling risks in operations of credit institutions before purchasing corporate bonds.
Also, a credit institution is not allowed to purchase corporate bonds in the following cases: Corporate bonds issued to restructure debts of the bond-issuing enterprise; Corporate bonds issued to contribute capital or purchase shares at other enterprises; Corporate bonds issued to raise its working capital.
This Circular takes effect on January 15, 2022.
