THE PRIME MINISTER
THE SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
Hanoi, August 14, 2017
Approving the bond market development roadmap
during 2017-2020, with a vision toward 2030
THE PRIME MINISTER
Pursuant to the June 19, 2015 Law on Organization of the Government;
Pursuant to the July 12, 2006 Law on Securities and the November 24, 2010 amended Law on Securities;
Pursuant to the November 26, 2014 Law on Enterprises;
Pursuant to the Government’s Resolution No. 51/NQ-CP of June 19, 2017, promulgating the Government’s action program to implement the Political Bureau’s Resolution No. 07-NQ/TW of November 18, 2016, on policies and solutions for restructuring the state budget and managing public debts to ensure a secure and sustainable national financial system;
Pursuant to the Prime Minister’s Decision No. 128/2007/QD-TTg of August 2, 2007, approving the capital market development roadmap through 2010, with a vision toward 2020;
At the proposal of the Minister of Finance,
To approve the roadmap for development of Vietnam’s bond market during 2017-2020, with a vision toward 2030, with the following principal contents:
1. Development viewpoints:
a/ To build and develop the bond market in conformity with the economic development level and in synchrony with other components of the financial market, including the stock market and monetary-credit-banking market;
b/ To develop the bond market both extensively and intensively, ensuring systemic safety, gradually approaching international practices and standards and modernizing the market’s infrastructure, thus turning it into a crucial channel for raising medium- and long-term capital at reasonable capital costs;
c/ To continue focusing on developing the government bond market as a basis for developing the bond market; to further develop the corporate bond market to create favorable conditions for enterprises to raise capital, especially medium- and long-term capital, thereby enhancing their corporate governance and information disclosure;
d/ To increase openness and transparency and protect the lawful interests of market participants.
a/ Overall objectives
- To develop a stable bond market with a complete structure and synchronous supply-demand factors; to expand investor base and increase the scale and quality of operation of the market, and diversify its products and operations, ensuring its open, transparent and effective operation.
- To proactively integrate into the international market and step by step approach international standards and practices;
b/ Specific targets
- The outstanding balance of the bond market will reach around 45% of GDP by 2020 and some 65% of GDP by 2030, with the outstanding balance of the market of government bonds, government-guaranteed bonds and municipal bonds to reach about 38% by 2020 and approximately 45% of GDP by 2030, and that of the market of corporate bonds to reach about 7% of GDP by 2020 and around 20% of GDP by 2030.
- The average maturity term of domestically issued government bonds will be 6-7 years during 2017-2020 and 7-8 years during 2021-2030.
- The average trading volume of government bonds, government-guaranteed bonds and municipal bonds per session will increase to 1% and 2% of the outstanding balance of listed bonds by 2020 and 2030, respectively.
- The rate of government bonds held by insurance companies, social insurance organizations, pension funds, investment funds and non-bank financial institutions will reach 50% by 2020 and 60% by 2030.
a/ Improving framework policies on the bond market
- For laws and resolutions of the National Assembly:
+ To study and include specific provisions on instruments to prevent and handle risks of public debts (including government debts), funding sources for risk handling, and the deciding competence in the future amendments to the Law on Public Debt Management, aiming to enhance the proactiveness of the Government, Prime Minister and Ministry of Finance in performing the tasks of swapping and redeeming government bonds to manage government debt risks at the same time with developing the bond market.
+ To study and propose the National Assembly to permit the issuance of government bonds that ensure the minimum average issuance term every year in order to raise funds for the state budget at reasonable costs along with managing government debt portfolio risks and developing the bond market.
+ To study and propose amendments to the Law on the State Bank of Vietnam and Law on Credit Institutions to allow credit institutions to use government bonds as part of their compulsory reserves in the future.
+ To study and propose amendments to the Law on Social Insurance to permit Vietnam Social Security to invest in corporate bonds with high credit ratings in a certain percentage, in addition to the percentages of deposits and purchased certificates and bonds of credit institutions. To improve mechanisms and policies to permit the Deposit Insurance of Vietnam to sell government bonds when necessary.
+ To study amendments to the Law on Securities to separate conditions for issuance of corporate bonds in private placements and for issuance of corporate bonds to the public, which require disclosure of adequate information, all corporate bonds to be registered and deposited in a centralized manner, and buyers of privately issued corporate bonds to be professional investors in order to protect investors.
- For guiding documents:
+ To promulgate a decree to replace Decree No. 01/2011/ND-CP on issuance of government bonds, government-guaranteed bonds and municipal bonds, and guiding documents, serving as a legal framework for creating founders of the secondary market and helping increase liquidity for these founders, and for restructuring the debt portfolio, stabilizing and developing the market as well as developing new products.
+ To promulgate decrees to replace Decree No. 58/2012/ND-CP of July 20, 2012, Decree No. 60/2015/ND-CP of June 26, 2015, and Decree No. 90/2011/ND-CP of October 14, 2011, on public offerings and private placements of corporate bonds in order to develop the corporate bond market according to the solutions specified in this Decision.
+ To adopt mechanisms and policies to develop the green bond market through which bond issuers can raise funds for implementing green projects.
+ Based on the practical market development requirements in each period, to formulate and revise documents detailing and guiding the implementation of tax laws.
+ To propose promulgating a decree on repurchase agreements (repos) for government bonds and government-guaranteed bonds in order to increase the liquidity of the secondary market.
+ To promulgate circulars guiding the development of the secondary market, regulating the bond trading and payment system, bond market founders in the secondary market, support of liquidity for market founders, and development of the repo market.
+ To promulgate circulars on safety limits and ratios of credit institutions and the bond purchase and sale by credit institutions according to the solutions specified in this Decision.
+ To publish bond issuance manuals to guide bond issuers in raising funds in the bond market.
b/ Developing the primary market
- For government bonds, government-guaranteed bonds and municipal bonds:
+ To work out and publicize government bond issuance timetables to enable members to proactively participate in the market, increase the capability of raising funds for the state budget and promote the development of the secondary market. When wishing to issue bills for implementation of monetary policies, the State Bank of Vietnam shall coordinate with the Ministry of Finance in working out bill issuance timetables and organizing the bill issuance in a manner that helps ensure stability of the bond and monetary markets.
+ To diversify government bonds, government-guaranteed bonds and municipal bonds to meet investor demands, create financial products and a standard yield curve in the financial market, specifically:
. To issue diversified types of government bonds, including also treasury bills, with a view to establishing a standard yield curve for short-term and long-term financial products in order to develop the bond and financial markets.
. To issue long-term government bonds on a periodical basis to attract investors being insurance companies, investment funds, pension funds and other non-bank financial institutions, contributing to prolonging the term of the government bond debt portfolio.
. To consider issuing new products according to roadmaps suitable to the market development and meeting investor demands, such as floating-rate bonds, strip bonds, and inflation-indexed bonds, etc.
. To develop bond derivatives according to roadmaps suitable to the market development and meeting investor demands, such as futures/term contracts and options contracts.
+ To continue issuing government bonds and government-guaranteed bonds through bidding (including also issuance to Vietnam Social Security) with a view to increasing the market scale and liquidity; to apply single- and multiple-price bidding methods depending on the market conditions and characteristics of each product in order to raise funds at reasonable costs, promote competition and increase market liquidity.
. To improve and develop the system of market founders capable of founding the primary and secondary markets in order to increase market liquidity.
+ To perform operations related to the additional issuance of bonds or swap and redemption of bonds for forming standard bond codes in order to increase market liquidity and stability and manage and prevent risks of the government bond debt, government-guaranteed bond debt and municipal bond debt portfolios.
- For corporate bonds
+ To create favorable conditions for enterprises to raise funds through bond issuance and increase openness and transparency in the process of raising funds through bond issuance, specifically as follows:
. To study amendments to the Law on Securities to separate conditions and dossiers for issuance of corporate bonds and for issuance of stocks to the public with a view to encouraging enterprises to issue bonds to the public for raising funds. To consider requiring enterprises issuing bonds to the public to undergo credit rating when there are at least two qualified rating enterprises operating in the domestic market.
. To review the conditions on private placement of corporate bonds toward requiring information disclosure, permitting only professional investors to invest in privately issued corporate bonds and requiring these bonds to be registered and deposited in a centralized manner.
. To devise a mechanism to permit bond-issuing enterprises to issue bonds in different drives to raise funds according to project implementation schedule.
+ To ask enterprises, especially large-sized ones, to raise medium- and long-term capital through corporate bond issuance.
+ To encourage diversification of types of corporate bonds when the market develops to a higher level, such as floating-rate valuable papers, medium- and long-term bonds, and securities converted from house purchase loans or collaterals, etc.
+ To issue regulations guiding the order and procedures for issuance of corporate bonds: training and guiding enterprises in raising funds via the corporate bond market. To encourage enterprises to raise their corporate governance quality and improve their accounting, bookkeeping and information disclosure activities and proactively raise funds through corporate bond issuance.
c/ For the secondary market
- To improve the market organization model and the system for trading in government bonds, government-guaranteed bonds and municipal bonds at the Stock Exchanges as suitable to the characteristics of agreed transactions, ensuring timely and accurate reporting in order to develop a standard yield curve in the market; to enhance the responsibility of secondary market members for reporting on transactions.
- To request market founders to offer two-way prices (purchase price and sale price) for standard government bond codes with a view to creating market liquidity.
- The State Treasury shall provide loans in bonds for market founders when they offer purchase prices and sale prices for standard bonds with a view to increasing market liquidity.
- To build a yield curve and government bond indexes to facilitate the assessment of the financial efficiency of bond investment portfolios.
- To develop a model contract for standard repos for use by bond market participants.
- To review and improve price and charge policies for depository registration, listing and trading activities in the bond market as suitable to the nature of bond trading.
- To consider building a specialized website on corporate bonds at the Stock Exchanges to provide information on corporate bond issuance and trading, thus promoting secondary transactions of corporate bonds.
- To encourage the listing and trading of publicly issued corporate bonds in the Stock Exchanges.
d/ Developing and diversifying investors
- For Vietnam Social Security: To shift from direct provision of loans to the state budget to investment in government bonds. To invest in government bonds mainly through bidding in line with the reform of the management of cash flows and investment method of Vietnam Social Security. To consider permitting Vietnam Social Security to invest in corporate bonds with high credit ratings (in addition to making deposits and purchasing deposit certificates and bonds of high-performance banks) after the Law on Social Insurance is amended.
- To promote the formation and development of voluntary pension schemes (pension insurance products and insurance funds) with appropriate solutions, including tax policies, in order to channel long-term investment capital into the bond market and diversify the social security system.
- To encourage the Deposit Insurance of Vietnam to buy and sell more bonds in both the primary and secondary markets with a view to increasing market liquidity.
- To revise investment policies of insurance businesses, especially life insurers, toward increasing investment in government bonds; to adopt different investment policies for bonds of rated businesses and those of unrated businesses so as to ensure the operation safety of insurers and create long-term investment capital sources for the bond market.
- To diversify types of targeted investment funds, including the bond investment fund. To encourage investment funds to increase investment in government bonds and corporate bonds.
- To study and implement on a pilot basis the retail of bonds to individual investors as a new fund raising channel to meet the people’s demand for investment in highly safe assets.
- To encourage foreign investors to make long-term investments in the bond market through improving information disclosure; reforming administrative procedures; and adjusting taxes and charges for bond trading for foreign investors; to study issuing foreign exchange transactions combined with exchange rate risk prevention instruments; to encourage foreign organizations to issue global depositary receipts to be listed on foreign markets with base assets being domestic government bonds.
- To study amendments to the Law on the State Bank of Vietnam and Law on Credit Institutions to permit credit institutions to use government bonds as part of their compulsory reserves.
- To improve policies on government bond-holding rates of credit institutions toward abolishing these holding rates in order to ensure flexibility in each period suitable to the development of the bond market and stability of the financial-monetary market; when necessary to prescribe such rate, to exclude bonds used for transactions so as to truly reflect the nature of investment in government bonds by credit institutions.
dd/ Developing intermediary institutions and market services
- To step up the implementation of the program on restructuring securities companies and fund management companies according to the principles and roadmaps set out in the Prime Minister’s Decision No. 252/QD-TTg of March 1, 2011, approving the strategy on development of Vietnam’s securities market during 2011-2020, and Decision No. 1826/QD-TTg of December 6, 2012, approving the scheme on restructuring the securities market and insurance businesses, and amending and supplementing documents (if any) to enhance the capacity of these institutions to participate in the bond market, especially in the bond issuance, trading and market founding.
- To promulgate mechanisms and policies on representatives of bond owners in order to manage bonds for investors in a professional and effective manner. To assess and amend the current mechanisms of establishment and operation of rating enterprises and voluntary pension funds to be suitable to the market development and improve the operation quality of these entities in the capital and bond markets.
- To organize bidding for government bonds, government-guaranteed bonds and municipal bonds at the Stock Exchanges.
- To modernize information technologies in the bidding system, registration, depositary and listing of government bonds and government-guaranteed bonds to simplify administrative procedures and reduce the time from issuance to listing of bonds from T+2 in 2016 to T+1 by 2025 in order to increase the bond market liquidity.
- To step by step transfer the function of payment for bonds, including government bonds, government-guaranteed bonds, municipal bonds and corporate bonds, from commercial banks to the State Bank of Vietnam, thus helping promote the secure and effective development of the market and facilitate the implementation of monetary policies.
- To set up a system to disclose information on issuance and trading of and corporate bonds listed or unlisted at the Stock Exchanges for promoting the development of the corporate bond market.
e/ Other solutions
- To enhance coordination between monetary and financial policies, and create connectivity, balance and synchrony between the monetary-credit market and bond market
+ To increase coordination between the Ministry of Finance and State Bank of Vietnam in exchanging and providing information on liquidity, interest rates, monetary market, issuance of government bonds and state budget revenues and expenditures.
+ To develop a stable monetary market and create a short-term standard yield curve to promote the liquidity of the monetary market and support the development of the bond market; to review and reduce according to roadmaps the use of short-term funds for provision of medium- and long-term loans, and minimize the provision of loans exceeding 15% of equity of credit institutions for a single client in order to reduce risks related to loan terms and funding sources for the banking system and promote the raising of funds through issuing corporate bonds.
+ To revise regulations on foreign exchange in order to create instruments for management of risks, especially exchange rate risks, to attract foreign investors in the bond market while ensuring the foreign exchange management orientation of Vietnam; to step by step liberalize capital transactions and increase the convertibility of Vietnamese currency under the State’s current mechanisms and policies.
- To increase dialogues with market members and improve the operation of Vietnam Bond Market Association
+ To organize periodical dialogues and exchanges between the Ministry of Finance, State Bank of Vietnam and market members to discuss and reach agreement on bond market development solutions.
+ To provide training for market members to request them to comply with regulations when participating in the bond market.
+ To encourage Vietnam Bond Market Association to issue bond market development standards, such as standards on ethics, transactions, methods of issuance of corporate bonds and model prospectus, in accordance with the legal framework with a view to ensuring uniform methods of calculating and listing prices and conducting transactions in the market.
+ To upgrade and improve the website on the bond market at the Ministry of Finance, aiming to publicize mechanisms and policies as well as issuance plans, timetables and issuance outcomes, creating conditions for investors to analyze and seek opportunities for investment in the bond market.
- To increase the management and supervision of the capital and bond markets under the current law to ensure their safe, public and transparent operation and protect the interests of market participants.
- To actively participate in international and regional cooperation programs and forums like the Association of Southeast Asian Nations (ASEAN), ASEAN + 3, Asia-Europe Meeting (ASEM), Asia-Pacific Economic Cooperation (APEC) forum, and Global Emerging Market Local Currency Bond (GEMLOC) Initiative with a view to increasing connection with regional bond markets and developing the domestic bond market.
Assessment of the roadmap implementation
1. Annually, the Ministry of Finance shall assume the prime responsibility for, and coordinate with the State Bank of Vietnam in, assessing the implementation of the bond market development roadmap set out in this Decision for reporting to the Prime Minister.
2. Every 5 years starting from 2020, the Ministry of Finance shall coordinate with related ministries and sectors in reviewing and evaluating the implementation of the bond market development roadmap then reporting to the Prime Minister for promulgation a new roadmap in conformity with the 5-year socio-economic development strategy.
Organization of implementation
1. The Ministry of Finance shall assume the prime responsibility for, and coordinate with related agencies in:
a/ Organizing the implementation of the bond market development roadmap during 2017-2020, with a vision toward 2030, in accordance with this Decision;
b/ Based on the set viewpoints, objectives and solutions, formulating and promulgating or submitting to competent authorities for promulgation mechanisms and policies aiming to develop the bond market according to Article 2 of and the Appendix to this Decision.
2. The State Bank of Vietnam shall:
a/ Coordinate with the Ministry of Finance in organizing the implementation of the solutions specified in Article 2 of and the Appendix to this Decision;
b/ Implement monetary policies in a proactive and flexible manner in close combination with financial policies to control inflation, ensuring the macro-economic stability and facilitating the development of the capital and bond markets.
Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and heads of related agencies shall implement this Decision.-
NGUYEN XUAN PHUC
* The Appendix to this Decision is not translated.