Lawyers criticize regulators' blame game on corporate bond problems

Two Vietnamese lawyers have criticized the Finance Ministry’s November 14 comments about the domestic corporate bond market, saying the regulator must also take responsibility for problems that have sprung up.

Truong Thanh Duc, director of law firm Anvi, and Nguyen Thanh Ha, chairman of SB Law, said both the ministry and State Securities Commission (SSC) must perform well their roles as market regulators instead of indulging in a blame game.

On Tuesday, the ministry said investors should assess by themselves the level of risk involved in investing in corporate bonds and are responsible for their own investment decisions.

Buying corporate bonds is not like placing savings into banks, the ministry said.

The very next day saw a strong sell-off in the local stock market. The Ho Chi Minh Stock Exchange, represented by the benchmark VN-Index, saw 429 stickers go down and only 43 go up.

The ministry’s comments also added to the pressures arising in the fourth quarter when, as calculated by top broker VNDirect Securities, VND58,840 billion ($2.44 billion) worth of corporate bonds mature, a year-on-year increase of 87.7%.

Duc, a member of the Vietnam International Arbitration Center (VIAC), said the ministry and SSC, as market regulators, have failed in three aspects: they adopted a stop-and-go attitude to managing the corporate bond market; they did not know the real quality of bond issuers; and they could not protect investors.

Echoing Duc, Ha of SB Law said the two regulators have not supervised the market properly, given that bond issuers have to submit their applications to the SSC.

"The finance ministry is right to say that investors are responsible for their own investment decisions. But responsibility also rests with the two entities as market regulators," Ha argued.

He proposed that the government sets up an ad-hoc committee with representatives from the Ministry of Public Security, Ministry of Finance, State Bank of Vietnam and some other state agencies to jointly build an emergency mechanism to rescue the corporate bond market and protect investor interests.

The corporate bond market was hit hard by the arrests of the leaders of major property developers Tan Hoang Minh in April and Van Thinh Phat in October. The arrested business executives are alleged to have committed fraud in previous bond issuances.

Recently-issued Decree 65/2022/ND-CP on private placement of corporate bonds adds many strict requirements, making capital raising via the corporate bond channel very difficult.

Corporate bonds, regardless of good, bad, big or small, are being sold off. Some bondholders even halve bond prices, but without attracting demand.

Particularly in October, there was only one private bond placement, a sharp decrease from the same period last year. In the first 10 months of the year, corporate bonds worth VND240,761 billion ($9.7 billion) were issued via private placements, down 51% year-on-year, official data shows.