Change the habit to promote the corporate bond market

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Enterprises are afraid of mobilizing bond capital, especially small and medium enterprises.

Incommensurate

According to the statistics from the Ministry of Finance, by the end of 2017, the outstanding debt of the corporate bond market was equivalent to 6.19% of GDP, up from the scale in 2011 (3.31% of GDP). The average volume of issued bonds in the period 2011 - 2017 was about VND 49 trillion / year, of which the issued volume in 2017 was more than 10 times higher than that of 2011.

Although the corporate bond market scale has grown in recent times, it is small compared to the scale of the bank credit channel (equivalent to 130% of GDP). Outstanding debts of Vietnam’s corporate bond market is much lower than the average level of about 20% -50% of GDP of other countries in the region and is incommensurate with the economic potentials.

According to the Party’s and Government’s policies, the development of bond market including corporate bond market is an important direction to mobilize medium and long-term capital for the economy, as it gradually reduces dependence on banks and facilitates enterprises to raise the bond capital.

Ms. Phan Thi Thu Hien, Director of the Department of Banking and Financial Institutions under the Ministry of Finance said that the Ministry of Finance was coordinating with ministries and branches to synchronously implement a number of solutions, in which focusing on perfecting the legal framework for issuance of corporate bonds toward separating the issuance for public offering and private issuance. The Ministry of Finance has just proposed the Government to amend Decree No. 90 on the private issuance of corporate bonds, which loosened issuance conditions to facilitate the mobilization of bond capital in connection with the focus on investors and strengthened the mechanism of public disclosure of information of issuers to protect the interests of investors.

In addition, the Ministry of Finance is also studying to develop the second-generation law on securities, which assesses the ability to attach credit ratings to the issuance of corporate bonds for public offering. In addition to the issuance mechanism, it needs to review and complete policies and mechanisms on investment, holding of corporate bonds in line with the current monetary and credit policies to create the consistency between the development of the bond market and the monetary and credit market.

In addition, diversifying investors in the bond market, issuing policies to encourage the participation of long-term investors such as insurance companies, the voluntary pension fund system under Resolution 28 dated 19th May 2018 of the Central Committee on diversifying the investment portfolio and structure of Social Insurance Fund, studying step by step to expand to high profitability areas on the principle of safety and sustainability. In the coming time, the Ministry of Finance will study the investment policies of the Social Insurance Agency to submit to the competent level to allow the Social Insurance Agency to partly invest in the high-ranking credit rating companies.

Finally, establishing a centralized specialized information page on corporate bonds at the Stock Exchange and improving the information disclosure mechanism on issuance of corporate bonds to enhance publicity and transparency in the process of bond capital mobilization.

Increasing creditbility

According to Ms. Phan Thi Thu Hien, in order to raise the capital mobilization capacity in the bond market, the enterprises themselves must change their habits and strengthen their enterprise governance capacity, improve quality of auditing and financial reports, raise the information disclosure obligation of enterprises, enhance dissemination to attract enterprises to join the capital mobilization through bond issuance.

In addition, synchronously carrying out credit policies in the direction of reducing the maximum by minimizing the rate of short-term capital used for medium and long-term loans; minimizing loans in excess of 15% of the equity of credit institutions to a single customer to reduce risk of maturity and funding sources for the banking system and to facilitate the capital mobilization through the issuance of corporate bonds.

Regarding the assessment corporate bond issuers, it is indispensable to credit rating. This is the activity of gathering information, analysing, commenting and evaluating the financial capacity and ability to fully fulfil obligations of enterprises and organizations and ability to fully and timely implement the debt liability.

Credit rating plays a major role in the development of the bond market. The result of Credit rating helps enterprises promote their prestige, brand name, financial capacity, and helps investors have tools to assess the credit risk of enterprises to orient investment. For management agencies, Credit ratings contributes to creating a market with public and transparent information.

Regarding the legal framework, the Government has issued Decree 88/2014 / ND-CP dated 26 September 2014, regulating credit rating services; The Prime Minister has issued Decision No. 507 / QD-TTg on the plan for credit rating services by 2020 and the vision for 2030.

According to the representative of the Ministry of Finance, to this date, 1 enterprise has been granted certificate of eligibility for credit rating services, 3 foreign enterprises are researching the Vietnamese market and showing their interests in the coming period.

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However, Mrs. Hien said that the development of credit rating services depends both on the supply and demand of the market. Credit rating service providers must ensure the quality of the provided services and have experience and prestige; Bond issuers must have demand for the services. According to the roadmap for bond market development, in the coming time, the issuance of corporate bond for public offering must perform credit rating when market conditions permit. This content is being studied to be included in the draft Law on Securities. As for the private issuance of corporate bonds, companies will be encouraged to perform credit rating to enhance publicity and transparency of information.