Banks should tighten assessment controls of their corporate bonds investments: experts

Banks must tighten their assessment controls of corporate bond investments to avoid excessive risk and the misuse of funds raised by firms, experts said.

Banks should tighten assessment controls of their corporate bonds investments: experts hinh anh 1

Illustrative image (Photo: VNA)

Banks must tighten their assessment controls of corporate bond investments to avoid excessive risk and the misuse of funds raised by firms, experts said.

In early April, the Banking Supervision Agency, under the State Bank of Vietnam (SBV) conducted an inspection of corporate bond investment activities at seven banks, while the Ministry of Finance inspected one bank.

According to the SBV, by the end of 2021, there are 41 credit institutions holding 274 trillion VND (11.7 billion USD) of corporate bonds, of which more than 75% of them are held by ten major banks - Techcombank, MBBank, VPBank, TPBank, BIDV, Vietcombank, VietinBank, HDBank, ABBank and SeABank. At some banks, the value of corporate bonds exceeds 10% of total assets.

Although the inspection results were not published, a SBV senior leader said in an interview with Vietnam Investment Review that a number of credit institutions failed to accurately assess bond issuance plans.

In particular, how companies planned to use the proceeds of corporate bond sales lacked clarity and transparency. Results from the inspection showed there are signs that firms have spent money from bond issuance for the wrong purposes, including cases where funds were used to repay bank loans, buy shares, lend, and transfer the money back to the issuers.

Economist Nguyen Xuan Nghia said that there is a phenomenon where capital raised from the issuance of bonds is circulated around to organisations and inpiduals that have relationships with each other or where the money is withdrawn in large quantities, causing the cash flow to be very complicated and difficult to determine the ultimate use of funds raised.

Pursuing growth and huge profits may have caused banks and other investors to overlook potential malfeasance in the corporate bond activities, Nghia added.

The violations also resulted from a lack of close attention by the board of directors, the executive board, and the leaders of units/pisions of some credit institutions in promptly correcting the shortcomings and mistakes internally. Inspection, control, and internal audits of credit institutions are not always effective, and internal regulations have not been regularly reviewed, updated, and completed, he added.

The issuers’ financial capacity can also be weak, including a high debt-to-equity ratio, no or low net revenue from main business activities, and undistributed profit in recent years, the SBV senior leader said.

"The determination of demand and term of bonds is not based on the actual bond issuance plans of the issuers," the officer said, adding that the monitoring, supervision, and collection of documents proving the purposes of the money raised from bond issuances by issuers are still a formality, but investors often fail to fully exercise the rights permitted by law to manage and supervise the use of funds raised from bond issuance.

Moreover, the valuation and management of collateral have not been strictly controlled due to professional limitations, while some borrowers have not fully followed the provisions of the law, the SBV and the regulations of the credit institutions in their loan relationship.

According to a VNDIRECT Securities Company analyst, credit institutions must increase their capacity for rating and appraising debt, particularly corporate bond investments, in order to reduce risks.

Accordingly, the expert suggested that credit institutions need to step up inspection and supervision of the issuers' use of capital to ensure that the capital is used for the right purposes, and strengthen risk management for corporate bond investments.

In addition, increasing the responsibility of credit institutions in the service provision agreements related to signed corporate bonds, implementing the responsibilities of the bondholders' representatives in accordance with regulations. In particular, exercise all the rights permitted by law to control and supervise to ensure that funds raised from the bond issuance are used for the right purposes stated in the plan of the issuer./.

Source: VNA
en.vietnamplus.vn

Related News

Shareholders expect the shareholder meeting season

Shareholders expect the shareholder meeting season

VCN - From mid-March to April this year, many banks have planned to organize their annual general meetings of shareholders (AGM). Accordingly, information about dividend distribution or profit targets always attracts the attention of shareholders, especially when many new plans are proposed this year.
Banks reduce revenue from insurance services

Banks reduce revenue from insurance services

VCN - In 2023, a series of negative incidents related to insurance sales resulted in a drop of revenue from cross-selling insurance of many banks. However, the opportunity for improvement remains as the insurance market is increasingly corrected, and customer trust is restored and strengthened.
Many real estate businesses face difficulties of cash flow

Many real estate businesses face difficulties of cash flow

VCN - Although many policies to overcome difficulties have been put forward by the Government, ministries and branches but many real estate businesses face the situation of being "thirsty for money". Finding solutions to unlock capital sources for the real estate market to promote recovery and development is essential.
Customs strives to expand utilities in e-tax payment

Customs strives to expand utilities in e-tax payment

VCN - To expand state budget payment methods to increase utilities in e-tax payment, the General Department of Customs has developed and collected comments on the draft Circular guiding electronic transactions in guaranty of revenue of tax, late payment interests, fine, fees, charges and other revenues for imports and exports, transited goods, vehicles on entry, exit and in transit.

Latest News

Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.

More News

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Vietnamese securities companies race to boost capital amid high market demand

Vietnamese securities companies race to boost capital amid high market demand

These companies understand the importance of boosting their capital to remain competitive and avoid falling behind their peers.
Central bank required to take urgent measures to stabilise gold market

Central bank required to take urgent measures to stabilise gold market

The Government has directed the State Bank of Vietnam (SBV) to urgently inspect and supervise to stabilise the gold market.
Read More

Your care

Latest Most read
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - Sharing at the conference "Consumer goods and distribution industry: M&A trends and investment strategies to raise capital for Vietnamese enterprises", organized by the Business Association of High Quality Vietnamese Goods and the Leading Business C
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
Mobile Version