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Wednesday, November 30, 2022

PM urges review of corporate bond issues to minimize risks

By Van Phong

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HCMC – Prime Minister Pham Minh Chinh has asked Deputy Prime Minister Le Minh Khai to chair a Government meeting on draft amendments to Decree 153/2020/ND-CP regulating corporate bond issues through private placement to minimize risks for investors.

Speaking at a meeting on August 3, Minister of Finance Ho Duc Phoc said sales of corporate bonds via private placement amounted to over VND250 trillion in the first half of this year, a strong surge over the same period last year.

Earlier, the Ministry of Finance advised individuals to exercise prudence against brokers who would talk them into buying corporate bonds via private placement with a high interest rate, up to 13% a year.

However, many still put their money into corporate bonds via this channel, particularly those with high coupons distributed by organizations, the minister said, adding that in the current situation, purchasing bonds that way entails risks as enterprises can issue bonds via their subsidiaries, just as what Tan Hoang Minh Group did.

“Corporate bonds offered by banks and securities companies are not safe to buy,” Phoc said, noting that private placement is not licensed by state agencies, while these organizations just provide service and collect brokering fees from bond issuers. They are not responsible for appraising and evaluating the issuers’ financial health and solvency.

Thus, the responsibility does not rest with them when the issuers fail to pay the principal and interest.

To fix this, the ministry has drafted amendments to Decree 153/2020. The decree would be revised in a way that makes sure funds raised from corporate bond sales will be used for approved purposes.

Bond issuers would be requested to ensure audit and consulting firms to guarantee that financial health, bond information, and collateral valuation are transparent during the process of selling bonds.

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