Aiming to unwind the real estate market, Circular 16/2021/TT-NHNN has a revised Draft. The highlight of the Draft is allowing banks to buy back sold corporate bonds. Is this the solution real estate businesses need to solve difficulties?
1. About Circular 16/2021/TT-NHNN
Circular 16 stipulates:
– Credit institutions and foreign bank branches are allowed to buy and sell corporate bonds.
– Buying and selling corporate bonds of credit institutions is specially controlled by the National Bank of Vietnam.
– Trading in corporate bonds between a specially controlled credit institution and a supporting credit institution must be approved by a competent authority.
– Circular 16 does not stipulate the form of bond trading, etc., as specified in Clause 2, Article 1, Circular 16/2021/TT-NHNN.
2. What is the difference between the impact on the real estate market of the Draft and the lowering of lending interest rates?
The regulation allows banks to buy back corporate bonds, and it is the highlight of the Draft. The purpose is to release the pressure caused by distributing bonds to investors… While the issuer has no ability to redeem them. However, the State Bank of Vietnam has also set up extremely strict terms and conditions, etc. In order to comprehensively inspect and supervise the purchase of corporate bonds.
As for the lowering of lending interest rates, real estate businesses have difficulties when they want to borrow but are no longer able to borrow. Because the business has not yet settled the old debt, there is no collateral, etc. The banks cannot lower interest rates because the new project has not completed the mortgage. The business cannot borrow more because they have not processed the old loans.
3. What is the impact of the Draft on Real Estate Enterprises?
Currently, real estate businesses need new credits to complete their projects. Meanwhile, the freezing and relaxation of old debts of bond issuers can touch many risks. Including bad debt risk and credit risk of banks that want to grant credit.
Therefore, if the solution still cannot generate cash flow, I’m afraid the impact of the Draft is not strong enough to drive real estate market growth.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
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Website: hmlf.vn Email: miller@hmlf.vn
