How many corporate bonds are banks holding?

The above information was shared by Governor of the State Bank of Vietnam Nguyen Thi Hong at the Conference on Developing a Safe, Transparent and Effective Capital Market in order to stabilize the macro-economy and ensure major balances of the economy.

The Governor of the SBV said that by the end of 2021, there were 41 participating credit institutions with a total outstanding credit bond of VND 274 trillion, accounting for 2.63% of the system’s total credit balance. Thereby contributing to increasing liquidity and promoting the development of the corporate bond market.

As an issuer, in 2021, bonds issued by credit institutions will account for 36.18% of the total volume of corporate bonds issued on the market. As of March 31, 2022, there were 29 credit institutions issuing bonds with outstanding loans of about VND 427 trillion, accounting for 3.7% of the total mobilized capital of the economy. Credit institutions are the second largest issuer of bonds in the corporate bond market today

The Governor of the State Bank of Vietnam proposed the Government a number of solutions for the financial market to develop synchronously, transparently and sustainably. In which, segments of the financial market (bond market, stocks, derivatives…) need to be developed synchronously; diversify investors participating in the market, encourage funds, insurance companies… to participate more deeply and widely in the market; establishing reputable credit rating companies, improving the publicity and transparency of the market.

Along with that, the legal corridor must be reviewed, completed, and implemented solutions to facilitate the development of the capital market (including the corporate bond market), reduce pressure on credit capital from the system of financial institutions. Credit institutions, especially medium and long-term capital.

The management, inspection and supervision of activities of the stock market also need to be strengthened, including the corporate bond market.

The SBV has issued Circular 16, stipulating that credit institutions are not allowed to buy corporate bonds issued with the purpose of restructuring corporate debts. Circular 16 also adds stricter regulations to contribute to controlling risks in the investment activities of corporate bonds of credit institutions, ensuring the safety of banking operations such as:

– Credit institutions can only buy corporate bonds when the credit institution has a bad debt ratio of less than 3% according to the latest classification period;

– Credit institutions are not allowed to buy corporate bonds issued with the purpose to increase the size of operating capital;

– Credit institutions are not allowed to buy corporate bonds issued with the purpose of contributing capital or buying shares in other enterprises;

– Credit institutions are not allowed to sell corporate bonds to subsidiaries of the same credit institution…

Viet Linh