Corporate bonds issued by banks have their characteristics, so they are less risky

DNHN - According to Dr. Can Van Luc, chief economist at BIDV and member of the National Monetary and Financial Policy Advisory Council, commercial banks issue very few corporate bonds. risks caused by particular characteristics.

According to Dr. Can Van Luc, the greatest risk to the corporate bond market today is that a large number of corporate bonds will mature between 2023 and 2024 as a result of the market's explosive growth between 2019 and 2021.

According to the Vietnam Bond Market Association (VBMA), approximately VND 271,000 billion of bonds will mature in 2023, of which approximately VND 119,000 billion will be issued by real estate businesses. In 2024, the value of bonds maturing without interest is approximately VND 330,000 billion (including VND 110,000 billion for real estate businesses).

Commercial banks and real estate are the two industries that issue the most corporate bonds, and these two industries also have the highest amount of corporate bonds maturing.

Due to their unique characteristics, corporate bonds issued by commercial banks carry almost no risk. These bonds are issued primarily by large, profitable, and stable financial institutions.

The majority of commercial banks have been independently audited, internationally audited, and listed on the stock exchange, ensuring the publicity and transparency of bonds.

The issuance of bonds by commercial banks must adhere to the State Bank of Vietnam's stringent regulations on safety ratios, with a clear issuance objective (mainly to increase Tier 2 capital, to ensure that the safety ratio is met). capital by Basel II and other international standards.

Commercial banks also maintain a reserve fund for credit and investment activities. Consequently, commercial banks that issue bonds frequently lack collateral (which is primarily guaranteed by the aforementioned characteristics), and their processes and procedures differ from those of conventional production and business enterprises.

According to the BIDV Chief Economist, real estate businesses issued nearly 215 trillion dongs in 2021 and 52 trillion dongs in corporate bonds in 2022 (second in volume, after credit institutions) at an average annual interest rate of 10.35%. (according to VBMA).

Accordingly, the amount of maturing bonds issued by real estate companies are also substantial, particularly in the next two years (approximately 115 trillion VND per year, excluding interest). Individual investors have also lost interest, making it difficult for businesses to raise capital to reverse debt shortly due to a series of violations that have significantly eroded investor confidence. After recent occurrences, she became more anxious.

The next obstacle is that Decree 65/2022 imposes stricter regulations on the issuance of private corporate bonds, while Decree 08/2023 was just issued and requires additional time to determine its effectiveness. in removing obstacles to the issuance of corporate bonds.

Credit capital for this topic is limited due to the State Bank's policy of restricting capital flow into risky fields; the stock market is no longer as vibrant as in the past; it is difficult to sell and liquidate assets to repay debts (due to the quiet real estate market and slow recovery).

Consequently, if bondholders are unwilling to accept the extension or exchange for other assets, a portion of businesses, particularly the real estate industry, could be at risk of delinquent bond debt.

According to Mr. Luc, the recently issued Decree 08 on corporate bonds is regarded as a temporary solution for the market's impending difficulties when discussing ways to develop and stabilize the corporate bond market in Vietnam. For the market to develop healthily and limit risks, however, long-term and macro measures are required to overcome major weaknesses such as the legal corridor and market management regulations, market infrastructure (trading system, credit rating agency, etc.), and investor platforms.

To regain investor confidence, it is essential to direct swiftly, decisively, and stringently the resolution of past violations of corporate bond issuance. This will expedite the recovery of the corporate bond market, create the conditions for businesses to access capital for investment, production, and even debt reversal, and ensure that the economic recovery process continues uninterrupted. It is necessary to swiftly reform procedures and conditions, reduce the time required for license issuance, and implement policies to encourage corporations to issue public bonds.

"This will be an important channel for businesses to raise capital, particularly real estate companies that need capital to reverse debt when private placement of corporate bonds is strictly regulated and credit capital is scarce. Concurrently, enhancing market infrastructure by establishing a centralized secondary market for corporate bonds, thereby increasing both liquidity and controllability; standardizing regulations on issuance documents, financial statements, and prospectuses; and fostering the development of a global financial market "said Mr. Luc.

Additionally, according to Mr. Luc, it is essential to have policies to promote credit rating and to disclose credit rating information for businesses in general (not only for corporate bond issuance). In addition, it is necessary to quickly consider licensing two or three additional qualified credit rating companies to promote international credit ratings.

Improve the infrastructure of the corporate bond market, including a centralized secondary market, a database of bonds and collateral, the management mechanism and market supervision, including the management mechanism for bonds after issuance, including collateral management, cash flow monitoring, and management of capital use purposes, and increase the level of sanctions for violations. It is necessary to improve the quality of individual investors on the market by increasing their financial education and introducing policies to encourage the growth of institutional investors simultaneously.

"The corporate bond market in Vietnam is an integral part of the country's financial and real estate markets. The management and development orientation should be closely aligned with the financial system, and the application of information disclosure and system safety standards should be closely monitored by an independent regulatory agency. In addition, greater attention must be paid to systemic risks, which spread between banks - securities - insurance - real estate ", Mr. Luc suggested.

Hoai Anh