Vietnam's capital market should be developed to handle the mid- andlong-term credit demand of the economy, and leave the management ofshort-term credit and financial services to the banking system.
Thesuggestion put forward by bankers and economists is aimed at taking thepressure off balance sheets and volatile capital structures at banksthat use short-term deposits to do mid- and long-term lending.
Vietnam'sfinancial market has developed exponentially, yet the development islargely dependent on bank credit, Nguyen Thi Kim Thanh, head of thecentral bank's Banking Strategy Institute, was quoted as saying by ThoiBao Kinh Te Viet Nam (Vietnam Economic Times).
Domesticoutstanding loans are equivalent to 104.9 percent of the GDP, which is6.5 times higher than the total value of the bond market and triples thecapitalisation value of the stock market. The country’s GDP stood at170 billion USD in 2013 and 141 billion USD in 2012.
The StateBank of Vietnam's statistics revealed that mid- and long-term moneyconstituted 30-35 percent of the total deposits, but mid- and long-termcredit accounted for more than 40 percent of the total demand.
BIDVChairman Tran Bac Ha was quoted by the newspaper as saying that bankstake liquidity risks by using short-term deposits to facilitate mid- andlong-term loans. This practice causes pressure on the central bank tore-finance or provide additional capital to banks via Open MarketOperation (OMO) at more frequent intervals by the year-end period.
Whilebanks' sources fall short of credit demand, the capital market is notadequately developed and in need of urgent assistance.
Governmentbonds, which constitute 90 percent of the bond market, including StateTreasury bonds and notes, Government-guaranteed bonds, local authorityguaranteed bonds, only manage to meet 16 percent of the credit demand.
Moreover,these tools are almost held as safe reserves by major creditinstitutions, such as BIDV, Vietcombank, Agribank, and Vietinbank untilthey mature. Credit that banks injected into government bonds reportedlyreached 65 trillion VND (3 billion USD), up 0.1 percent by the end ofthe first quarter this year as compared to the end of 2013.
After bond sales, however, mobilised money often makes a round trip within the state treasury and banks that also bore fees.
Hasuggested that the State and Government should chalk out plans to usecapital mobilised from bond sales, such as public investment projects.
TranHoang Ngan, a member of the National Advisory Council on Monetary andFinancial Policies, emphasised that it is not just necessary to fixregulations for the stock market, but also pay more attention to revivethe government bond market.
Ngan proposed sellers to diversifymaturities and to make pre-sale information available to the public inorder to help investors to be better prepared. Post-sale policies arealso required to boost transactions in the secondary market.
Inthe meantime, the corporate bond market recorded a good performance lastyear, and Vietnam is aiming higher by organising its technical andlegal grounds in order to be well-prepared to facilitate issuers.Vietnam's corporate bond market featured the participation of 20issuers, but just one-fourth are active in the market.
TheMinistry of Finance plans to mobilise up to 35 trillion VND (1.65billion USD) from corporate bonds this year, up 1.8 percent against2013.
Last year, the volume of corporate bonds sold was 34.41trillion VND (1.62 billion USD), up 19.87 percent against 2012, 37.64percent against 2011, and 14.7 percent against 2010.-VNA
Thesuggestion put forward by bankers and economists is aimed at taking thepressure off balance sheets and volatile capital structures at banksthat use short-term deposits to do mid- and long-term lending.
Vietnam'sfinancial market has developed exponentially, yet the development islargely dependent on bank credit, Nguyen Thi Kim Thanh, head of thecentral bank's Banking Strategy Institute, was quoted as saying by ThoiBao Kinh Te Viet Nam (Vietnam Economic Times).
Domesticoutstanding loans are equivalent to 104.9 percent of the GDP, which is6.5 times higher than the total value of the bond market and triples thecapitalisation value of the stock market. The country’s GDP stood at170 billion USD in 2013 and 141 billion USD in 2012.
The StateBank of Vietnam's statistics revealed that mid- and long-term moneyconstituted 30-35 percent of the total deposits, but mid- and long-termcredit accounted for more than 40 percent of the total demand.
BIDVChairman Tran Bac Ha was quoted by the newspaper as saying that bankstake liquidity risks by using short-term deposits to facilitate mid- andlong-term loans. This practice causes pressure on the central bank tore-finance or provide additional capital to banks via Open MarketOperation (OMO) at more frequent intervals by the year-end period.
Whilebanks' sources fall short of credit demand, the capital market is notadequately developed and in need of urgent assistance.
Governmentbonds, which constitute 90 percent of the bond market, including StateTreasury bonds and notes, Government-guaranteed bonds, local authorityguaranteed bonds, only manage to meet 16 percent of the credit demand.
Moreover,these tools are almost held as safe reserves by major creditinstitutions, such as BIDV, Vietcombank, Agribank, and Vietinbank untilthey mature. Credit that banks injected into government bonds reportedlyreached 65 trillion VND (3 billion USD), up 0.1 percent by the end ofthe first quarter this year as compared to the end of 2013.
After bond sales, however, mobilised money often makes a round trip within the state treasury and banks that also bore fees.
Hasuggested that the State and Government should chalk out plans to usecapital mobilised from bond sales, such as public investment projects.
TranHoang Ngan, a member of the National Advisory Council on Monetary andFinancial Policies, emphasised that it is not just necessary to fixregulations for the stock market, but also pay more attention to revivethe government bond market.
Ngan proposed sellers to diversifymaturities and to make pre-sale information available to the public inorder to help investors to be better prepared. Post-sale policies arealso required to boost transactions in the secondary market.
Inthe meantime, the corporate bond market recorded a good performance lastyear, and Vietnam is aiming higher by organising its technical andlegal grounds in order to be well-prepared to facilitate issuers.Vietnam's corporate bond market featured the participation of 20issuers, but just one-fourth are active in the market.
TheMinistry of Finance plans to mobilise up to 35 trillion VND (1.65billion USD) from corporate bonds this year, up 1.8 percent against2013.
Last year, the volume of corporate bonds sold was 34.41trillion VND (1.62 billion USD), up 19.87 percent against 2012, 37.64percent against 2011, and 14.7 percent against 2010.-VNA
