Conditions for issuing bonds to the public should be relaxed.

To compensate for the lack of liquidity in the private corporate bond market, experts recommend stronger solutions to encourage public bond issuance.

The total amount of new bond issuance in the first 10 months of 2024 reached over VND360,000 billion, higher than the total issuance for the whole year of 2023. PHOTO: Shutterstock. Graphics: Dan Nguyen

No additional conditions to "tighten" public bond issuance

According to the report of the Vietnam Bond Market Association, from the beginning of the year to the date of information announcement on November 8, the whole country had 331 private issuances, worth VND 315,792 billion, but there were only 21 public issuances, worth VND 32,114 billion, accounting for 9.2% of the total issuance value. Compared to before 2023 (this rate is usually below 5%), the bond issuance rate has improved, but is still small, meaning that this market still has many potential risks.

The draft Securities Law (amended) being discussed by the National Assembly stipulates that individual investors are only allowed to buy individual corporate bonds in two cases: the issuing enterprise has a credit rating and has collateral; the issuing enterprise has a credit rating and has a payment guarantee from a credit institution.

According to National Assembly delegate Hoang Van Cuong (Hanoi), the above regulation will cause the liquidity of the bond market to shrink, making it more difficult for businesses to issue individual corporate bonds because it is harder to find buyers. Meanwhile, Dr. Can Van Luc, Chief Economist of BIDV, said that once the individual bond channel is tightened, it is necessary to open up the bond issuance channel to the public, otherwise, the bond market will be suffocated at both ends.

In previous drafts of the Securities Law (amended), the Ministry of Finance - the drafting agency - also wanted to tighten the conditions for issuing bonds to the public (regulations that public issuance requires collateral or a commercial bank guarantee).

This regulation makes many businesses worried. The Vietnam Bond Market Association believes that if a business operates effectively and has collateral, it can borrow capital from banks and does not have to seek the path of issuing bonds to the public. The above "barrier" regulations will reduce the supply of bonds issued to the public, because even many leading businesses have difficulty meeting the conditions.

According to many businesses, if they had enough reputation to be guaranteed by a bank, they could have borrowed unsecured loans, or if they had collateral, they could have mortgaged the bank to borrow capital immediately, instead of waiting a whole year for approval to issue bonds to the public.

Fortunately, in the latest draft of the Securities Law (amended) submitted by the Government to the National Assembly last week, the regulation requiring collateral and bank guarantees has been removed. Statistics for 2023 show that only about 30% of bonds on the market have collateral, and even fewer bonds have bank guarantees.

Need to be more open with bonds issued to the public

The latest draft of the Securities Law (amended) does not tighten the conditions for issuing bonds to the public, but there is no move to "open" this field further.

Remove regulations that affect capital markets.

- Deputy Prime Minister, Minister of Finance Ho Duc Phoc

Regarding public issuance, we initially designed the Draft Securities Law (amended) to require collateral or a commercial bank guarantee. However, after many times of receiving opinions from businesses and ministries and branches, the Government agreed not to stipulate that there must be a bank guarantee or collateral, because if this were introduced, it would affect the capital market. Of course, the issuance of bonds to the public must be approved and licensed by the State Securities Commission.

According to experts, the reason why businesses are reluctant to issue bonds to the public is that the procedures for listing and issuing bonds to the public are currently complicated, lasting from 6 months to 1 year, and the requirements for information disclosure and transparency are more stringent. Meanwhile, business opportunities come very quickly, but often pass very quickly as well. If businesses have to wait 6 months to 1 year to have their bond issuance application reviewed as they do now, they will miss the opportunity.

“Therefore, to promote public bond issuance, the first thing is to shorten the time for reviewing public issuance dossiers and simplify administrative procedures. If the time for reviewing dossiers is reduced to a few weeks, the amount of bonds issued to the public will certainly increase sharply,” said Dr. Le Xuan Nghia, an economic expert.

Issuing bonds to the public is an international practice, and is also the only way to help the bond market develop transparently and sustainably. Bonds issued to the public help businesses' capital mobilization activities to be better monitored, information to be more transparent, goods to be of better quality, and attract more investors.

Although the Draft Law on Securities (amended) does not add regulations on bonds issued to the public, according to experts, the State Securities Commission can completely proactively review the process, simplify procedures, shorten the time for appraisal and approval of bond dossiers issued to the public.

As for the requirements on information transparency, the regulatory agency cannot "give in", but must require businesses to seriously implement them.

In the two channels of private issuance and public bond issuance, the Ministry of Finance does not set a specific goal of narrowing or expanding any market, but clearly, once the private corporate bond market encounters difficulties, if the public bond market also freezes, the capital market will be congested, causing disruption in the capital flow of enterprises.

Source: https://baodautu.vn/nen-noi-dieu-kien-phat-hanh-trai-phieu-ra-cong-chung-d230055.html