Illustrative image (Photo: VNA) It followed a meeting with voters (members of the public) theState Bank of Vietnam (SBV) held in Ho Chi Minh City amid the ongoing bondmarket troubles.
Besides asking for underwriting banks to take responsibility forredeeming bonds, the voters also urged the SBV to tighten inspection of creditinstitutions to ensure they comply with regulations while investing in bonds.
The SBV recently raided 11 banks and fined a number of them forviolating regulations related to bond purchases. Under current regulations,banks must have an internal credit rating system and can only buy bonds iftheir bad debts ratio is below 3%.
For bonds sold in the domestic market, when issuers cannot pay infull and on time the bond principal and interest, they must negotiate withbondholders for extending the term of bonds (up to two years) or paying byother assets.
Banks are prohibited from buying bonds issued by a business torestructure its debts or raise working capital.
The SBV also plans to make credit ratings mandatory for publicissuances of bonds to ensure the market is healthy and transparent.
The SBV said it would work with the Ministry of Finance, StateSecurities Commission and other agencies to develop the bond market into animportant channel of medium- and long-term capital mobilisation.
SCB scandal
Referring to the arrest of Truong My Lan, chairwoman of propertydeveloper Van Thinh Phat for alleged fraud related to issuance and trading ofbonds last October, the voters wanted the ministry and the securities watchdogto keep bondholders informed about the investigation progress to regain theirconfidence.
A number of bondholders have already filed a lawsuit against the SaiGon Joint Stock Commercial Bank (SCB) and Tan Viet Securities for“cheating.”
The litigants, mostly long-term depositors in the bank, said theyhad been sold corporate bonds by the bank’s staff but led to believe they weredepositing in a “flexible saving-like product” from which they could withdrawmoney at any time after 31 days.
Many of them have repeatedly gathered outside the central bank’shead office in Hanoi since the arrest, demanding SCB, which is now under thecentral bank’s special control, should return their money by buying back the“fraudulent” bonds it sold to them.
Speaking at several meetings with people who bought bonds throughSCB, SBV Governor Nguyen Thi Hong said: “The central bank will continue to workwith concerned agencies to ensure that the legitimate rights and benefits ofinvestors are protected.”
The Ministry of Finance has said: “The investigation agency ishandling this case. We have not received any information on the progress,results or recommendations.”
Investor confidence in the bond market has tumbled followingscandals.
Many investors who bought bonds through banks have complained theyhave not received principal or interest in time.
A recent government decree to resolve problems faced by thecorporate bond market has not managed to revive investor confidence,experts said.
The decree, which allows issuers to extend bond redemption byup to two years, only helps prevent the marketfrom collapsing but does not protect bondholders, they said.
Who is to blame?
Prime Minister Pham Minh Chinh has blamed the Ministry of Finance,particularly the State Securities Commission of Vietnam, and the central bankfor poor management of corporate bonds.
The ministry has said bond issuers must be responsible for payinginterest and principal in full and in time.
Despite its shortcomings, the bond market has room to grow due tohigh capital demand from businesses, the ministry has said.
But experts pointed out that investor confidence would not returnunless the Government addresses all the problems they face and safeguard theirrights.
Corporate bonds worth a huge amount of money are set tomature this year and next year, putting tremendous pressure on issuing firms,mostly in the property industry, who now have a liquidity crunch but areprohibited from making fresh issuances to restructure their debts.
As of the end of 2022 banks were holding nearly 190 trillion VND (8.09billion USD) worth of corporate bonds.
They included Military Bank (MB), VietinBank, BIDV, Vietcombank,Techcombank, VPBank, TPBank, SHB, Bao Viet Bank, HDBank, VietinBank, Bac ABank, OCB , MSB, NamABank, VIB, Kien Long Bank, and SeABank.
MB, Techcombank, VPBank, TPBank, and SHB had the biggestholdings./.
VNA
