Bank "tightens" the race of real estate bonds

Commercial banks tightened control over investment in real estate corporate bonds, did not buy bonds to restructure capital and ensure compliance with limits and prudential ratios.

According to Ho Chi Minh City Real Estate Association (HoREA), in the first 5 months of 2019, real estate, construction and infrastructure businesses issued corporate bonds with a value of up to 16,230 billion dong, accounting for 27% of the total value of bonds issued, ranked second.

Even real estate businesses have issued bonds with very high interest rates up to 12-14.5%/year, nearly double the savings interest rates, potentially risky for both issuing businesses bonds, investors and banks.

The real estate bond market is still in room. Illustration

Accordingly, the conditions for bond issuance are more open for real estate businesses, along with many risks that can occur to investors such as the issuance of unsecured assets, no conversion, no evidence permission.

According to the observation, the real estate bond market is still open when the majority of investors are still inaccessible, while banks and investment funds have a deeper understanding of bonds. Therefore, this has a great influence on the banking system - one of the potential investors of this "pie".

In order to minimize potential risks, the State Bank of Vietnam (SBV) requires commercial banks to intensify post-lending inspection and supervision, especially to supervise the use of capital for the right purposes; regularly monitoring and evaluating to identify abnormal signs early on the ability of enterprises to repay debts to limit bad debts arising; promptly detect and strictly handle violations of laws and internal regulations in credit extension activities.

Notably, the SBV has requested to review the investment in bonds for businesses with large balances, especially those with credit relations with many other credit institutions/businesses to ensure compliance in accordance with regulations on prudential ratios and ratios in banking activities. Especially, there are regulations on credit limit for a customer and related person.

The SBV said it will strictly handle violations of regulations on corporate bond investment.

According to Linh Anh