On 1 September 2011, the State Bank of Vietnam (SBV) issued Circular No. 28/2011/TT-NHNN (Circular 28) guiding the purchase of corporate bonds by credit institutions, finance companies and branches of foreign banks (collectively referred to as 'credit institutions').
To be eligible for such purchase, a credit institution must be set up and operating in accordance with the Law on Credit Institutions with its establishment and operating license issued by the SBV specifying its right to purchase corporate bonds.
Salient provisions of Circular 28 are discussed below.
Scope of application
The scope of application of Circular 28 is limited to the purchase of corporate bonds by credit institutions on the primary market within the territory of Vietnam, including the purchase by the credit institutions of corporate bonds not taken up by investors pursuant to the underwriting agreement with the issuer. Corporate bonds may be issued by way of either a private or public offering.
Conditions for credit institutions to purchase corporate bonds
To be permitted to purchase corporate bonds, a credit institution must:
Branches of foreign banks are not entitled to purchase convertible bonds.
Principles on purchase of corporate bonds
Corporate bonds are purchased according to the following principles:
Provisions for stock depreciation
Credit institutions must set up reserves and conduct risk handling pursuant to the guidelines of the Ministry of Finance for listed bonds and the guidelines of the SBV for unlisted bonds.
Orgnisation of implementation
Circular 28 requires credit institutions to issue their regulations on corporate bonds and send these regulations to the banking inspection bodies for the purpose of supervising their purchase of corporate bonds.
Corporate bonds purchased by credit institutions prior to the effective date of Circular 28 are allowed to be in circulation till the maturity date.
Circular 28 will come into effect on 20 October 2011.
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