OUTSTANDING VALUE OF CORPORATE BOND EQUALS 3% OF COUNTRY’S TOTAL OUTSTANDING CREDIT

Total outstanding value of corporate bonds by the end of April 2022 reached VNĐ320.4 trillion (US$13.8 billion), accounting for a small proportion of the country’s total outstanding credit of 2.86 per cent, according to the State Bank of Việt Nam.

The State Bank reported that by the end of April 2022, credit for securities investment and trading accounted for about 0.5 per cent of the total outstanding loans of the economy, 98 per cent of which were short-term loans, focusing mostly on outstanding loans to invest in Government bonds.

In order to control risks related to securities and corporate bonds and to ensure the safety of the credit institution system, the State Bank is gradually completing a legal framework with stricter regulations to control risks in bond investment activities of credit institutions while enhancing the safety of the system.

The State Bank will strengthen the inspection, examination and strict supervision of credit granting in the securities sector and corporate bond investment by credit institutions in order to promptly detect any potential hidden risks and take appropriate measures.

According to the State Bank, this agency has directed credit institutions to review and reassess credit granting, strengthen risk management measures, and improve the effectiveness of internal inspections.

The risks in the securities market mostly arise from the operations of businesses listed on the market and bond issuers. Therefore, it is necessary to have comprehensive and synchronous coordination among relevant ministries and branches to filter and consolidate the stock market as well as the corporate bond market.

In addition to the positive results, the recent rapid growth of the stock market and the bond market had created potential risks such as the phenomenon of price manipulation in the stock market and risks in the corporate bond market, said Phạm Hồng Sơn, Vice Chairman of the State Securities Commission at the seminar on Development of Capital Market and Real Estate Market in the framework of the 4th Việt Nam Economic Forum, held on Sunday in HCM City.

He said many investors, especially individual investors, did not fully understand the law on investment and transactions of individual corporate bonds, adding that the quality of service providers had not been in uniform.

This posed a requirement for the management agency including the Ministry of Finance and the SSC, to further promote measures to manage, supervise and make some adjustments and modifications.

Sơn said the SSC would continue to maintain market management to ensure safe and transparent operations and protect the legitimate rights and interests of investors.

“First, SSC will continue to improve the legal framework for the market in the direction of enhancing transparency, developing stably and sustainably,” he said.

In the immediate future, the SSC will be active in putting new regulations and policies into the Law on Securities and guiding documents into practice while continuing to improve the legal framework, focusing on completing the development strategy of the stock market to 2030.

SSC will also promote the equitisation and divestment process of State-owned enterprises.

For the government bond market, it will develop a standard market meeting the demand for capital mobilisation for the State budget and supporting the restructuring of the budget and public debt in a safe and sustainable direction, ensure the mobilisation of resources for the socio-economic development plan and the economic recovery.

For the corporate bond market, SSC is focusing on developing a transparent secondary market, building market standards, clearly separating between bonds issued to the public and privately issued.

Sơn added: "In the immediate future, the SSC is actively directing and coordinating with the stock exchanges and the Securities Depository Center in building and putting into operation the trading floor for private issued corporate bonds; promoting the public supervising the use of money from bond mobilisation and information disclosure and bond trading on the Hà Nội Stock Exchange's information disclosure system."

The SSC will continue to restructure securities companies and fund management companies according to the project approved by the Prime Minister, review, classify, develop plans for each company to take appropriate measures, research and digitalise financial assets on the stock market, apply financial technologies, improve the quality and professional ethics of the team of securities practitioners.

For auditing organisations, price appraisal organisations, credit rating agencies, SSC will coordinate with units of the Ministry of Finance to improve the morality and quality of services of these organisations; encourage service providers on the stock market to implement fintech applications.

Source: VNS