Friday , July 19 2024

Banks allowed to repurchase bonds before one-year

Credit institutions are allowed to buy back corporate bonds before the previous 12-month waiting period, according to a new circular issued Monday by the State Bank of Vietnam,

According to an old circular from 2021, banks were only allowed to buy back unlisted corporate bonds 12 months after the bonds were issued.

The new circular, which will be in effect until Dec. 31, 2023, was issued after Prime Minister Pham Minh Chinh instructed the state bank to create more favorable conditions for banks to invest in corporate bonds. The move aims to increase supply and liquidity in order to develop a safe and efficient bond market.

The corporate bond market has experienced rapid growth over the last three years, with bond issuances totaling VND462 trillion (nearly $19.6 billion) in 2020 and VND658 trillion in 2021, according to data from the Vietnam Bond Market Association.

However, the market slowed down after arrests related to violations in bond issuance and improper use of capital by some large real estate firms in mid-2022.

Meanwhile, bond maturity pressure is increasing, with bonds due this year totaling nearly VND273 trillion, according to VNDirect Securities Corporation.

Many businesses, especially real estate companies, have failed to fulfil their obligations on principal and interest payments regarding corporate bonds.

Firms mobilized VND24.7 trillion from bond issuances in the first quarter of this year.

Early this month, the Government issued a new decree on loosening management over corporate bonds.

Late this month, the PM also urged the central bank to swiftly draft plans for restructuring weak banks, including the Saigon Joint Stock Commercial Bank (SCB), and complete the drafting of the revised Law on Credit Organizations to tackle existing obstacles.

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