Commercial banks run one-man show in Vietnam
Commercial banks run one-man show in Vietnam
Commercial banks have too many functions in Vietnam, from providing loans to businesses to funding long-term infrastructure projects, from lending to fund securities investments to trading government bonds.
Nine out of 10 top bond traders of the 2014 government bond market in the Hanoi Stock Exchange report are commercial banks. The other is a securities company which is a subsidiary of a commercial bank.
The 2014 ceremony on honoring excellent bond market founders held by VBMA, the Vietnam Bond Market Association, gave the most honorable rewards to Techcombank, BIDV and Maritime Bank.
More than 90 percent of the issued government bonds are held by commercial banks.
The eight members signing the market makers’ agreement (MMA) are also commercial banks. These include BIDV, Vietcombank, HSBC Vietnam, ANZ Vietnam, Standard Chartered Vietnam, Techcombank, Maritime Bank and Sacombank.
The list of the 10 most outstanding government bond bidding members included five commercial banks and five securities companies, which all have relations to banks.
Analysts have warned that once the National Assembly’s Resolution No 78 takes effect, which stipulates that only the State Treasury can issue long-term bonds (five years and longer), it will not be easy to sell government bonds.
However, what happened in the January government bond bid showed quite the opposite.
A report by VBMA showed that the State Treasury issued VND17.4 trillion worth of bonds in the month, a sharp increase over the 72.28 percent of December 2014, despite sharp decrease in interest rates.
Even the bonds issued by the Vietnam Development Bank and the Bank for Social Purposes guaranteed by the government, which are less favored than government bonds, also sold well.
According to VBMA, most of the papers were bought by commercial banks and securities companies backed by commercial banks.
Analysts noted that the Vietnamese bond market was open only to commercial banks. Meanwhile, in a healthy market, all investors have opportunities to buy government bonds.
Governor of the State Bank Nguyen Van Binh admitted that bankers are the biggest buyers of government bonds. However, banks do not trade bonds in the secondary market, but they mostly use bonds as mortgage to borrow capital from the State Bank.
“It is really bad,” Binh commented.
What needs to be done, according to Binh, is to create policies that would make people who have idle money not only think of depositing money in banks, but also invest in government bonds.
If so, idle money would not only flow to banks but also to the capital market from which it is poured into investment projects. This would help ease bank loan interest rates.
