Hanoi (VNS/VNA) - The Government has assigned theMinistry of Finance to study a proposal to allow the State Bank of Vietnam to guaranteepayment of bank bonds, just like with bank deposits.

This Government move comes after the Vietnam Association of Financial Investors(VAFI) sent documents to the Prime Minister, the Ministry of Finance, and theState Bank of Vietnam to propose solutions to increase long-term capitalmobilisation for the economy when deposit interest rates plummet.

VAFI recommends that it is necessary to build risk-free bonds, whose interestsand principals are guaranteed to pay on time in all situations, but may stillbe slightly affected by inflation and devaluation of the Vietnamese dong.

This type of bond must be issued by a qualified bank listed on the Ho Chi MinhStock Exchange (HoSE). And there should be more standards required for thesebonds, such as relative profit margin, low bad debt ratio, and the State needsto regulate the rate and volume of bond issuance for individual investors.

VAFI argues that the above-proposed regulations should be put in place toensure that, in all cases, commercial banks are able to pay interest andprincipals of bonds to individual investors.

According to the association, this solution is necessary because banks havedifficulty in mobilising long-term deposits - over 1 year - despite highdeposit rates. The cause is that investors fear risks about exchange rates,inflation, macroeconomic fluctuations and low liquidity. When needing towithdraw long-term deposits, investors must accept the loss of interestsavings.

If the State Bank guarantees these bonds, VAFI believes that a huge amount ofmoney will be poured into bank bonds because people seek higher interest ratesin bonds rather than short-term deposits, the association said.

In addition, this agency recommends that risky bonds should not be issued toindividuals but only to organisations because they have investment experience,which helps them assess the risk level of bonds./.