Tightening laws on banks pouring capital into company bonds?

On September 1, Minister of Finance Ho Duc Phuc signed Official Letter No. 10059/BTC-VP to the Securities Fee, Division of Finance and Banking and the Vietnam Inventory Trade requesting to strengthen inspection work. , monitoring the company bond market.

Like many warnings over the previous time, the above dispatch of the Ministry of Finance clearly states: Lately, company bonds (Company bonds) have turn out to be a big and vital capital mobilization channel out there. Nonetheless, in addition to the constructive results on companies, the non-public placement of company bonds additionally exposes many dangers to buyers and poses the chance of inflicting insecurity and security of the nationwide monetary system.

To be able to strengthen the inspection and supervision of the company bond market, Minister Ho Duc Phuc requested the above clues to review and proceed to excellent the laws on administration and supervision of the company bond market; which focuses on constructing inspection and supervision measures, tightening the issuance of personal company bonds with out collateral or the standard of collateral and the repute of the issuer is low with the intention to goal the market. clear, secure and restricted threat.

On the identical time, the above focal factors strengthen and step up the inspection, examination and supervision of the issuance and provision of providers on particular person company bonds, particularly the issuance of small and new enterprises. established and operated in high-risk fields with unclear and substantive enterprise outcomes; concentrate on reviewing and detecting enterprises exhibiting indicators of violating or circumventing the provisions of the regulation within the issuance of company bonds.

On the identical time, various clues representing market contributors have submitted their feedback to the State Financial institution of Vietnam (SBV), a couple of draft that tends to tighten laws on pouring capital into this area of business banks. business (NHTM).

MULTIPLE PROHIBITIONS FOR COMMERCIAL BANKERS

Since 2020, the State Financial institution has issued a draft round regulating the acquisition and sale of company bonds by credit score establishments and international financial institution branches.

In response to a mirrored image from an trade affiliation, the brand new draft nonetheless retains most of the anticipated instructions of laws as set out in 2020 regardless of feedback, even including extra stricter provisions than these set out in 2020. with the earlier draft.

Briefly, the SBV goals to tighten the laws on credit score establishments pouring capital into this area, with many issues anticipated to be prohibited.

Particularly, credit score establishments are usually not allowed to borrow capital from different credit score establishments to purchase company bonds.

Credit score establishments are solely allowed to purchase company bonds when the dangerous debt ratio is beneath 3% in response to the latest audited monetary statements on the time of buy, aside from the case of buying company bonds below the restructuring plan. approval authority.

Credit score establishments might solely purchase and promote company bonds after they meet the protection limits and ratios as prescribed by regulation.

Credit score establishments are usually not allowed to purchase bonds (together with shopping for from preliminary issuance and shopping for again from different organizations and people) of issuers with dangerous money owed at shopping for credit score establishments and at different credit score establishments. inside the final 12 months previous to the choice to approve the acquisition.

Credit score establishments are usually not allowed to purchase company bonds which are issued for the aim of restructuring the money owed of the issuing enterprises themselves.

Credit score establishments are usually not allowed to purchase company bonds issued for the aim of contributing capital or shopping for shares in different enterprises.

A credit score establishment might not promote company bonds to its personal subsidiary, besides within the case of promoting company bonds to a subsidiary below an accredited restructuring plan…

STILL PROHIBITED LEARNING POINTS NOT PROHIBITED?

On behalf of credit score establishments, on the premise of gathering opinions from members, the Vietnam Banks Affiliation (VNBA) has additionally despatched a written remark to the State Financial institution of Vietnam, stating its views on many of the proposed laws talked about above.

As with the regulation that credit score establishments are usually not allowed to borrow capital from different credit score establishments to purchase company bonds, VNBA believes that the Legislation on Credit score Establishments doesn’t prohibit this exercise, so there is no such thing as a foundation to introduce such a ban. And the introduction of this prohibition just isn’t actually according to the precept of law-making.

In response to VNBA, credit score establishments mobilize capital from varied sources together with capital from individuals, organizations and monetary establishments (together with different credit score establishments) and conduct centralized capital administration. Concentrated capital is used for a lot of completely different functions comparable to funding, lending, debt compensation… and doesn’t separate the supply of capital formation when used.

“Due to this fact, the credit score establishment has no foundation to find out from which supply the capital used to buy company bonds is fashioned. Due to this fact, it’s proposed to take away this content material as a result of it’s not appropriate with the capital administration actions of the credit score establishment”, VNBA stated. request.

On the level of limiting the dangerous debt ratio to lower than 3% when shopping for company bonds, the consultant group of credit score establishments additionally recommended that it shouldn’t be utilized to basic monetary corporations, as a result of the traits of this group typically have excessive rates of interest. excessive dangerous debt ratio.

With the regulation that credit score establishments are usually not allowed to purchase company bonds, which have the aim to restructure the money owed of the issuing enterprises themselves, VNBA proposes to the Drafting Committee to outline extra clearly what’s “the aim of restructuring”. debt restoration” as a result of there may be at the moment no authorized doc with a definition on this subject. In Round 02/2013/TT-NHNN regulating the classification of property and provisioning for dangers… solely the definition of debt is structured and the compensation time period.

With the regulation that credit score establishments are usually not allowed to purchase company bonds issued through which the aim is to contribute capital or purchase shares in different enterprises, VNBA believes that “the aim of bonds to purchase shares and contributed capital is the needs just isn’t prohibited by regulation, neither is it an element affecting credit score high quality, so there is no such thing as a foundation to ban credit score establishments from shopping for bonds for this goal.” Due to this fact, VNBA additionally proposed the Drafting Board to think about eradicating this provision.

As well as, VNBA commented on many different content material factors within the draft of the State Financial institution and proposed to rethink.

Together with VNBA, on September 1, the Vietnam Bond Market Affiliation (VBMA) stated that it had additionally gathered the opinions of its members on the above draft and despatched particular feedback to it. SBV.

In response to VBMA, this draft round, if issued, can have a number of impacts on company bond funding actions of credit score establishments particularly and the company bond market on the whole.

Additionally in response to VBMA’s report, the whole worth of efficiently issued company bonds in 2020 is 368 trillion, up 24% in comparison with 2019. The excessive development charge continues to point out within the first 7 months of 2021, when the whole value worth reached VND 235,094 billion, up 35.8% over the identical interval in 2020.

Lam Giang

Enterprise life

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