New payment mode for G-bonds

The launching ceremony of the new payment mode for trading of Government bonds through the State Bank of Viet Nam on Tuesday.

According to Duong Van Thanh, general director of the Vietnam Securities Depository Centre (VSDC), payment via the commercial bank mode, as done previously, is only suitable for a small- or medium-sized G-bond market. It is not preferable now when the market develops to a new high level with fast rising transaction value.

In the first half of this year alone, the listing value of the G-bond market reached VND979 trillion (US$42.93 billion), equal to 18 per cent of Viet Nam’s GDP. Average transaction value in a session in H1 was VND7.7 trillion, 21 times higher than in 2009, while the payment value in the market also rose 586 per cent against 2010 to VND1.2 quadrillion.

With the rising value in the G-bond market, payment for transactions of G-bonds should be made through the central bank to ensure safety and ease in the payment of G-bond transactions, Thanh said.

According to the Ministry of Finance, this is a breakthrough in the modernisation of the bond trading system in accordance with international practices. It also helps accelerate the process of international integration of the market, creating a prerequisite for the development of cross-border bond payment services.

Under the new payment model, payment for transactions of G-bonds listed on stock exchanges is carried out using the mode of payment according on each transaction.

Based on the data provided by the stock exchanges, the VSDC identifies the payment obligation of each relevant party and sends the payment information to the SBV.

The transfer of G-bonds is implemented on VSDC’s system on the basis of transferring G-bonds between depository accounts of organisations and ensuring the principle that the selling side has sufficient bonds to be transferred on the payment date and the purchasing side has enough money to pay for the G-bond transactions.

The cash payment for G-bond transactions between organisations, which perform direct payments via the SBV, is conducted through the inter-bank online payment system.

The State Securities Commission of Viet Nam decides the payment date for G-bond transactions after reaching a consensus with the SBV. The VSDC is responsible for guiding payment steps and procedures for G-bond transactions.