Ticker

6/recent/ticker-posts

Header Ads Widget

Tightening regulations for banks to buy and sell corporate bonds

The State Bank of Vietnam (SBV) has just issued Circular No. 16/2021/TT-NHNN stipulating the purchase and sale of corporate bonds by credit institutions and foreign bank branches.


The Circular clearly stipulates that credit institutions are not allowed to buy corporate bonds in the following cases:

Firstly, credit institutions are not allowed to buy corporate bonds issued with the purpose to restructure the debts of the issuing enterprises themselves.



Second, credit institutions are not allowed to buy corporate bonds issued with the purpose of contributing capital or buying shares in other enterprises.


Third, credit institutions are not allowed to buy corporate bonds issued with the purpose to increase the size of operating capital.

In addition, the Circular also stipulates that credit institutions are not allowed to sell corporate bonds to subsidiaries of that same credit institution, unless the credit institution being the transferee is forced to sell corporate bonds to the commercial bank to be transferred. Obligatory.


Notably, credit institutions are only allowed to buy corporate bonds when the bad debt ratio is less than 3% according to the latest classification period according to the regulations of the State Bank on classification of assets, deduction level, method of making provision for risks. and the use of provisions to handle risks in operations for credit institutions before the time of purchasing corporate bonds.


The total balance of purchase of corporate bonds shall be included in the total outstanding credit for a customer and related persons according to the provisions of Article 128 of the Law on Credit Institutions (amended and supplemented) and regulations of the State Bank on safety limits and ratios in the operation of credit institutions.


For corporate bonds that have been listed on the stock market or registered for trading on the UPCoM trading system, credit institutions shall make and use provisions for risks in accordance with the law on setting up and handling provisions for devaluation of inventory, loss of investments, bad debts and warranties for products, goods, services and construction works at the enterprise.





For unlisted corporate bonds, credit institutions shall classify, make provision for risks, and handle risks for the balance of purchase of corporate bonds in accordance with the State Bank's regulations on classification of assets, level of credit deductions, methods of setting up risk provisions and use of provisions to deal with risks in the operation of credit institutions.



Relaet post:

Post a Comment

0 Comments