Banks warned about risks of real estate corporate bonds

The State Bank of Vietnam's headquarters in Hanoi (Photo: VNA)

According to the SBV, after reviewing the business performance of banks in the first half of this year, it saw the corporate bond investment of some banks facing risks as the ratio of such investment was high and is continuing to rise.

Notably, the amount of bond investment in construction and real estate firms at some banks accounted for a large proportion of the banks’ total assets while the real estate market has not yet recovered firmly and the business performance of realty firms still faces many difficulties.

In addition, some banks also invested in bonds with other purposes, such as to restructure debts of issuers, which have high risks.

In order to ensure the safety of the banking system and limit risks in corporate bond investment, under the direction, SBV required banks to review their internal regulations related to the appraisal and approval procedures of corporate bond investment so as to ensure they are in accordance with the Government’s current laws.

The SBV also directed commercial banks not to buy corporate bonds, which have the purpose to restructure the debts of issuing companies, in accordance with the country’s legal regulations.

According to the State Securities Commission, total corporate bond issuance in the first six months of 2019 reached 60 trillion VND (2.58 billion USD).

In June and July, there were 44 bond issuers, including 17 realty companies, eight banks and two securities companies. The remaining 17 companies that issued bonds were from different sectors.

Deputy Prime Minister Vuong Dinh Hue has also recently asked for stricter supervision on corporate bond issuance so that the finance and equity sectors operate properly and safely.

Accordingly, Hue requested the Ministry of Finance, the State Securities Commission and the SBV to supervise the corporate bond market carefully and create a development plan for the corporate bond market, which must consist of lending limits, conditions and ratings.