How to settle government bond transactions

The Ministry of Finance has just issued Circular 46/2017/TT-BTC guiding the settlement of transactions involving government bonds, government-guaranteed bonds, and local government bonds.

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The circular clearly stipulates the methods and principles for organizing the settlement system for government bond transactions. Accordingly, the settlement of transactions for buying and selling government bonds listed on the Stock Exchange is carried out using a transaction-by-transaction settlement method.

Based on transaction data provided by the Stock Exchange, the Vietnam Securities Depository Center determines the payment obligations for cash and government bonds of each relevant party and sends payment information to the State Bank of Vietnam.

The transfer of government bonds is carried out on the system of the Vietnam Securities Depository Center based on the transfer of government bonds between the depository accounts of the specified organizations, ensuring that the seller must have sufficient government bonds to transfer on the settlement date, and the buyer must have sufficient funds to make the payment for the government bond transaction.

The settlement of government bond transactions between payment institutions directly through the State Bank of Vietnam, as stipulated in this Circular, shall be carried out on the interbank electronic payment system.

The settlement time for government bond transactions is determined by the State Securities Commission in consultation with the State Bank of Vietnam. The Vietnam Securities Depository Center provides guidance on the procedures for settling government bond transactions.

The circular also clarifies measures to remedy the temporary shortfall in the ability to settle payments for government bond transactions.

Specifically, an indirect payment institution temporarily lacking the ability to settle government bond transactions may use borrowed funds from member banks to make payments according to a payment support agreement signed between the parties in accordance with legal regulations. If the payment support agreement stipulates the use of securities as collateral for the loan, the Vietnam Securities Depository Center will freeze the securities at the request of the paying member bank.

The clearing member bank, the custodian member bank, or the direct account opening institution is a commercial bank that temporarily lacks the ability to settle government bond transactions. The State Bank of Vietnam provides support through overdraft and overnight lending operations to facilitate the settlement of government bond transactions.

The handling of violations by depository members, direct account holders, and member banks with insufficient payment capacity is regulated as follows: Depository members, direct account holders, and member banks with insufficient payment capacity for government bond transactions must apply support mechanisms or have their payment deadlines postponed or transactions canceled. They will be subject to disciplinary action depending on the severity of the violation. The handling of violations will be carried out in accordance with current legal regulations. Depository members, in particular, must also comply with the regulations of the Vietnam Securities Depository Center.

This Circular takes effect from August 1, 2017.

According to Lan Phuong/chinhphu.vn