Draft Amendment to Circular 16

There are five main changes in the draft circular:

1) For credit institutions to buy corporate bonds, the debt-to-equity ratio (post-bond issuance) of the issuer must not exceed 5 times.

2) Credit institutions cannot buy C.bonds if the relevant funds are intended for business and investment cooperation with other companies.

3) An additional three provisions appear to be targeted at restricting the use of cash when banks purchase new C.bond issuances directly. We believe the provisions include requirements for banks to manage issuer revenues and to ensure that the funds raised from bond issuance are used for the purposes stated in the issuance documents.

4) Credit institutions investing in C.bonds would have both the right and obligation to supervise the relevant bond issuance proceeds to ensure that the issuers use the funds for the intended purposes.

5) The prohibition on banks repurchasing C.bonds that they have sold within the prior 12M would be suspended until end-2023.

For the complete report, please access here: Bank_Sector_Circular 16 Amendment (Draft)_Mar 28

Analyst: Tanh Tran, tanh.tran@yuanta.com.vn