On November 10, 2021, the State Bank of Vietnam issued Circular 16/2021/TT-NHNN stipulating the purchase and sale of corporate bonds by credit institutions and foreign bank branches.

Corporate bonds can be purchased and sold when they meet the following requirements: (i) Being corporate bonds issued in accordance with law; (ii) Issued in Vietnamese Dong; (iii) Under the legal ownership of the seller, the principal and interest have not been fully paid and repaid yet, and the seller commits that the corporate bond is free of dispute, is allowed to be traded in accordance with the law, is not under the forward, discount, or rediscount contract (save for the cases in which the credit institution purchases newly issued corporate bond).

A credit institution is only allowed to buy corporate bonds if it has an NPL ratio of less than 3% according to the latest classification period according to the regulations of the State Bank of Vietnam on the 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.

In addition, credit institutions may not purchase corporate bonds in the following cases: (i) One of the purposes of issued corporate bond is to restructure debts of the issuer; (ii) One of the purposes of issued corporate bond is to contribute capital and/or purchase share in other enterprises; (iii) One of the purposes of issued corporate bond is to increase working capital.

For corporate bond purchase agreements/subscription agreements entered into before the effective date of Circular 16, credit institutions and customers continue to comply with signed agreements in accordance with regulations and law applicable at the time of signing. Any detail of the contracts revised after the effective date thereof must conform to Circular 16.

Circular 16 takes effect from January 15, 2022.