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Banking & Finance

Credit rating agency proposed

Released at: 22:38, 02/12/2014

Credit rating agency proposed

A local bond association is seeking authorities' approval to set up credit rating agency.

by Thong Dat

The Vietnam Bond Market Association (VBMA), whose members include more than 50 banks, securities firms, finance companies, insurers, and fund managers, is considering creating a credit rating agency.

If approved, the agency would be the first in Vietnam established under Decree No.88/2014/ND-CP issued by the government in September.

A credit agency is needed because it can step in and boost the transparency of the debt market, said Mr. Do Ngoc Quynh, General Secretary of VBMA. Though common in the global financial arena, such agencies are new for Vietnam, where many types of bonds have not been evaluated by independent bodies. Mr. Quynh added that VBMA has been in discussions with foreign partners and is now seeking experienced partners to establish the credit rating agency.

It is estimated that VND30 trillion ($1.4 billion) worth of corporate bonds are issued each year in Vietnam while the total outstanding loans of the bond market are around 2.3 per cent of GDP; a modest ratio compared with regional countries. Despite Vietnam’s bond market lagging far behind global standards, the corporate bond market still has major potential.

The Ministry of Finance is considering proposing to the government a specific project to regulate the number of credit rating agencies in the country. It will then evaluate and adjust bond issue conditions to suit the development of the bond market. The ministry will consider adding a condition that bonds must be rated by one credit rating agency or more.

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