Circular No. 55/2000/TT-BTC guiding the auction of government bonds through the centralized securities trading market

CIRCULAR

Guidelines for bidding on government bonds through centralized securities trading markets

 

Implementing Decree No. 01/2000/NĐ-CP dated January 13, 2000 of the Government on the issuance regulations for government bonds; After reaching consensus with the State Securities Commission; The Ministry of Finance provides guidelines for bidding on government bonds through centralized securities trading markets as follows:

 

I. GENERAL PROVISIONS

1. Government bonds bid through centralized securities trading markets are types of treasury bonds and investment bonds with terms of one year or longer.

Bonds from the same issuance batch are uniformly defined regarding the issuance date and maturity date.

2. Government bonds bid through centralized securities trading markets are listed and traded at the Securities Trading Center (STC), Stock Exchange (SE).

3. Based on the annual capital mobilization plan of the state budget and the investment bond mobilization plan of ministries, sectors, provincial people's committees under the central government, and the Development Support Fund, which have been approved by the Prime Minister; The Ministry of Finance develops quarterly bidding plans for government bonds, detailed by term, and notifies investors to prepare participation plans in the market.

4. Bidding on government bonds is conducted by the STC and SE according to the provisions of this Circular and specific guidance from the State Securities Commission. The STC and SE act as agents for the Ministry of Finance in reviewing market participants, receiving bids, evaluating bids, announcing bid results, and are entitled to a fee as stipulated in point 10.3 section 10 part II of this Circular.

II. SPECIFIC PROVISIONS:

1. Principles of bidding:

1.1. Maintain confidentiality of all information of participating organizations and the interest rate ceiling set by the Ministry of Finance (if applicable).

1.2. Conduct open and equal bidding in terms of rights and obligations among participating organizations.

1.3. Successful bidders are responsible for purchasing government bonds according to the volume and interest rate announced.

2. Forms of bidding:

Bidding on government bonds is carried out in two forms: competitive and non-competitive bidding.

Competitive bidding involves bidding on interest rates. Through competitive bidding, interest rates and winning volumes of participating members are formed.

Non-competitive bidding involves registering to purchase government bonds at the interest rate formed through the results of competitive bidding.

For each issuance, the Ministry of Finance may specify the bidding form as competitive or both competitive and non-competitive. In cases where both competitive and non-competitive bidding forms are applied, the volume of non-competitive bidding shall not exceed 30% of the total volume of bonds expected to be issued in that bidding round.

3. Conditions for participating in bidding through centralized securities trading markets:

Organizations specified in items a, b, c, and d of point 2 Article 18 of the Government Bond Issuance Regulations promulgated by Decree No. 01/2000/NĐ-CP dated January 13, 2000 of the Government, wishing to participate in bidding on government bonds through centralized securities trading markets must meet the following conditions:

Having legal entity status, established in accordance with current Vietnamese laws;

Having a minimum statutory capital of 22 billion Vietnamese dong;

Engaging in effective business operations with sound financial conditions;

Having a Vietnamese dong account opened at a bank as prescribed by the STC and SE;

Submitting a bid participation application to the STC and SE.

Annually, the STC and SE review the conditions of participants to issue or revoke certificates of membership for bidding on government bonds.

4. Methods of selling bonds:

Government bonds bid through centralized securities trading markets are sold in the following forms: discount, par value, above par value, or below par value.

5. Types of bonds:

Bonds bid through centralized securities trading markets are issued in the form of certificates or book-entry records.

For the certificate form: The Ministry of Finance prescribes the model and organizes printing to provide to successful bidders.

For the book-entry record form: Recorded and managed by the STC, SE, and depositary organizations.

When newly issued, government bonds are executed in the form of book-entry records; If the owner wishes to receive bond certificates, the depositary organization must notify the Ministry of Finance to issue certificates, and simultaneously inform the STC and SE to reduce the book-entry records of government bonds.

6. Organization of bidding on government bonds:

6.1. Time of organizing bidding:

Bidding is organized weekly, monthly, or quarterly based on the state budget's capital mobilization plan, ministries, sectors, provincial people's committees under the central government, the Development Support Fund, and market conditions.

6.2. Bid announcement:

Two days before the bidding date, based on the issuance proposal of the Ministry of Finance, the STC and SE send the government bond issuance notice to participating members and publish it in mass media.

6.3. Registration for bidding:

Before 13:00 on the day of opening bids, participating members must submit bid sheets to the STC and SE and complete a 5% margin deposit on the volume of bonds bid.

The format and method of submitting bid sheets and paying margin deposits are prescribed by the STC and SE.

6.4. Opening bids:

The bid opening time is set at 13:30 on the bidding day. The procedure and process for opening bid sheets, checking their legality and validity, are prescribed and implemented by the STC and SE.

6.5. Determination of winning volume and interest rate:

a) Basis for determining winning volume and interest rate:

Bid volume and interest rate of participating organizations.

Expected issuance volume and directed interest rate (if applicable).

b) Principles for determining winning volume and interest rate:

For organizations participating in competitive bidding:

The quantity of bonds awarded is selected based on the bid interest rate from low to high; at the highest successful bid interest rate where the quantity of bids exceeds the planned issuance volume, the quantity of successfully awarded bonds will be allocated to each bidder in proportion to their bid volume at that interest rate.

The highest successful bid interest rate shall be the common issuance interest rate applied to all successful bidders.

Non-competitive bidding participants may purchase bonds at the successful bid interest rate. The issuance volume for these participants will be allocated in proportion to their bid volumes.

6.6. Determining the bond selling price and the amount to be paid upon maturity:

a) Selling bonds through discount:

The bond selling price is determined using the following formula:

MG

G= (1 + Ls)^nⁿ

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry         G:        Selling price of bonds

                        MG: Face value of the bond

                        Ls: Successful bid interest rate (% per annum)

                        n: Term of the bond (years)

Upon maturity, it will be settled at the face value of the bond.

b) Selling bonds at face value:

b.1. For bonds with principal and interest paid once at maturity:

The bond selling price is 100% of the face value.

The amount to be paid upon maturity is calculated using the following formula:

                        T = MG x (1 + Ls)ⁿ

Where:        T: Total amount (principal and interest) to be paid         Ls: Successful bid interest rate (% per annum)

                        MG: Face value of the bond

                        b.2. For bonds with periodic interest payments:

                        n: Term of the bond (years)

Periodic interest payments are calculated using the following formula:

The bond selling price is 100% of the face value.

L= MG x Ls / k

Ls

L: Amount of periodic interest payment

                        k

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry         Face value of the bond         Successful bid interest rate (% per annum)

MG:     k: Number of interest payments per year

             Ls:      Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

             c) Selling bonds above or below face value:        c.1. The Ministry of Finance sets the periodic interest payment rate; simultaneously, the issuance interest rate and bond selling price are determined through bidding.

If the issuance interest rate is higher than the rate set by the Ministry of Finance, the bond selling price will be lower than the face value of the bond.

If the issuance interest rate is lower than the rate set by the Ministry of Finance, the bond selling price will be higher than the face value of the bond.

c.2. The bond selling price is determined using the following formula:

L

G= -------------------

Ls x k

             L                                 r = the simplified formula for calculating the bond selling price is as follows:                     MG

k1                              +                       +.... +              +

             Ls                   Lx [1/(1+ r)]                   Ls

[1+]¹   [1+       ]²                     [1+      ]^{organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.}          [1+        ]^{organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.}

            k                      k                     r: Bond selling price

Ls

Periodic interest payment amount     Face value of the bond

            Successful bid interest rate (% per annum)

Number of interest payments per year                                   

Number of interest payment periods over the entire term of the bond^{organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.}                         MG

k1                                                      +

c.3. The amount of periodic interest payment is calculated using the following formula: Number of interest payment periods over the entire term of the bond^{organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.}

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry

            G:        Lt

            Face value of the bond         L = MG x -------------

            MG:     Lt: Periodic interest payment rate (% per annum)

            Ls:       c.4. Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

            c) Selling bonds above or below face value:         c.5. Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

            t:          6.7. Announcing the bidding results:

After determining the interest rates and quantities awarded, the Stock Exchange Center and the Securities Commission sign and send the consolidated bidding result reports to the Ministry of Finance, which forwards them to the State Securities Commission.

                                    Based on the consolidated bidding result report, the Stock Exchange Center and the Securities Commission notify participating entities of the bidding results, publish the results on public media, and post them at the headquarters of the Stock Exchange Center and the Securities Commission.

            7. Payment for purchasing government bonds:

             k

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry         Face value of the bond         Successful bid interest rate (% per annum)

            MG:     Lt: Periodic interest payment rate (% per annum)

            7.1. Within two working days following the bidding date, successful bidders must transfer the full amount for purchasing bonds at the selling price confirmed in the award notification into the National Treasury account opened at the State Bank's Trading Department.        7.2. The bond issuance date is set for the second working day after the bidding date. On the issuance date, the State Bank's Trading Department credits the National Treasury with the proceeds from selling government bonds to successful bidders and simultaneously notifies the Stock Exchange Center and the Securities Commission. Based on the State Bank's Trading Department notification, the Stock Exchange Center and the Securities Commission process the bond registration for successful bidders.

            c) Selling bonds above or below face value:         c.5. Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

7.3. In cases where successful bidders delay payment procedures beyond the specified date, the Stock Exchange Center and the Securities Commission require the bank where the bidding entity has an account to deduct the deposit and transfer funds from the deposit account to the National Treasury. Entities that delay payment will be fined for late payment. The fine amount is deducted from the entity's deposit account to pay into the state budget. The late payment fine is calculated using the following formula:

(St x Ls x 150%) x n

P= ----------------------

365

P: Late payment fine amount

St: Amount delayed in payment

Ls: Successful bid interest rate (% per annum)

n: Number of days delayed in payment

In cases where the balance in the deposit account of successful bidders remains insufficient to make payment more than five days beyond the specified payment period, the unsatisfied portion of the successful bid results will be canceled, and the entity will be fined 5% of the canceled amount to be transferred to the state budget.

                                    8. Transferring funds from government bond issuance:

Based on the credit notice from the State Bank's Trading Department, the Central National Treasury processes:

c) The Reorganization Enterprise Fund at the state-owned holding corporation level is centralized in a separate account of the state-owned holding corporation, managed by the Board of Directors, to support the reorganization and ownership conversion of enterprises under the state-owned holding corporation as stipulated in Article 2 of this Decision and is responsible for settling accounts with the Ministry         Revenue collection for the central budget from treasury bonds.         Amount of late payment fine

                        St:        Late payment amount

                        Ls:       Auction interest rate (% per year)

                        n:         Number of days overdue

In case the balance in the deposit account of successful bidders is insufficient forpayment more than 5 days beyond the specified payment period, the unsatisfiedportion of the auction result will be cancelled and the penalized entity shall pay afine of 5% on the cancelled amount to be transferred to the state budget.

8. Transfer of capital from government bond issuance:

Based on the credit notification from the State Bank Trading Department, the CentralTreasury shall proceed with the following procedures:

To collect the central government budget for treasury bonds.

Central budget allocation for investment bonds issued to raise funds for projectsunder central management. Ministries and sectors shall recognize debts with theState Treasury for the amount of bond issuance from the date of issuance.

Provincial budget allocation for investment bonds issued to raise funds forprojects under local management. The People's Committee of the province or citydirectly under the central government shall recognize debts with the StateTreasury for the amount of investment bond issuance from the date of issuance.

Credit account of the Development Support Fund. The Development Support Fundshall recognize debts with the State Treasury for the amount of investment bondissuance from the date of issuance.

9. Payment of Government Bonds upon maturity:

9.1. For non-book-entry bonds:

Theprincipal and interest payment of the bonds shall be carried out at the StateTreasury or the Government Bond payment agents. One day prior to the principaland interest payment due date, the Ministry of Finance (or the Department ofFinance and Prices, the Development Support Fund) shall process the transfer offunds to the State Treasury or the payment agents to pay the bondholders. TheState Treasury and the payment agents shall be entitled to a fee on the actualprincipal and interest payments made.

9.2. For book-entry bonds:

Theprincipal and interest payment of the bonds shall be carried out at the bonddepositary organizations. One day prior to the principal and interest paymentdue date, the Ministry of Finance (or the Department of Finance and Prices, theDevelopment Support Fund) shall process the transfer of funds to the StockExchange Center, the Securities Exchange Board to transfer to the depositaryorganizations for direct payment to the bondholders. The Stock Exchange Center,the Securities Exchange Board, and the depositary organizations shall beentitled to a fee on the actual principal and interest payments made. Theallocation of fees between the Stock Exchange Center, the Securities ExchangeBoard, and the depositary organizations shall be carried out according to theagreement among the relevant parties.

10. Budget for issuing and paying Government Bonds:

10.1.The budget for organizing the issuance and payment of Government Bonds shall becovered by the central budget (for treasury bonds and project bonds undercentral management), the local budget (for project bonds under localmanagement), and the Development Support Fund (for investment bonds raisingfunds for the Fund).

10.2The printing cost of Government Bond certificates shall be settled with theprinting agency according to the contract.

10.3.The budget for organizing the auction of Government Bonds shall be paid to theStock Exchange Center, the Securities Exchange Board at 0.1% of the total valueof the winning bonds.

10.4.The budget for paying Government Bonds shall be paid to the units responsiblefor payment at 0.1% of the actual principal and interest payments made.

10.5.The Stock Exchange Center, the Securities Exchange Board, the depositaryorganizations, the State Treasury, and the Government Bond payment agents shallbe responsible for using the budget for issuing and paying Government Bondsaccording to the financial regulations stipulated for their respective units.

11. The Ministry of Finance and the Securities Commission shall be responsible forinspection and supervisionof the auction of Government Bonds through the centralized securities market inaccordance with the provisions of this Circular.

TheSecurities Commission shall be responsible for resolving any disputes,complaints, or accusations arising from the organization of the auction ofGovernment Bonds through the centralized securities market.

III. IMPLEMENTATION:

1. This Circular takes effect from the date of signature.

2. The Securities Commission shall provide detailed guidance on the procedures andprocesses for the auction of Government Bonds through the centralized securitiesmarket and organize the implementation of the provisions of this Circular./.