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Banking & Finance

Credit risks pose threat if not fully addressed: experts

Released at: 17:08, 12/01/2018

Credit risks pose threat if not fully addressed: experts

Photo: Quang Huy

"Credit Risk Management for Trade and Investment in Vietnam" workshop hears of need for transparent and reliable information in all economic sectors.

by Quang Huy

Credit risk management should be enhanced to make sure business information is transparent and reliable in order to improve Vietnam’s trade, economic, and investment conditions, experts told the “Credit Risk Management for Trade and Investment in Vietnam” workshop held in Hanoi on January 11.

While credit risk management is normally considered a core business activity done only in the banking and finance sector, potential risks may also pose threats to the country’s trade and investment environment if they are not fully addressed, CEO of data analysis firm StoxPlus, Mr. Nguyen Quang Thuan, said.

Transparent business and economic information and data would help strengthen Vietnam’s international trade, draw more attention from foreign investors, improve the performance of local businesses, and help them access foreign capital markets.

At the moment, “the reliability of data inputs in Vietnam is still weak given the fragmented data-source infrastructure and poor financial reporting environment,” Mr. Thuan said, adding that better credit risk and business data management would provide local banks with better insight of the finances and operations of local businesses.

“As banks conduct insightful reviews of company profiles, they are able to determine whether the businesses are strong enough and whether lending rates should be high or low based on the financial risks that the business may encounter,” he said.

Credit risk and data management would help local authorities prevent foreign companies from transfer pricing, which is used to avoid taxation, and improve the quality of foreign investment in the economy, he added.

In fact, there was a big difference between a company’s financial statement sent to tax authorities and the one sent to credit institutions for making loans.

“We find out in some cases that if companies do not issue tax invoices for products sold in the market, they do not have to record the transaction in financial reports for tax purposes and avoid business income tax,” he explained. “But they can record the transaction in the financial statements submitted to banks for credit purposes.”

He therefore urged authorities to empower independent third-party vendors that have technological advances, such as StoxPlus, to collect and analyze financial and economic data so that information is transparent and reliable for investors.

Agreeing, Lead Financial Sector Specialist at the World Bank in Vietnam, Mr. Alwaleed Alatabani, told the workshop that local authorities must compel companies to improve their financial statements and reports to international standards.

Local authorities also need to work with financial institutions on corporate earnings reports, so that the country can provide a better business environment and give foreign investors better insights into Vietnam’s economy.

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