Corporate Bond Issuance Gone Rogue
Investigations reveal a pattern of regulatory lapses and prolonged mismanagement by multiple authorities, creating a fertile ground for underperforming businesses to exploit loopholes and flood the market with high-risk corporate bonds.
According to the Government Inspectorate (TTCP), between 2015 and 2023, regulatory bodies failed to proactively update policies governing corporate bond issuance, oversight, and capital utilization. This legal vacuum enabled companies to raise funds illicitly, issue unqualified bonds, and misappropriate capital, posing systemic risks to financial markets and individual investors.
Two corporate bond violations involving Novaland Group have been referred to the Ministry of Public Security for legal action.
Numerous real estate firms issued bonds for projects lacking legal clearance, funneling capital through intermediaries or disguised business partnerships to redirect bond proceeds to third parties. TTCP warns this high-risk practice threatens investor capital and distorts domestic capital markets.
A critical issue highlighted by TTCP is the lack of transparency in disclosures. Many companies submitted vague issuance plans without specifying capital use, rendering fund tracking nearly impossible. Post-issuance, several entities arbitrarily altered capital allocation plans, violating disclosure obligations.
The Hanoi Stock Exchange, tasked with monitoring disclosures, was found negligent in fulfilling its duties, allowing prolonged violations by major private conglomerates to go unaddressed.
Regulatory Gaps and Weak Enforcement
TTCP attributes the root cause to deficiencies in corporate bond regulatory frameworks.
Firstly, credit rating regulations issued in 2014 were only voluntarily implemented in 2020 and mandated from January 1, 2024. During this legal void, financially weak firms issued substantial volumes of high-risk or junk bonds. The Ministry of Finance bears primary responsibility for this delay.
Secondly, the real estate sector, a major bond issuer, lacks project-specific issuance controls, leading to excessive fundraising beyond actual needs and destabilizing financial markets.
TTCP recommends Prime Ministerial directives to hold violators accountable and tighten bond issuance and management discipline. The Ministry of Finance must address identified shortcomings, revise Decrees 153/2020/NĐ-CP, 65/2022/NĐ-CP, 08/2023/NĐ-CP, and Circular 76/2020/TT-BTC to strengthen the legal framework.
Proposed measures include clarifying capital use plans, payment schedules, issuance limits, and third-party cooperation oversight; establishing joint Ministry of Finance-State Bank capital tracking mechanisms; and developing independent credit rating systems to enhance market transparency and risk assessment.
TTCP underscores that regulatory laxity and delayed reforms enabled opportunistic firms to exploit loopholes, issue bonds beyond their means, and inflict severe economic damage. It calls for stringent enforcement, expedited institutional reforms, and a transparent, secure bond market to protect investors and bolster financial system integrity.
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