The Ministry of Finance (MoF) has tightened control over risky corporate bond issuance.
Stricter rules are needed to control risk at growing corporate bonds issuances. Photo: Duc Thanh
The MoF has published a document requesting the State Securities Commission (SSC), the Finance and Banking Department under the MoF, and the Vietnam Stock Exchange to strengthen inspection of the corporate bond market.
In recent years, corporate bonds have emerged as one of the most crucial elements in capital mobilisation but have also exposed retail and institutional investors to higher risks.
Finance Minister Ho Duc Phoc also urged the Finance and Banking Department to coordinate with relevant parties in implementing new regulations on corporate bond issuance while at the same time completing regulations on market management and supervision.
One of the priorities is to tighten the issuance of private corporate bonds with no or low-quality collaterals.
The SSC was also assigned to strengthen inspection and examination of individual corporate bonds issuances.
The market regulator will focus on monitoring the issuance of small- and medium-sized businesses, startups, or enterprises operating in high-risk sectors.
The SSC shall report more serious instances of fraud or inappropriate actions to the police.
The MoF is tightening the inspection of the corporate bond market as the volume of private corporate bond issuances continued to increase in the first six months of 2021.
In general, in H1/2021, businesses conducted 306 bond issuances, including 293 private placements with a total value of VND176.828 trillion ($7.7 billion), a more than 8 per cent jump compared to the same period last year, and 13 issuances to the public valued at VND15.375 trillion ($668.5 million), equivalent to 50.3 per cent of the public issuance volume in 2020 (not including the issuance of international bonds by some major players like Vingroup or BIM Group).
The volume of corporate bonds without collateral or guaranteed only by shares issued in the first quarter of 2021 accounted for a large proportion, with a large part owned by real estate firms. This poses a significant risk.