On May 31, the Ministry of Finance sent a report to National Assembly Deputies explaining their assessment of corporate bonds.
National Assembly delegates said: Many violations of the law in the financial market have occurred but the authorities have not promptly detected and handled them (such as the cases related to SCB Bank, Tan Hoang Minh Group, FLC...), affecting the healthy development of the economy , negatively impacting society and people, so stronger preventive measures are needed.
Regulations on private bond issuance are slow to be completed, affecting the development of new capital mobilization channels for businesses.
According to the Ministry of Finance, from 2021 onwards, the Enterprise Law has not clearly stipulated the management mechanism for non-public companies, and the Securities Law has not clearly stipulated the restriction on private securities transactions.
Accordingly, since 2018, when the market began to develop, the Ministry of Finance has proposed solutions under the Government's authority, including: Restricting transactions after 1 year of issuance; requiring information disclosure on the specialized page at the Hanoi Stock Exchange to increase publicity and transparency; using administrative measures to control issuance volume (in 2020).
At the same time, the Government proposed to amend the Law on Enterprises and the Law on Securities in the direction of only allowing the issuance and trading of corporate bonds for professional securities investors; there must be an issuance consultancy organization; management and supervision through a consultancy organization because the number of issuing enterprises is large.
After more than 1 year of implementing the provisions of the 2019 Securities Law, the 2020 Enterprise Law, Decree No. 153/2020/ND-CP and Decree No. 155/2020/ND-CP, the Ministry of Finance said that there was a phenomenon of small individual investors deliberately violating regulations to become professional securities investors to buy individual corporate bonds.
In addition, businesses issue interest rates to raise capital despite weak financial situations.
The Ministry of Finance also pointed out that the quality of service provision by service providers (commercial banks, securities companies, depository organizations...) is still limited.
"There is a phenomenon of some commercial banks having employees solicit customers to transfer their savings deposits to individual corporate bond investments without providing full information to investors, causing misunderstandings. For example: misunderstandings between issuance guarantees and payment guarantees; between deposit certificates and bond investments," the Ministry of Finance explained.
Faced with this situation, the Government issued Decree No. 65 amending and supplementing regulations on the offering and trading of individual corporate bonds in the direction of strict management, being cautious with risks in the market and increasing transparency in mobilizing bond capital.
Immediately after Decree No. 65 was issued, the domestic and foreign financial and monetary markets developed unfavorably. Bank deposit interest rates increased, and liquidity in the financial and monetary markets faced difficulties.
Especially after the incident of Van Thinh Phat Group and SCB Bank from October 2022, the domestic corporate bond market has fluctuated a lot, the issuance volume has decreased, and the situation of buying back bonds before maturity has increased sharply.
Specifically, the volume of corporate bond issuance in 2022 only reached VND 337.1 trillion, down 44.3% compared to 2021, the volume of early repurchase was VND 220 trillion, up 57% compared to the previous year.
Therefore, on March 5, the Ministry of Finance submitted to the Government for promulgation Decree No. 08. The provisions of this Decree allow enterprises to negotiate with investors to pay for bonds with assets or change the terms, conditions, and extend previously issued bonds (the maximum extension period is not more than 2 years); suspend implementation until December 31, 2023 for regulations on determining the status of professional securities investors, bond distribution time, and mandatory credit rating.
"The Decree helps businesses have more time to deal with immediate difficulties regarding bonds, contributing to reducing liquidity pressure and gradually restoring confidence in the market," the Ministry of Finance assessed.
The Ministry of Finance said: Since Decree 08 took effect (March 5) to May 19, 2023, the volume of bonds issued was VND 25.5 trillion, accounting for 96.7% of the volume since the beginning of 2023. A number of large enterprises have successfully negotiated and extended bonds with investors.
"The outstanding debt of corporate bonds as of May 19 was about VND1.1 million billion, accounting for 11.6% of GDP in 2022," said the Ministry of Finance.
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