Circular No. 100/2015/TT-BTC guides on the issuance of local government bonds in the domestic market.

CIRCULAR

Guidelines for Issuing Local Government Bonds

in the Domestic Market

________________

According to Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government detailing and guiding the implementation of the State Budget Law;

Pursuant to the Law on Public Debt Management dated June 17, 2009;

Pursuant to the Securities Law dated June 29, 2006, and the Law Amending and Supplementing Certain Provisions of the Securities Law dated November 24, 2010;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 01/2011/NĐ-CP dated January 5, 2011 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds;

Pursuant to Decree No. 79/2010/NĐ-CP dated July 14, 2010 of the Government on public debt management operations;

Considering the proposal of the Director of the Department of Financial Institutions and Financial Organizations;

The Minister of Finance issues this Circular guiding the issuance of local government bonds in the domestic market.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

Article 1. This Circular guides the issuance of local government bonds in the domestic market.

Article 2. The subjects to which this Circular applies are the People's Committees of provinces and centrally governed cities, organizations, and individuals related to the issuance of local government bonds in the domestic market.

Article 2. Issuing Subjects

The issuing subject of local government bonds is the People's Committee of the province or centrally governed city (hereinafter referred to as the Provincial People's Committee).

Article 3. Purpose of Issuance

Local government bonds are issued to invest in programs and projects specified in Clause 3, Article 4 of Decree No. 01/2011/NĐ-CP dated January 5, 2011 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds (hereinafter referred to as Decree No. 01/2011/NĐ-CP).

Article 4. Conditions for Issuing Bonds

The Provincial People's Committee must meet all conditions for issuing local government bonds stipulated in Article 39 of the Public Debt Management Law and Article 24 of Decree No. 01/2011/NĐ-CP.

Article 5. Terms of Bonds

In addition to the terms and conditions of bonds prescribed in Article 6 of Decree No. 01/2011/NĐ-CP, the issuing subject must comply with the following provisions:

Point 1. Term of Issuance

Local government bonds have a term of one year or more. The specific term is decided by the Provincial People's Committee, in accordance with the capital usage needs and market conditions.

Point 2. Face Value of Bonds

Local government bonds have a face value of one hundred thousand (100,000) VND. Other face values of local government bonds are multiples of one hundred thousand (100,000) VND.

Point 3. Volume of Issuance

The volume of each issuance is determined by the issuing subject based on the capital usage needs of the locality, the ability to raise funds in the market, and must be within the issuance limit approved by the competent authorities as stipulated in this Circular.

Point 4. Interest Rate of Issuance

The interest rate for issuing local government bonds is determined by the issuing subject for each issuance but shall not exceed the interest rate ceiling set by the Ministry of Finance as stipulated in Article 9 of this Circular.

Chapter II

APPROVAL OF BOND ISSUANCE PROPOSALS

Article 6. Development and Approval of Bond Issuance Proposals

Point 1. When there is a need to raise capital through the issuance of local government bonds to invest in economic and social development projects under the provincial budget expenditure responsibilities or projects with repayment capacity at the local level, the Provincial People's Committee must develop a bond issuance proposal for each fiscal year to submit to the Provincial People's Council for approval.

Point 2. The bond issuance proposal mentioned in Clause 1 of this Article includes the following basic contents:

a) The purpose of issuing local government bonds as stipulated in Article 3 of this Circular, specifically:

- Investment in construction projects for economic and social development under the provincial budget expenditure responsibilities; or

- Investment in projects with repayment capacity; or

- Investment in both projects under the provincial budget expenditure responsibilities and projects with repayment capacity. In this case, the proposed volume of bonds for each purpose must be clearly stated.

b) Information about the list of construction projects approved by the Provincial People's Council for the expected use of funds raised from bond issuance, including: project names; investment decisions approved by the competent authority; sources of project funding; type of project (projects for economic and social development under the provincial budget expenditure responsibilities or projects with repayment capacity).

c) A report evaluating the repayment capacity of the project (for projects with repayment capacity).

d) Expected conditions and terms of local government bonds, including: volume; term; face value; currency of issuance; interest rate of bond issuance; commitments of the issuer to bondholders regarding the protection of bondholders' rights as stipulated in Clause 1, Article 8 of Decree No. 01/2011/NĐ-CP; terms of repurchase and exchange of local government bonds (if applicable).

đ) Expected time and method of issuing local government bonds.

e) The situation of raising and repaying principal and interest of funds raised from all sources of the provincial budget over the three consecutive fiscal years prior to the fiscal year of expected issuance, including: debt balance at the beginning of the fiscal year; total funds raised during the year; situation of repaying principal and interest of debts raised during the year; source of payment for principal and interest of debts raised during the year (from the budget or project revenue); debt balance at the end of the fiscal year and at the time of developing the bond issuance proposal.

g) Total maximum borrowing limit allowed for the provincial budget at the time of developing the bond issuance proposal according to the State Budget Law, Public Debt Management Law, and guiding documents.

h) Plan for allocating sources of funds to pay annual interest on bonds and principal when due.

i) Expected information to be provided to investors before the bond issuance period as stipulated in Article 8 of this Circular.

3. The local government bond issuance plan must be reviewed and approved by the Provincial People's Council. In cases where the Provincial People's Council approves the policy, the limit on capital mobilization, and delegates to the Standing Committee of the Provincial People's Council the review and approval of the local government bond issuance plan, these contents must be clearly stated in the Resolution issued by the Provincial People's Council according to the provisions of the Law on the Organization of People's Councils and People's Committees and Resolution No. 753/NQ-UBTVQH11 dated April 2, 2005 of the Standing Committee of the National Assembly on the Operation Regulations of the People's Council.

Article 7. Approval of the Local Government Bond Issuance Plan by the Ministry of Finance

1. After the Provincial People's Council approves the local government bond issuance plan in accordance with Clause 3, Article 6 of this Circular, the Provincial People's Committee shall submit the application for issuing local government bonds to the Ministry of Finance for review and comment before organizing the issuance. The documents submitted to the Ministry of Finance include:

a) A request for issuing local government bonds in the format attached as Appendix 1 to this Circular;

b) The local government bond issuance plan as stipulated in Clauses 1 and 2, Article 6 of this Circular;

c) The approval document for the local government bond issuance plan issued by the Provincial People's Council or the Standing Committee of the Provincial People's Council as stipulated in Clause 3, Article 6 of this Circular;

d) The Resolution of the Provincial People's Council approving the provincial budget estimate for the year in which the bonds are expected to be issued, specifying the total domestic investment capital.

đ) A list of socio-economic development projects under the provincial budget expenditure responsibilities in the five-year plan that have been approved by the Provincial People's Council.

2. Upon receiving all the documents specified in Clause 1 of this Article within twenty (20) working days, the Ministry of Finance will examine and provide comments on the local government bond issuance plan. The examination and comments include:

a) Conditions for issuing bonds;

b) The issuance plan for bonds;

c) The permissible limit on capital mobilization for the provincial budget in accordance with the State Budget Law, Public Debt Management Law, and guiding documents;

d) The maximum permissible amount of bonds to be issued (for projects capable of being repaid locally).

3. The Ministry of Finance will notify its comments in writing regarding the local government bond issuance plan as stipulated in Clause 2 of this Article so that the Provincial People's Committee can organize the issuance of bonds in accordance with this Circular. In cases where the conditions for issuance are not met, the Ministry of Finance will notify in writing and specify the reasons.

Chapter III

ORGANIZATION OF LOCAL GOVERNMENT BOND ISSUANCE

Section 1. ISSUANCE OF LOCAL GOVERNMENT BONDS

Article 8. Disclosure of Information Before Issuance

1. At least five (05) working days before the planned auction date for bonds or at least ten (10) working days before the planned issuance date for bonds through guarantee or agency issuance, the Provincial People's Committee is responsible for disclosing basic information about the local government bond issuance on the website of the Provincial People's Committee, or the Department of Finance, or the organization authorized to carry out bond issuance operations, or the Securities Exchange where the auction takes place.

2. The information to be disclosed as stipulated in Clause 1 of this Article includes:

a) The issuer of the bonds

b) Purpose of bond issuance;

c) The conditions and terms of the bonds (including: quantity; term; face value; principal and interest payment methods; redemption and exchange terms if applicable);

d) The time and method of bond issuance;

đ) The anticipated source of funds for principal and interest repayment when due;

e) The list of projects intended to use the proceeds from the bond issuance, including those socio-economic development projects under the provincial budget expenditure responsibilities; or projects with the potential to recover capital.

g) The situation of capital mobilization and principal and interest repayment of the provincial budget over the three consecutive fiscal years prior to the issuance year from all sources, including capital mobilization through local government bond issuance (if any); the outstanding debt of the provincial budget from all sources at the time of planned bond issuance.

h) The final accounts of provincial budget revenue and expenditure or estimated provincial budget revenue and expenditure (if there is no approved final account data) for the three consecutive fiscal years prior to the issuance year, including the total provincial budget revenue, total provincial budget expenditure (including total regular expenditure, total investment construction expenditure).

i) The provincial budget revenue and expenditure estimates for the year of planned local government bond issuance, approved by the Provincial People's Council, including the total provincial budget revenue, total provincial budget expenditure (including total regular expenditure, total investment construction expenditure).

Article 9. Interest Rate for Issuing Local Government Bonds

1. At least fifteen (15) working days before organizing the issuance of local government bonds, the People's Committee of the province shall send a notification document on the issuance plan to the Ministry of Finance to announce the framework interest rate for issuing local government bonds. The notification document must clearly state the following contents:

a) The expected time to organize the issuance;

b) The expected volume, term, form, and method of issuing bonds.

2. Within seven (07) working days from the date of receiving the notification document on the issuance plan under Clause 1 of this Article, the Ministry of Finance shall specifically announce the framework interest rate for issuing bonds so that the People's Committee of the province can organize the issuance according to the provisions of this Circular.

3. Based on the framework interest rate stipulated by the Ministry of Finance under Clause 2 of this Article and the market conditions at the time of issuance, the People's Committee of the province shall determine the interest rate for issuing bonds.

Article 10. Issuance of Local Government Bonds through Auction Method

1. The auction of local government bonds shall be organized at the Stock Exchange where the auction of government bonds takes place.

2. The principles of organizing the auction, the form of the auction, the participants in the auction, the procedures for organizing the auction, the method of determining the auction results, and the payment method for purchasing bonds shall be applied according to the regulations on issuing government bonds through the auction method at the Stock Exchange.

Article 11. Issuance of Local Government Bonds through Guarantee Issuance Method

1. Principles of Issuance:

a) The People's Committee of the province issues bonds through a guarantee method for one main guarantor organization or for multiple guarantor members (hereinafter referred to as the guarantor group) in accordance with the provisions of this Circular.

b) In the case of issuing through a guarantee method for one main guarantor organization, the People's Committee of the province or the authorized organization shall directly negotiate with the main guarantor organization to agree on the volume, term, interest rate, and issuance guarantee fee for each issuance period. The main guarantor organization may purchase the bonds for itself or distribute them to customers according to the agreement.

c) In the case of issuing through a guarantee method for a guarantor group, the People's Committee of the province or the authorized organization shall directly negotiate with the guarantor members of the guarantor group or negotiate with the representative of the guarantor group (if the guarantor group appoints a representative) regarding the volume, term, interest rate, and issuance guarantee fee for each issuance period. Guarantor members may purchase the bonds for themselves or distribute them to customers.

2. Conditions for becoming a main guarantor organization or a guarantor member of a guarantor group, rights and obligations, selection process for the main guarantor organization and guarantor members, negotiation procedures, and bond purchase payment procedures shall be carried out according to the provisions in Appendix 2 of this Circular.

Article 12. Issuance of Local Government Bonds through Agency Issuance Method

1. The People's Committee of the province or the authorized organization issuing bonds shall select organizations meeting the conditions to act as issuance agents, principal repayment agents, and interest payment agents.

2. The procedures for selecting issuance agents, principal repayment agents, and interest payment agents, and the procedures for organizing the issuance of local government bonds through the agency issuance method shall be applied according to the procedures for issuing government bonds through the agency issuance method.

Article 13. Registration, custody, and listing of bonds

1. Local government bonds shall be centrally registered, custodied, and settled at the Vietnam Securities Depository and listed and traded centrally at the Stock Exchange upon the request of the issuer.

2. The process for registration, custody, and listing of local government bonds shall be applied in accordance with the process for registration, custody, and listing of government bonds.

Section 2. REPURCHASE AND SWAP OF LOCAL GOVERNMENT BONDS

Article 14. Repurchase of Bonds

1. The People's Committee of the province may repurchase bonds ahead of schedule to reduce debt obligations or to restructure debts according to a project approved by the competent authority. The level approving the issuance project of local government bonds under this Circular is also the level approving the repurchase plan of local government bonds.

2. The People's Committee of the province shall apply the procedures for repurchasing government bonds to implement the repurchase of local government bonds.

3. The People's Committee of the province shall be responsible for the effectiveness of the repurchase of local government bonds and report to the Ministry of Finance on the results of the repurchase in accordance with Article 25 of this Circular.

Article 15. Principles of Bond Swap

1. The People's Committee of the province may swap bonds to restructure debts. The bond swap must comply with the following principles:

a) Implementation according to the swap plan approved by the competent authority and commented in writing by the Ministry of Finance. The level approving the issuance project of local government bonds is also the level approving the swap plan.

b) Ensuring equal value based on market price, transparency, and fairness in the swap.

c) Ensuring that the total outstanding debt raised by the provincial budget does not exceed the limit set forth in the State Budget Law, Public Debt Management Law, and guiding documents after the swap.

d) The bonds being swapped must have a remaining term of one year or more and be deposited at the Vietnam Securities Depository.

2. During the bond swap period (from the registration date to the completion of the swap), the circulating bonds being swapped will be frozen on the deposit account of the bondholder at the request of the People's Committee of the province.

Article 16. Methods of Bond Swap

1. The bond swap shall be carried out in one of the following methods:

a) The People's Committee of the province issues new bonds to swap circulating bonds.

b) The People's Committee of the province issues additional quantities of bonds according to the terms and conditions of circulating bonds to swap another circulating bond.

2. The People's Committee of the province decides on the method of bond swap and publicly announces the method of bond swap.

Article 17. Bond Swap Plan

1. The bond swap plan must include the following basic contents:

a) Purpose of the bond swap;

b) Conditions and terms of the bonds expected to be swapped (bond code, quantity of bonds to be swapped, issue date, maturity date, nominal interest rate, payment method for bond interest);

c) Conditions and terms of the bonds expected to be received

- In case of supplementary bond issuance, the conditions and terms include: issue date; maturity date; nominal interest rate; payment method for bond interest.

- In case of initial bond issuance, the conditions and terms include: expected issue date; expected term; principle for determining the nominal interest rate; payment method for bond interest.

d) Expected time to organize the bond swap period.

e) Borrowing limit and expected outstanding debt before and after the bond swap.

2. After the bond swap plan specified in Clause 1 of this Article is approved by the competent authority, the People's Committee of the province sends the bond swap plan to the Ministry of Finance for review and comments on the following contents:

- Quantity of bonds to be swapped.

- Borrowing limit and outstanding debt before and after the bond swap.

- Conditions and terms of the bonds to be swapped and conditions and terms of the bonds expected to be received.

Article 18. Discount Rate for Bonds

1. The Ministry of Finance shall decide on the discount rate range to determine the price of swapped bonds and the price of replacement bonds in each swap round.

2. The People's Committee of the province shall negotiate and agree with the bond owner on the discount rate but must ensure that it falls within the discount rate range decided by the Ministry of Finance under Clause 1 of this Article.

Article 19. Bond Swap Process and Fees

1. The procedures, swap fees, and the determination of the price of local government bonds to be swapped shall be applied according to the procedures, fees, and methods for determining the price of swapped central government bonds.

2. The People's Committee of the province shall be responsible for the effectiveness of the local government bond swap and report to the Ministry of Finance on the results of the bond swap as stipulated in Article 25 of this Circular.

Chapter IV

INTEREST AND PRINCIPAL PAYMENTS ON BONDS, ACCOUNTING REGIME, ISSUE FEES, AND PAYMENT FEES

ISSUE FEES AND PAYMENT FEES FOR BONDS

Article 20. Interest and Principal Payments on Bonds

1. The issuer subject shall be responsible for paying interest and principal on bonds when due from its own legitimate sources of funds.

2. For economic and social development programs and projects under provincial budget expenditure responsibilities, the source of payment for interest and principal on bonds shall be guaranteed from the provincial budget.

3. For investment programs and projects capable of generating revenue locally, the source of payment for interest and principal on bonds shall come from the legitimate revenues of these programs and projects. In cases where project revenues are insufficient to pay the due interest and principal on bonds, the People's Committee of the province shall be responsible for allocating funds from the provincial budget to make payments.

Article 21. Issue Fees and Payment Fees for Bonds

Issue Fees

Bid issue fees, issuance guarantee fees, and issuance agency fees for local government bonds shall be agreed upon between the People's Committee of the province and the bidding organization, guarantor, and issuance agent. The maximum issue fee for local government bonds for each method shall not exceed the issue fee for central government bonds applicable to that method in the domestic market according to current regulations.

2. Payment Fees for Principal and Interest on Bonds

Payment fees for principal and interest on local government bonds shall be set at the same level as those for central government bonds according to current regulations.

3. The source of payment for issue fees and payment fees for principal and interest on local government bonds shall be guaranteed from the provincial budget.

Article 22. Accounting Regime

The issuer subject and related units shall be responsible for organizing accounting work in accordance with the Accounting Law, State Budget Law, and other relevant legal documents governing the current accounting regime.

Chapter V

INFORMATION AND REPORTING REGIME

Article 23. Prompt Reporting of Results of Each Issuance Round

Within seven (07) working days from the end of each local government bond issuance round, the People's Committee of the province shall report in detail the issuance results to the Ministry of Finance for consolidation and monitoring. The content of the report shall follow the form attached in Appendix 3 of this Circular.

Article 24. Periodic Reports and Unusual Reports

1. Within thirty (30) working days after the end of the fiscal year, the People's Committee of the province shall be responsible for submitting a written report on the situation of bond issuance, interest repayment, and principal repayment of local government bonds to the Ministry of Finance for monitoring according to the form attached in Appendix 4 of this Circular.

2. In addition to the periodic reporting contents stipulated in Clause 1 of this Article, the People's Committee of the province shall be responsible for submitting reports as required by the Ministry of Finance in certain unusual circumstances.

Article 25. Report on the completion of the bond repurchase or exchange period

Within seven (7) working days after the completion of the local government bond repurchase or exchange period as stipulated in this Circular and relevant regulations, the Provincial People's Committee must report to the Ministry of Finance with the following contents:

1. The code and quantity of bonds repurchased; the code and quantity of bonds exchanged; the code and quantity of bonds swapped.

2. The repurchase interest rate or the swap interest rate corresponding to each bond code.

3. The remaining debt raised from the provincial budget and the remaining local government bond debt after the repurchase and exchange have been implemented.

Article 26. Disclosure of Information After Completion of the Issuance Period

No later than seven (07) working days after the completion of the issuance of local government bonds, the Provincial People's Committee shall be responsible for disclosing information about the results of the issuance of local government bonds, including the quantity, term, and issuance interest rate of the bonds on the website of the Provincial People's Committee, or the Department of Finance, the organization authorized to carry out the bond issuance business, or the Securities Trading Center.

Article 27. Annual Information Disclosure

From the time of bond issuance to the maturity date of the bond, annually, the Provincial People's Committee shall be responsible for disclosing information on the website of the Provincial People's Committee or the Department of Finance and the organization authorized to carry out the issuance business, and the website of the Securities Trading Center. The annual disclosure information includes:

a) The approved provincial budget revenue and expenditure forecast of the current fiscal year within sixty (60) days from the date the Provincial People's Council approves the provincial budget revenue and expenditure forecast of the current fiscal year; specifying the total balanced provincial budget revenue, the total balanced provincial budget expenditure (detailed according to regular total expenditure, total construction investment expenditure).

b) The approved provincial budget revenue and expenditure settlement of the previous fiscal year within sixty (60) days from the date the Provincial People's Council approves the provincial budget revenue and expenditure settlement of the current fiscal year; specifying the total balanced provincial budget revenue, the total balanced provincial budget expenditure (detailed according to regular total expenditure, total construction investment expenditure and total principal and interest repayment of capital raised).

Chapter VI

HANDLING VIOLATIONS DURING THE BOND ISSUANCE PROCESS

Article 28. Suspension of Local Government Bond Issuance

1. The Ministry of Finance shall implement the suspension of local government bond issuance in the following cases:

a) The Provincial People's Committee does not implement the bond issuance according to the approved issuance plan as stipulated in this Circular.

b) The interest rate of issued local government bonds exceeds the interest rate range announced by the Ministry of Finance.

c) The issuance volume exceeds the permitted issuance volume as stipulated in Clause 3, Article 5 of this Circular.

2. The suspension of issuance applies to the issuance period already carried out with violations mentioned in Clause 1 of this Article and subsequent issuance periods (if any) within the issuance volume approved by the competent authority for the Provincial People's Committee.

3. Upon receiving notification from the Ministry of Finance, the Provincial People's Committee must immediately implement the suspension of bond issuance.

Article 29. Handling Violations

Organizations and individuals involved in the implementation of local government bond issuance who violate the provisions of this Circular will be subject to legal action according to the current laws based on the nature and extent of the violation.

Chapter VII

RESPONSIBILITIES OF RELATED AUTHORITIES

Article 30. Responsibilities of the Ministry of Finance

1. Implement the tasks stipulated in Articles 7, 9, 15, 17, and 28 of this Circular.

2. Aggregate and monitor the implementation of the information and reporting system on the situation of bond issuance, principal and interest repayment of local government bonds by the Provincial People's Committee as stipulated in this Circular.

Article 31. Responsibilities of the Provincial People's Council

1. Approve or authorize the Standing Committee of the Provincial People's Council to approve the Bond Issuance Plan for local government bonds in accordance with this Circular.

2. Approve the early redemption plan or bond swap plan submitted by the Provincial People's Committee in accordance with Articles 14 and 15 of this Circular.

3. Supervise the raising, management, and use of funds from local government bonds, repayment of principal and interest on bonds when due, or supervise the early redemption and bond swap of bonds in accordance with this Circular.

Article 32. Responsibilities of the Provincial People's Committee

1. Develop the bond issuance plan for local government bonds and the loan repayment plan to be submitted to the Provincial People's Council for approval, and complete the bond issuance documentation to be sent to the Ministry of Finance for comments in accordance with this Circular.

2. Submit the bond issuance plan for local government bonds to the Provincial People's Council or the Standing Committee of the Provincial People's Council for approval.

3. Bear full responsibility for the accuracy and truthfulness of the data presented in the bond issuance plan for local government bonds. Bear responsibility for assessing the feasibility of repayment of projects that have the potential for repayment at the local level and the ability of the provincial budget to repay principal and interest on projects within the provincial budget expenditure responsibilities.

4. Develop plans for early redemption and bond swaps for local government bonds to be submitted to competent authorities for approval and implementation in accordance with this Circular.

5. Organize the issuance of local government bonds in accordance with this Circular.

6. Use funds raised from bond issuance for their intended purposes effectively in compliance with the State Budget Law, the Public Debt Management Law, and related guiding documents; bear full responsibility for the use of bond issuance funds in accordance with the law.

7. Balance the provincial budget to ensure sufficient funds for paying interest and principal on local government bonds when due for cases where local government bonds are issued for investment in projects within the provincial budget expenditure responsibilities, and for projects with the potential for repayment but insufficient revenue from these programs and projects to pay interest and principal on bonds as stipulated in this Circular.

8. Monitor and supervise the use of funds for their intended purposes effectively, recover funds to repay debts for investment projects with the potential for repayment at the local level.

Chapter VIII

IMPLEMENTATION

Article 33. Implementation Provisions

1. This Circular takes effect from August 1, 2015.

2. This Circular replaces Circular No. 81/2012/TT-BTC dated May 22, 2012, of the Ministry of Finance guiding the issuance of local government bonds in the domestic market.

3. During the implementation process, if there are difficulties or obstacles, the Provincial People's Committee and relevant units shall promptly report to the Ministry of Finance for specific guidance./.